For a year before the decision was announced state banks had been nationalizing, some of them undoubtedly for the purpose of escaping the assessments. Thirteen state banks took out national charters in 1910, and 11 nationalized in 1911. On the other hand, new state banks were organized pretty freely, with an eye to the prestige of guaranteed deposits. Nationalization has now ceased, for there was not an instance in Nebraska in 1912; but the organization of state banks continues. On account of nationalizations and liquidations, the state banks lost ten in number between the February and June reports in 1911, at the time the guaranty law was going into effect, and their deposits fell off more than $2,000,000. From March to June of that year the national banks increased by eight, and their deposits by $1,400,000. Since that time the state banks seem to have been somewhat preferred. The table shows that they have gained forty-two in number and $20,000,000 in deposits in two years and a half, while the increase 1 Letter from the Deputy Comptroller of the Currency, April 23, 1913. for the national banks is only four in number and about $9,500,000 in deposits. It would seem that some of the state bankers now see a little benefit arising from the guaranty scheme. When it was first projected they were bitter over any plan that would tax them to pay the losses of other bankers. There have been no losses, however, and gradually a few extra deposits have come in, not deposits of large amounts, but here and there $2,000 or $3,000 from people who would not have been expected as depositors, at least as depositors in a state bank without the guaranty. Most of the state bankers have now dropped their active fight on the guaranty plan, and more than a few seem pleased with the way it is working. They are advertising the guaranty on their checks and deposit tickets, and making the most of the system they formerly opposed. The figures show that the national banks, while not growing so fast as the state banks, have suffered no drain. The national bankers say that the deposits that have left them for the guaranteed state banks have been scarcely perceptible. In a state where no national bank has failed in fifteen years, it would have been surprising to find that state bank guaranty had made national bank depositors uneasy. The virtual acquiescence of the state bankers is due in part to the fact that no money has been taken out of their banks. The assessments are merely set aside as deposits to the credit of the State Banking Board. The bankers regard this account as a special surplus, and so, in a sense it is; but it is a common surplus, and when it is drawn upon (for Nebraska cannot always escape failures), there will be disappointment and possibilities of trouble. The failure to collect assessments, to get the taxes out of the hands of the taxed banks, still seems a defect in the Nebraska law, altho the bankers like it. Another defect is the provision for paying depositors as soon as a bank fails, or as soon as the receiver has calculated how much cash he must draw from the guaranty fund to supplement the cash in the failed bank. The failure of the Oklahoma plan was due to this same provision as much as to any one cause. A series of failures would require immediate large expenditures from the fund, and make emergency assessments necessary. But a series of failures would come, if at all, at a time when all banks were hard up, and when an emergency tax would be a burden and perhaps a danger. The Nebraska plan is good in that it has accumulated a fund of nearly $1,000,000. It is bad in that it leaves this fund with the very banks that have it to pay, and in that it promises to pay deposits immediately on failure. It is to be observed, however, that under the administration of the Nebraska banking department the promise to pay depositors immediately on failure seems not to have caused reckless banking. And, as bearing on the existence of a need of deposit guaranty or insurance, the fact that deposits in state banks are guaranteed is found to influence deposits somewhat, even in a state where bank failures have for years been unknown. IV. TEXAS The deposit Guaranty Act of Texas has never been attacked in court. It has been in operation since January 1, 1910, and the results must be called favorable so far. The fiscal year of the Texas banking department ends August 31st. No bank failed at all the first year. One failed the second year, two the third year and three between August 31, 1912, and the present date (October 9, 1913). Taking the failures in their order, the Harris County Bank and Trust Company of Houston suspended August 7, 1911, and the examiner uncovered forgeries, false entries, and paper placed in the bank for fraudulent purposes. The president left before he could be apprehended. The guaranty fund was drawn on for $111,649.90 and an emergency assessment for that amount was levied on the guaranteed banks. In 1912, however, a 50 per cent dividend was paid to creditors, and half the assessments returned to the banks.1 The Paige State Bank, capitalized at $10,000, was taken over by the banking department early in 1912, because the president had placed $19,000 of worthless paper in the bank. The guaranty fund was called upon for $13,697.90.2 The last bank that has cost the fund anything is the First State Bank of Kopperl. It was closed December 6, 1912. Then it was discovered that S. J. Spotts, the president, had been previously convicted of violation of the National Bank Act, and had served a term in a Federal prison. Spotts was found in Los Angeles, was brought back to Texas for trial, and on a plea of guilty was sentenced to four years in the state penitentiary. The deposits of the bank were $16,000 and in paying them $8,000 was used from the guaranty fund.3 The three banks that failed subsequently were liquidated without calling upon the fund. The guaranty fund has, therefore, paid only $133,347.80 on account 1 Report of Commissioner of Insurance and Banking, 1911-12, p. 19. • Ibid., p. 21. • Ibid., p. 19. 4 Telegram from W. W. Collier, Commissioner. of failed banks in about four years, and has recovered more than $55,000 of that amount. The showing is considered excellent, and new banks have been organized in large numbers to keep up with the rapid growth of the state. For the fiscal year 1911, 109 state banks and trust companies with capital of $2,522,000 were authorized to begin business. The next year the number was 77 with $3,169,000 capital, but 8 of these were trust companies with $100,000 or more capital each. The 8 had together more than half of the total new capital of the year. The typical new organizations were still banks with the minimum capital permitted, $10,000. In the fiscal year 1912, 23 state institutions with $1,110,000 capital were incorporated.1 The Texas banking report for 1913 is not yet at hand, but new organizations must have been numerous, for the number of state banks and trust companies increased from 709 in June, 1912, to 776 in April, 1913. For comparison, the statistics of national bank organizations are here set down. The new banks include conversions of state banks. The data as to the new banks are for the years ending October 31st, and as to the conversions, for calendar years. Obviously bankers are not afraid to organize under the state system and remain in it, and yet a considerable amount of capital is being invested in national banking. A comparison of bank statements tells much the same 1 Report of the Commissioner of Insurance and Banking, 1911-12. |