matters, as far as possible, into their own hands. Such a result was forecasted in the articles in this Journal three and four years ago.

The Oklahoma laws of 1907 and 1909 provided for the accumulation of a guaranty fund of five per cent of the deposits of the state banks, out of which the depositors of failed banks should be paid the amount of their deposits as soon as banks closed, no matter whether the fund had reached the five per cent maximum or not. In case the accumulations in the fund should ever be insufficient to pay the deposits of any failed bank, interest bearing warrants were to be issued to the depositors. The conclusion from a study of the situation in 1909 was that any plan that provided for payment of depositors immediately upon the closing of the banks must fail, unless as a matter of simple luck failures should be very few until a large fund could be accumulated.1 The luck has been the other way. The Oklahoma crops of 1910 and 1911 were poor. The crops of 1912, tho on the whole good, were not sufficient to restore the former level of prosperity. The year 1913, except in the cotton raising counties, has been unfavorable. The real estate boom that had been going on in many Oklahoma towns collapsed in 1910 and the succeeding years. Since the date of our former study, therefore, the state of Oklahoma has not enjoyed even average prosperity for the working out of the experiment of deposit guaranty.

No fewer than twenty-seven banks, with about $7,000,000 of deposits, have failed since the establishment of the guaranty system, or have been liquidated with the aid of the guaranty fund, and at least two others have required assistance from the guaranty fund. These failures, however, cannot be attributed to the

1 Quarterly Journal of Economics, vol. xxiv, p. 340.

adverse agricultural conditions. Only three national banks have failed in Oklahoma during the same time. Many of the state bank failures must be due to recklessness and incompetence.

It will be remembered that the first guaranty law of Oklahoma was enacted immediately after the creation of that state, which includes what was formerly Oklahoma territory and also what was the Indian territory. The territory of Oklahoma had had a banking law and bank inspection while the Indian territory had not. It resulted that a great many banks that had never been supervised were thrown under the jurisdiction of the banking department of the state of Oklahoma. It was announced that all were examined before the guaranty law went into effect, but this proves not to have been literally true. Results indicate also that the examinations were in many cases superficial and inefficient. The report of the Bank Commissioner about that time states that a large number of banks were technically not in harmony with every provision of the laws. It was, however, felt by the state authorities that it would be unwise, and certainly it would have been unpopular, to put these banks out of business. Their deposits were, therefore, guaranteed and they remained a menace to the guaranty experiment. It is now said in Oklahoma that 75 of them were actually insolvent. This assertion cannot, of course, be verified; it illustrates the bad feeling caused by losses and consequent heavy assessments upon the solvent banks.

Perhaps the most unfortunate condition of all has been that for much of the time the state banking department was regarded as a part of a political machine. The department seems to have considered it necessary

1 First Annual Report of the Bank Commissioner, p. viii.

2 Ibid., p. ix.

to make a showing of success for the guaranty law, which was a political measure. When it was no longer possible to keep a bank open it was deemed essential to pay the depositors at once even if prudence would have dictated that time be taken for exact investigation of the situation. At the same time the Banking Board feared the political effect of levying on the solvent banks assessments sufficient to cover all failures as they occurred. It was believed, and was probably true that, if the limit of assessments, two per cent of deposits per annum, should be levied, the state banks would literally rebel. While the courts would undoubtedly have decided that the banks must pay the full assessments, in practice such assessments could not have been enforced. If the six hundred state banks had combined to resist such assessments, court decrees would not have amounted to much and the political prestige of Governor Haskell and his Bank Commissioners would have suffered irreparable injury.

Again, there have been more than a few cases of outright dishonesty in the administration of the banks. The present Bank Commissioner of Oklahoma has said that the heaviest losses of the past few years could have been avoided if more careful scrutiny had been given to the records of those who sought permission to organize and operate banks.1 In a recent conversation this Commissioner, Mr. Lankford, told the writer that he had removed twenty bank officers and prosecuted sixteen others during his term.

Some rascals come into every new country and every new state at its settlement. That there have been bad men in Oklahoma banks will not surprise those who remember how Oklahoma was first settled by horsemen who lined up at the Kansas or the Texas

1 Proceedings of the Oklahoma Bankers' Association, 1912, p. 91.

border and at a signal rode for the choice claims, nor those who remember that for years the Indian territory had not even a territorial government, justice being administered by the Indian tribes or by infrequent federal process. Good men predominated, of course. The wonder is that bad men have been so few and are being got rid of so fast.

Now a record of nearly thirty bank failures in five years, with almost all of them coming in three years, has not been equalled in the United States for a long time, the most recent parallel being perhaps the experience of some western states during and after the panic of 1893. The comparison holds good with respect to some of the Oklahoma failures. The greater number were simply a result of collapse after rapid settlement and exploitation, followed by a period of agricultural adversity, in a state where the records and the capacity of bankers were not closely investigated, and where bank examinations were in too many cases ineffective. These are not the cases, however, that have cost the guaranty fund any great part of the two million dollar loss.

It will be instructive to consider certain failures and see how they affected the guaranty fund, or have been affected by it. In November, 1910, the Creek Bank & Trust Company of Sapulpa failed. This was a crooked failure and one of the officers was sentenced to the penitentiary. September 10, 1912, there was another failure at Sapulpa, the Farmers and Merchants Bank, which one of the State Banking Board told the writer was the worst mass of filth he had seen in Oklahoma banking. Two of the officers were in jail for some time for failing to produce some of the books. The Citizens Bank of Mountain Park failed in April, 1911.

The last report of the Bank Commissioner says

that twenty-five thousand dollars of the notes held by the failed bank represented fraudulent transactions of the officers, who had been arrested and were then under bond awaiting trial.1

The Bank Commissioner took charge of the Night and Day Bank of Oklahoma City, June 7, 1911. This was one of a chain of Night and Day Banks operating in Memphis, Tennessee, Kansas City, Missouri, and Little Rock, Arkansas. Another bank in Hot

Abner Davis, Pres

Springs was also in the chain. ident of the Oklahoma City institution, was convicted in the United States Court at Memphis, in October, 1912, with five others, for misuse of the mails in the furtherance of fraudulent bank schemes. He went to old Mexico, and there was a rumor that he was thrown into jail there for some other reason. The following amusing incident is here set down for any bearing it may have on the quality of some Oklahoma examinations a few years ago. A banker who was then a state bank examiner in Missouri tells the writer that he was in Oklahoma City to gather some information bearing on the Kansas City institution, and that one of the Oklahoma examiners was assisting him by looking over the books of the affiliated Oklahoma City bank. The Oklahoma City examiner came back to the hotel and told the Missouri examiner that everything must be all right, that Abner Davis had $30,000 on deposit in the Night and Day Bank of Oklahoma City. The Missouri examiner told him he had better go back and look again and make a thoro investigation of that account. The Oklahoma examiner insisted, however, that he was correct. When the bank closed a short time later it developed that the $30,000 was not a credit, but was an overdraft, and that the

1 Third Biennial Report of Bank Commissioner, p. xiv.