, 1925-01-14
Some Bitter Experiences

YIN III 1hpSiiSiiN1o
That something must be done in Wyoming to.
ward protecting depositors in State banks is
agreed TO on all sides. What it shall be, is an
other question. That it is altogether likely to
become a subject for legislation is not doubted.
But certainly, if our people will profit by the eX-
perience of other states the route is not through a
guaranty of deposits law. Such laws have been
tried, and for that matter are at present upon the
statute books of several states, including. Kan
sas, Nebraska, North Dakota and South Dakota.
OKLAHOMA had a bitter experience and repealed
her guaranty law.
Here is an authentic statement of the exper-
fence of our neighboring state of Nebraska:
Nebraska has 924 state banks with total de-
posts OIL last call of $3.50, 800, 100000. Its Guar
anty Law was passed in 1909 and became oper-
alive in 1911. 1t provided for an annual as
sesslnent against state banks of ITO of l per
cent Of their average deposits, with a maximum
assessment of ! per cent in any one year. Such
assessments were to continue until the amount
in the Guaranty Fund reached a sum equivalent
to IL per cent of average annual deposits.
BY 1920, approximately S2,250,000.00 had been
accumulated in the fund. In 1914 there occurred
one small failure, and two years later in 1916,
another. These we're easily taken care of from
the funds on hand. In 1920, however, . banks
failed. In 1921, 1922 and 1923, 81 banks closed,
and difficulties began. The total deposits in
these closed banks aggregated approximately
$2O,OO0,0OO.O0. There was almost a stampede
started by state banks to surrended their char
ters and to enter the national system. 1t was
only by the most strenuous efforts on the part of
the Bankers Association and by appeals to their
loyalty TO the state that bankers were induced
to abandon the idea. 1t was feared that loss
of confidence in the success of the Guaranty Law
thus clearly manifested, would cause a complete
loss of public confidence in state banks and pre-
cipitate runs on a large scale.
At the time failures began, there was as above
stated, approximately $2,250 10000 in the Guar
anty fund, which had been accumulated from
1911 to 1920 from assessments of Ito of 1 per
cent per annum on the average annual deposits
of the banks. To pay the claims of depositors
of the IS banks, the state banks of Nebraska
have been required to contribute the vast sum of
S12,000,OO0O0, while only SS,000,000.00 were rea-
LIED from the assets of the failed institutions.
This sum represents almost exactly half of the
capital stock of all the state banks of Nebraska
doing business on October 9TH, 1924. In one
year, 1924, the assessments against one banl
amounted to Is per cent of its capital stock and
in the same year another bank paid into the
fund % per cent of its capital.
From January LIST, 1928 to August LIST 1924,
only 354 of the 924 banks have charged off bad
debts aggregating S2,339, $500, while Ga have
assessed stockholders the sum of 81 LOIS, 265. 90 to
assist in making contribution TO the fund and
absorb their own losses as far as it was possible
TO do so. The deposits in these last Ga banks
who found 1t necessary to call upon their stock
holders, totaled approximately s1S,000,0 100000.
One large state bank alone has contributed to
the fund during the past four years, the sum of
S172,00000. Another large bank has made Il
contribution Of over s100,000.O0 during the same
period. In this latter bank the control of stock
is held by one man, who has, therefore CON
tributed S~50,000.00 from his own funds to assist
in paying the depositors of banks incompetently
managed or looted by crooked officials.
Now turn to Oklahoma for Il more ~unfavor-
able record and n greater lesson to those favor
ing bank guaranty legislation. Tho assets of
failed banks under the Oklahoma law had n face
value of S20,000,000. In the Judgment of the
best informed bankers and officials probably
S3,500,000 gross can be realized from these as.
sets, but they are scattered badly and the cost of
collection is tremendous il not prohibitive. Out
of this total net collection of $4,000 is con.
sidered a fair estimate.
In 1914 the law of Oklahoma was amended TO
provide for Il minimum of 1 per cent per an.
mum to be paid ON the average annual deposits
for a period of three years, and 10 of / per cent
thereafter. From 1907 TO date Of repeal of the
law, 266 state banks nationalized, ~ failed, and
1873 consolidated with other banks. This left
3S9 state banks TO assume the burdens of the
law, with unpaid guaranty fund warrants of
81 1908, 100000 then outstanding.
The last assessment of 10 of / per cent Weld.
ed the sum of s133,000.00. The SAM amount is
still due from those who could not, or would not
paw. So far no legal action to enforce payment
has been taken, but such action is being contem.
and will undoubtedly be attempted. After
OH the payment Of deposits the sum of
So. 100. 937. 90 collected from assessments, the fund
and the law was repealed, leaving mp.
proximately 81 900 10000 Of deposits unpaid.
As high as 30 per cent oil their capital was
contributed by several banks III ono year.