Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-05-17
BANKS DECLINING
PUBLIC DEPOSITS
Dakota County Unable to Sc
cure Depository With Nee
essary Security.
BY C. b. UPHAM.

State and county officials in num-
Der of the States are having difficulty
in getting banks to accept their money
In these days Of low interest rates.
The latest instance is that of the
treasurer Of Yankton County, S. Oak,
who has been unable to secure any
county depositaries for the year 1881.
He has even advertised for applications
from banks for handling the county
funds.
The attorney general Of the State has
now ruled that If he cannot induce a
bank to accept the deposit and pay in
terest, the county treasurer will be JUS
tilted in designating depositaries that
will pay no interest, but will give the
necessary security, and if no bank will
either pay interest or give security, he
may nevertheless deposit the funds in
an active" depositary under law of
1927, which luckily seems to have been
discovered, to meet the emergency.
More Critical Elsewhere.
The situation in many States Is even
more critical than in South Dakota. In
| that State, the interest rate is set at
mot more than 2 per cent per annum."
In others the rate fixed by statute Is a
minimum rather than maximum, and
higher than 2 per cent In addition,
such funds must be secured by the
deposit of high-grade collateral or a
corporate surety bond, in many cases.
1t IS just a losing business, the banks
say, to accept public funds. and in every
section OF the country they are refus-
ing to qualify.
The tax collector for a county in a
Southern State recently found himself
in the position Of being required to
place tax funds in a bank in the
county which would pay interest where
as bank failures had resulted in his
particular county being destitute of
banks with the single exception of one
institution which refused to either pay
! interest on the deposit or give security
for it. After digging around in the
| legal tones the States attorney general
unearthed hoary statute which per-
mitted the sheriff of a county to make
deposits in banks unrestricted. Safety
and protection for the county funds
were provided by having the tax
! gatherer turn them over to the sheriff
who then deposited them in the very
bank which had refused to give interest
or security.
Revision Is Needed.
Fixed legal requirements as to interest
on public deposits are not flexible
enough to meet the shifts of monc-
market rates. There is need for a
revision in most States of the public
funds statutes, and indeed, perhaps a
determination Of the reasons for re-
quiring banks to give security for the
moneys Of States and their subdivisions.
thus making them preferred creditors.
in case of bank failures Recent court
decisions denying private depositors
such preferment have criticized the
whole philosophy behind security for
public deposits.
Treatment of public deposits IS being
discussed at the annual conventions Of
the State Bankers Associations which
are now beginning their sessions, and
at the Bank Management Conferences
being conducted by the American Bank
ers' Association, and 1t is possible that
some uniform way out of the present
difficulties will be devised.
(Copyrisht 1917