The Commoner.
VOLUME , NUMBER
M
i
EDUCATIONAL SERIES
GUARANTY OF DEPOSITS
Bslow Trill be found a copy of House Roll
4 5 J, prepared by the committee on banks and
banking of the senate and house of representa
tives of the legislature of Nebraska. The meas
ure was prepared by the joint committee of
the two houses in conference with Governor
Saalleaberger, Mr. Bryan and others especially
interred in the subject. While the measure
is subject to amendment in both the house and
senate, still as the committee have been in
consultation with those members of the legisla
ture who have shown an interest in the subject,
the measure is not likely to be materially
changed In any important part. It is, there
fore, published in The Commoner for the bene-;
fit of its Nebraska readers and also for the
benefit of those in other states who are con
sidering the subject.
It will be noticed that, first, the depositors
are to be paid immediately upon the furnishing
of satisfactory proof of their claims, and second,
that the assessments against a bank shall not ex
ceed one per cent of the deposits-in any one year.
This limitation of assessment is a wise one; it
answers the objection that is made that an un
limited assessment might wipe out all the profits
of a perfectly sound and well managed bank,
and at the same time the security of the deposi
tor is not lessened. All the banks stand back
of each bank, and every depositor is sure of
full payment of hfs claim. It is only in extra
ordinary cases that any delay will occur; in
ordinary cases the payment will be made at
once, and the communities will avoid the em
barrassment usually caused by bank failures.
It will be noticed that provision is made for
rigid regulation of bapking. No officer of the
bank, other than a director, is allowed to bor
row from the bank, and directors are allowed
to borrow only upon the approval of the board
of directors. No one is allowed to borrow more
than one-fifth of the bank's capital and surplus,
and the loaning of more than one-fifth to any
person Is made a criminal offense. This is an
lmporntut proWojon. The. national hanking law
does not prescribe any penalty except suspen
sion, and that penalty is seldom invoked, be
cause the punishment falls upon the stockhold
ers and the community. The measure proposed
la the Nebraska legislature puts the penalty
where it belongs, namely, upon the man who
violates the law, and the fixing of a criminal
penalty will prevent overloaning, and overloan
ing is the most fruitful cause of bank failures.
It will be noticed also that the Nebraska
measure fixes a proportion between the capital
and surplus on the one hand, and the loans
on the other. This Is to prevent the bank from
becoming top heary with deposits. The capital
and surplus form the margin which protects de
positors. This margin decreases as the deposits
increase. The limit fixed in the Nebraska bill
will compel an increase in capital or surplus
to correspond with increased deposits, and thus
the bank will be made stronger and the danger
of failure will be lessened.
The Nebraska measure contains another pro
vision an entirely new one namely, that the
stockholders shall have property sufficient to
meet the statutory liability. Experience shows
that only about three per cent of the 100 per
ont statutory liability has been collected in the
case of failed banks. Why should a stockholder
be permitted to gather in the profits of banking
when times are good if he is not able to re
spond to the legal requirements in case the
bank fails. The Nebraska measure provides a
remedy, it requires that no one shall become a
stockholder unless he is financially able to meet
the requirements of the law. In other words,
the Nebraska measure gives substance to a pro
vision which heretofore has been largely a"
shadow.
It is not claimed for the Nebraska measure
that it is perfect, but it is a long step toward
better banking. The regulations are reasonable -and
the restrictions are just; they will result
in a decrease in the number of bank failures,
and thus strengthen the guaranty fund. And
the guaranty fund by giving confidence to de
positors "will draw money from hoarding and
hiding and furnish each community with a
stable volume of currency with which to do.
business. The guaranty fund gives security to
the depositors; it gives protection to the com
munity; it gives assurance to the business man
who has to borrow at tho bank and it gives to
are stockholder the peace of mind that comes
with the confidence that no depositor can lose
money by depositing in his bank. Heretofore
the conscientious .stockholder has been con
stantly menaced by the criminal act of the bank
official. This law removes that fear without
lessening his sense of responsibility for the
bank's management.
The Nebraska Guaranteed Bank Deposits Bill
T1A Mil gpTOAil nn .. V. lll ...
w ... ,iv.wvi wj uj cue jujul committee
on banks and banking of the Nebraska legisla
ture is as follows:
House roll number 423 a bill for an act
for the regulation, penalties for its violation,
repealing chapter eight of the compiled statutes
of Nebraska of 1907, and all acts and parts of
acts inconsistent herewith.
