The midland journal. (Rising Sun, Md.) 1885-1947, 1933-09-22
National Topics Interpreted

pointment of Walter ]. Cummings of
Chicago, and q. g.
Insuring Bennett of Salt
Bank Deposits Lake, as members
of the board, the
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 a new thing and be-
cause of it's complicated character,
it 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 1t have suf-
ficient assets that it can pay off de-
positors 100 cents for each dollar If
bank cannot do that, the law au-
thorizes the board of the corporation
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.
1 have been speaking of the So
called temporary insurance provisions,
for there is permanent insurance act
that takes effect July 1, 1884, 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
insured, the amount between $4,000
and $4,000 will be Is 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 very few
days after the bank fails, for the de-
posit insurance fund will have money
with which to do it. The Deposit In
surance corporation will take over the
assets of the bank, hquidate them and
get as much Of its 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
ca1uaC Thau bouo
to put up the
money. The law requires that each
bank becoming member of the cor
poration must pay into the fund a
sum equal to one-half of 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
Iy, If there should be seige of fail
ures such as we had in the last several
years, anybody's guess is good as to
how long 250,OOO,O0O 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 OPP
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.
nharo &c xvhara tho ruh oon,ac Tho