time it has been possible for the state banks to have their deposits guaranteed.

The increase in the number of state banks is striking. The guaranty system may have been an influence in the organization of some of the new banks, but rarely the moving cause. Deposits are not guaranteed until banks are a year old. Most of the new banks in Kansas, as well as in other Western states, are small institutions, so small that they could not have entered the national

system. The typical capital of a new bank continues to be $10,000, altho, of course, state banks are chartered occasionally with much larger capital. Deposits in national banks increased fully as much as in state banks between 1909 and 1913, and, by proportion more, altho in the meantime the largest national bank in Kansas had moved a few hundred yards into Missouri. Many of the national banks and a few of the state banks have insured their deposits in the Bankers' Deposit Guaranty and Surety Company of Topeka, a corporation originally formed largely to counteract the influence of the state guaranty law, which was expected to attract business to state banks. The Company is not pushing the deposit insurance feature of its business, however, altho it has never had a loss. It is understood to insure the deposits of about 100 banks, practically the same number it insured three or four years ago.

It is significant that the number of banks participating in the Depositors' Guaranty Fund is increasing.1 The fact that they cannot participate for a year after they are organized means that the banks now coming into the scheme have decided, after opportunity to consider the matter, that the guaranty of their deposits by the state fund will increase their deposits somewhat, or make their deposits rather more stable, or both. It is not that the sign "Deposits Guaranteed by Bank Depositors' Guaranty Fund of the State of Kansas" draws business in quantity from the other banks, as it did in Oklahoma in the first year or two of the experiment. It is that occasionally a deposit comes in from a man who, the cashier knows, would not have patronized the bank if its deposits had not been under guaranty. Or a deposit remains for a time whose

1 Letter from the Bank Commissioner.

T

owner would have made haste to use it in the days when every bank lived to itself alone.

If any system of insuring deposits in a fund administered by the state is to endure, it should have some of the features of the Kansas guaranty plan. The allowance for capital and surplus and the payment of depositors at the final liquidation only are admirable. It is unwise that the Guaranty Fund should be limited to $500,000, for there are many single banks in Kansas with deposits larger than that sum, and half a million is too small a reserve for $70,000,000 of risks. It is still more unwise that the assessments while the fund is being accumulated should be only one-twentieth of one per cent per annum. That rate is theoretically good, but it builds up the fund far too slowly.

Further comments on the Kansas scheme can best be made after a study of Nebraska and Texas.

III. NEBRASKA

It is now fifteen years since a national bank failed in Nebraska. It is eight years and more since a state bank failed, and then the depositors lost only $2,000. In Nebraska," writes Mr. E. R. Gurney of Fremont, a keen observer, " we have a population of mixed races, a very large percentage, however, running to foreign born. These foreign people are hard working, economical and almost always good pay. Their notes in most any bank can be approved. Moreover, our state has reached an age where stability is the rule, and more than all other circumstances, is the fact that we have had a capable and vigorous administration of our State Banking Department for something like fifteen years past. Our banks, therefore, are sound from the standpoint of the assets and also from the influence of supervision."

It is true that in many Western states, the foreign born farmers are regarded as more certain payers than the Americans. Less venturesome, they are sometimes better risks for the banker, even if, or probably because, they are satisfied with modest results. If they develop a country less rapidly than Americans develop it, their progress is steadier and their notes in bank are not subject to so many vicissitudes.

What Mr. Gurney says of the Nebraska Banking Department is also true. The Secretary of the Board,

Mr. Royse, has done such excellent work that the changing state administrations of ten years have wisely kept him continuously in office.

The time when the Nebraska deposit guaranty act of 1909 was to take effect had not arrived when the United States Circuit Court enjoined the state officials from putting it into operation. The Act was upheld by the Supreme Court, however, with the Oklahoma and Kansas statutes, and the first assessment was collected July 1, 1911.

It

The legislature had made a few amendments in April, but the working plan was essentially that adopted in 1909. There were four semi-annual assessments of one-fourth of one per cent of average deposits. The last of these was paid January 1, 1913. Further assessments are one-twentieth of one per cent semiannually, as originally provided. New banks still pay one per cent of their average deposits the first year. is now provided that when the Guaranty Fund reaches one and one-half per cent of the deposits of the state banks, assessments shall cease until the fund is depleted below one per cent of deposits. To correct an ambiguity, the act of 1911 provided that no bank which had paid the assessments and otherwise complied with the banking laws should be required to give any further security

for public deposits. This is different from the Oklahoma plan, where special security is given and deposits specially secured are not within the guaranty.

The only important amendment adopted this year permits the investments of a bank to equal ten times its capital and surplus, instead of eight times, which was the limit fixed in 1909.

The original act of 1909 prohibited private banking and required the thirteen private banks to procure state charters or discontinue business. It made the guaranty scheme obligatory upon all state banks. These provisions are unchanged.

Where economic conditions are settled and banking stable, it is not to be expected that changes in the banking laws will effect a marked change in the disposition of accounts. Nevertheless, the reports of Nebraska banks since the United States Supreme Court decision (January 3, 1911) make an interesting study. Important items from the reports of state and national banks a year before and just after the decision are here presented in comparison with the reports of August, 1913.