The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1926-06-23

+; Causes and conditions which led to
the closing Of 237 state banks of
North Dakota during the six years
ending April l. 1926, were analysed
by George A. Bangs Of Grand Forks,
special assistant attorney general OF
North Dakota. in an address to the
annual convention OF the North Da-
kota Bankers Association here.
Mr.. Bangs, who has represented the
state and the Depositors Guaranty
fund commission in most of the liti-
cation arising in connection with We
closed banks, also outlined certain
steps which he believed might aid in
preventing recurrence of such con-
ditions in the future.
Among the factors which in North
! DakOta aggravated the general condi-
| ton OF deflation, the speaker pointe
to inability on the part OF stockhold-
ers to meet the crisis with liquid as
sets, under-capitalization, overcompe-
| tition, diminution OF bank profits,
loans for capital purposes, and mex
perience of officers and directors, and
tho depositors' guaranty fund law.
AS remedial measures. NJ. Bangs
advocated a licensing law to guard the
public against inexperienced and in
capable bank management. better
supervision OF banks through q non-
political banking board and an exam
ming department named for long
term at adequate salaries, consolida-
tiOn OF banks. and redraftiIfE OF the
banking laws with attention to the
provisions found in the laws of some
states on minimum capital. and DIS
cretionary power on the granting Of
bank charters.
Repeal OF the Depositors Guaranty
law was also recommended by the
| speaker:
237 Closings in Six Years
In presenting the history Of the de-
flation period, Mr.. Bangs showed that
! during the six years ending April l.,
| 1926, 237 state banks Of North Dakota
| closed, and actually went into the
hands Of the state receiver. The
ledger balances OF these banks APP
proximated $43,40O,OOO. The loans
! and discounts weer $35, 1868 which
was 1913 per cent of the total deposits
! Of these banks. OF this amount, $780,
!, 989,724 was pladged to secure bills
payable.
!! 1.-The obvious cause Of the bank fail
ures was the frozen assets consisting
of unc0llectable loans and discounts
and the large amount tied up in bank
ing houses, furniture and fixtures and
other real estate. But these are
merely the outward manifestations,
and the question interesting to US is.
! what were the causes which produced
/ the accumulation of these frozen as
sets in the banks during this period.
said Mr.. Bangs.
~ do not think conduct or dis
honesty plays any material part in
/ h NnpSvN h~Svk kn CO.. N,,A
cases were rare although there were
perhaps mistaken attempts to protect
the depositors by keeping the banks
from closing.
"Before speaking of the deflation
in values which began during the
summer Of 1920 and within the next
three years reduced these values at
least SO per cent, it would be wise to
examine the conditions then existing
from entirely independent causes
without which the results Of the de-
flation, though doubtless severe,
would not have been so disastrous.
Stockholders Reserve Power
ut was the exception when the
stockholders in a struggling bank did
not unflinchingly sacrifice their for
tunes, but North Dakota is q new,
and as yet partially developed state.
Th""e was n" accumulation Of wealth
in the state in the form of money or
oonus, or in0eed in any form other
than the value which had come to the
| farms The bulk Of the stockholders
therefore could contribute to the
banks only properly Of the same class
as that which was already making the
banks top heavy.
Capitalization and Excessive
! Competition
Outside Of Fargo, Grand Forks,
and other centers the average capital
of the country banks amounted to
$4,000 or $4,000, an amount GER
tainly as small as is consistent with
entire safety. Of this amount by
May 1920, there was tied up, in bank
ing houses, furniture and fixtures,
and other real estate more than 60
per cent of the amount of the capital.
In the closed banks the same items
approximated lis per cent of the
''In other words the closed institu-
tons not only had all Of their capital
absorbed by real estate, but serious
entertainments had been made on the
deposits.
an September. 1922. the payables
amounted to 225 per cent of the
banks capital.
"The average throughout the United
j