The Ely miner. [volume] (Ely, Minn.) 1895-1986, 1933-09-22
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National Topics Interpreted - fTTYTMA
- by William Bruckart SRKI5nF

OulGdSO, dnu ~. We
Insuring Bennett Of Salt
Bank Deposits Lake as members .s
new Federal Deposit Insurance corpor-
alton formally has taken shape, and
the second big step has been made
toward another experiment in national
government, namely, the insurance of
bank deposits Of private individuals
and corporations. Nothing like it has
ever been attempted on so vast a
scale as is now being worked out for
the banking act of 1888 was the first
national law ever to carry provisions
for guaranteeing deposits. OF course,
1t does not become operative until next
January 1, but many tasks remain to
be performed before this new piece
of federal machinery is ready to run.
Because it is new thing and be-
cause of its complicated character,
1t seems better to outline again what
the deposit insurance proposes to do.
After January 1, 1884, each and every
deposit amounting to $500 or less is
automatically insured if the bank in
which that money is deposited has
complied with the requirements of law.
Since those requirements are highly
technical and quite complex for lay
man to understand, it may suffice to
say the law demands that the bank be
absolutely sound and that it have suf-
f1cient assets that it can pay off de-
positors 100 cents for each dollar. If
bank cannot do that, the law au-
to refuse to admit that bank to men,
bership, and when that happens, it
seems to me, the particular bank may
as well close up shop. Few persons
will leave their money with it longer
than it takes to withdraw it.
/ have been speaking of the So
called temporary insurance provisions,
for there is permanent insurance act
that takes effect July 1, 1894, and
then the amount of deposits coming
under the protection of the insurance
fund will be much larger. After next
July 1, any depositor's account amount
ing to $4,000 or less will be fully
insured. In the next category, all of
the account up to $4,000 will be in
sured and IS per cent of the amount
above that figure until the total is
$4,000 If the total is greater than
$4,000, the first $4,000 will be fully
;pc,,rad tho opooupt hotuaap c10 000
and $4,000 will be 70 per cent in
sured, and all above $4,000 will be
so per cent insured The theory is
that this protection will make it GER
tain none of the depositors will be
seriously handicapped should the bank
close The bulk of the depOsitors
will be paid in full within a very few
days after the bank fails, for the de-
posit insurance fund will have money
with which to do it. The Deposit In
assets of the bank, liquidate them and
get as much of it's money back as pos
sible, after it has paid off all depos-
itors. 1t is to be remembered, how
ever, that those with large accounts
may have to wait awhile to get their
money, for part of those are not in
sured.
While the Federal Deposit Insur-
ance corporation is federal agency,
it is in fact owned
Banks Put by the banks them
Up Money serves. Iney nave
money. The law requires that each
bank becoming member of the cor
poration must pay into the fund
sum equal to one-half of 1 per centum
of the deposits that bank has. That
will make several hundred million dol
lars available and the supporters of
the insurance plan claim the total will
be large enough to last a long time
before another assessment will have to
be made upon the banks to replenish
the fund That, of course, is open to
question. Only time can tell whether
the fund is sufficient. Nor can anyone
know now how many bank failures
there will be in the future. If there
are few, then the drain on the insur-
ance fund will be small and, converse
ly, If there should be a seige of fail
ures such as we had in the last several
years, anybody's guess is good as to
how long S250,OO0,000 will last in pay
ing off depositors.
All of the national banks, that is.
banks which have received charters
from the comptroller of the currency
In the treasury, must be members of
the corporation. The law makes that
certain. Then, all of the banks op-
Grating under charters given by their
respective states and which are men,
bers of the Federal Reserve System
must be members. That is in the law.
too. But there are some eight thou
sand state banks which are not men,
bers of the Federal Reserve System.
With them, membership in the corpora
ton is optional. If they choose to
seek membership-and all of them
must or face withdrawal of deposits
they must pass the examination that
the law provides.
There is where the rub comes. The
examination will be strict. The banks
can't ''bone up" for that examination.
Their assets must be sound. they must
be as large or larger than the total
of the deposits, and they must be
able to show that if their depositors
are insured, the corporation can soon
er or later get the money back which
it pays out to those depositors.
1t is well known that it takes an
average of about seven years for
bank that has failed to wind up its
affairs. That necessarily means that
depositors will get their money back.
or whatever part of it that is saved
A.