The midland journal. (Rising Sun, Md.) 1885-1947, 1934-08-17
'Depositors
Protected
National Topics Interpreted

OeP0sEt0rS among residents of
Protected the drouth area that
the prolonged dry
period and it's attendant effect on con-
ditions may cause some fresh trouble
among banks. 1 inquired among Off
Gals of the Federal Deposit Insurance
corporation concerning those condi-
tions, and l have assurances that
there is little, If any, danger Of new
banking difficulties. Furthermore, the
officials reminded me that even If new
troubles should arise nearly all of the
depositors In the distress communities
are protected under the bank deposit
guarantee law.
In reporting these assurances I do
not mean to imply that every bank In
all parts of the country has insurance
coyerage for its depositors. But the
scope of the insurance corporation
membership is so broad that 1t Is al
most possible to describe 1t as COM
plete coverage among the small banks.
The corporation figures show that 81
per cent of all depositors whose indi-
vidual accounts are less than $1,000
per person are protected by the insur-
ance. Something like 95 per cent of
all Of the banks in the country are
members Of the insurance pool.
The significance Of these figures can
not be minimized. For example, re-
cent bank failure in Illinois was cared
for by the Deposit Insurance corpora
ton and it paid so per cent of the
number of depositors with a total of
$125,OOO, figure that was exactly half
of the total deposits in the bank. That
is to say that only 1 per cent of the
number of depositors in the bank had
accounts in excess of $4,000 each-the
maximum insured under the temporary
fund-but the total of these larger ac-
counts was equal to the total depos-
its of the other 80 per cent of the in
dividuals having accounts with that
institution.
With respect to the fear that has
been indicated in the drouth-stricken
communities, it was explained that
many individuals thought there would
be repetition of conditions several
years ago when the small banks were
unable to realize On loans and short
time credits extended in the same
areas. The depression made it impos-
sible for many borrowers to repay.
The officials told me, however, that
the conditions now are somewhat diff
ferent. They pointed out, for exam
pie, that many of the distressed farm
mortgages hitherto privately held are
now in the hands of the government
and that the home loan bank system
has been doing the same sort of thing
for owners of residences in towns and
cities. This naturally has alleviated
some of the stress on the local banks.
1t Is true, of course, that many of
the banks have extended credit on
what normally would be sound bases,
and that the drouth and its conse-
uuent destruction of crops will cause
some loans to be uncollectible at this
time. But the point is that the strain
is not so great as it was early in the
depression and officials here generally
believe that the banks will pull
through with the very minimum Of
failures.
It is curious coincidence, however,
that this new fear of banking trouble
in the drouth areas
Nebraska should arise at
Experiment time when the state
of Nebraska is just
closing out its 25-year experiment with
q state bank deposit guarantee law.
The Nebraska experiment was by no
means successful. Its life was very
short. Nevertheless, 1t has taken that
state almost twenty years to clean up
the wreckage that resulted from an
attempt to insure all deposits within
the limited Jurisdiction of one state.
It is to be recalled that during con-
gressional debate on the federal law
much argument. was advanced against
enactment of the national insurance
law on the basis of the failure Of the
numerous state attempts. The answer
apparently lies in the fact that condi-
lions in one state may be bad from an
economic standpoint, or they may be
bad in several states, but 1t Is sell
dom that the whole United States suf-
fers conditions Of character that re-
suit in widespread wreckage of banks.
Another strength which officials of the
Federal Deposit Insurance corporation
see in their own law is that no at
tempt is made to guarantee all depos-
its. AS heretofore said, the limit is
$4,000 for any individual account.
While that limitation does not protect
the holders of great amounts Of cap
ital 1t Is sufficiently high. according to
the studies by the insurance corpora
ton to provide for Immediate repay
ment to at least 81 per cent Of the
individual depositors in this country.
The federal corporation has more
than $500, 100000 at its command upon
which 1t. can draw Immediately for
payment to depositors in case of any
bank failure. It is ridiculous to as
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