Be it Enacted by the Legislature of the State
of Nebraska:
Section 1. The business of banking, or the xe
clT?nK J. oslia of money or instruments of
Vinfw' P'J or order' the counting, nego
tiating of promissory notes, drafts, bills o ex
change, and other evidences of. debt; and the loan"
LnK 2 moey "Pon personal or other security Is
hereby declared to be a Quasi-nubile busing7 iJt
subject to regulation andcontrol by the Sat!
Sec. 2. It shall be unlawful tor anv conStnn
partnership, firm or Individual t eaSSS ?7n or
transact a banking business within thlsstate on
and after the taking effect of this act except bv
means of a corporation duly oreanlxwi rZ? 5?
purpose under the laws of 8i iSti AnS h
tlon of the provisions of tb.fi i sectta Nhafl'suMect
the corporation, partnership, firm or individual
offending to a penalty of twenty-five Ffts otn Li
lars for each day of the continustinn P dot
&$-Htigg33
this state as they exlstedrfor ? Ill .th,e. ,aws ot
shall be construed to mean 23? h,V?crf lal bank"
tutlon as shall. In addition ?oh?CJl nk'nff insti
Pwers. follow the n?PJ h ef r.-?ls of other
stltutions as shall. In addition to the exercise of
other powers, follow the practice s of reSlnir
deposits only upon the presentation of pa&sooka
Security?" !oaDS are ChIefly made "3 estate
aJ?eZ ii ?he term "lawful money" as used In this
sfitf1)e.con8tn,ed to mean all coin? United
fertffii il?iur 10t(i? old certificates, alive?
ro national bank notes, and aU other
TnTDey b or which iySereaiSS
s?JUeAby ? un,de? authority of the United
hf'lf circHlatlng medium, and shall l5!o
be construed to mean any form at certificate whwo?
inow or may hereafter beclar toTe htwiS
money of the United States v" " De Jawxux
ffiSlSS -thor oTpfc accounts
provisions CSF?0i4
this act Is not Intended to aS fh,hlwever- at
under the banking laws PoPf y P b r?Hf rSnIzed
Said board sbalf be and constitute i?S S1'
ing board, and4 succeisS? to the stoKo?
hoard as now existing as surh ntiff?ie. banking
records, books, files and pS thHS$ to f11 th
exercise all the powers tx&dfhSl' 1?,dshal
f4!JCh bSEd er the law Sf fhlsitatl dUUe3
of the state, and who at tS.?imSAe2n elector
naent, shall have had at least tS2Lf h!s aPP0lnt
experience In actual banft nm ars Poetical
ceive a salarv of three thnncEdwho sha re
Per year, and a clerk 0fsd K1,a,rs (53.000.00)
receive a salary of fiftS H' Yho shall
($1,500.00) per year and ffi l,n u"dred dollars
book-keeper anVan me filt a Sent
SSvOrn.1, SPEJK at ;thVpleaur2 V"
Joined upon them? and auch otbef dXaf ter en
devolve upon such offices Th nties as. usually
at least three years actual experience In practical
banking, to make an. examination of and into th
affairs of every corporation transacting: a banking
business and subject to the provisions of this ac:,
as often as shall be deemed necessary or proper
by the said state banking board, and at least twice
in each year. But no person thus appointed sha'.i
be permitted to examine the affairs of any bank
in which be has a personal Interest, or of which
be is, or within one year next preceding his ap
pointment was an officer or employe, and any and
all persons appointed under the provisions of this
section shall be subject to removal at the pleasure
of the governor. Said bank examiners so appoint
ed shall perform all the duties and exercise all
the functions of bank, examiners under the laws
of this state. Such secretary and bank examiners
shall each enter into a bond, to the state of Ne
braska, before taking their respective offices, with
surety or sureties to be approved by the governor,
the secretary's to be in thejsum of $25,000.00 and
each examiner's in the sum of $25,000.00.
Sec 7. The said banking board shall procure
and keep a. seal, upon which shall be engraved
the coat of arms of the state and the words "State
Banking Board of Nebraska" and all charters and
orders issued by said board shall be attested bv
said seal and the signatures of the said chairman
and secretary.
Sec S. Any bank examiner so appointed shall
have power to make a thorough examination into
all the books, papers and affairs of any corporation,
transacting a banking business In this state, and,
in. so doing, to administer oaths and affirmations,
and to examine on oath or affirmation the officers,
agents, and clerks of such corporation, touching
the. matters which they may be authorized and
directed to inquire Into and examine, and to sum
mon, and by attachment -compel the attendance of
any person or persons in this state to testify under
oath before them in relation to the affairs of such
corporation. The person or persons making such
examination shall make a full and detailed report
of the condition of such corporation, to the state
banking board. Provided, that any examiner ap
pointed under the provisions of this act who shall
knowingly and wilfully make any false or fraudu
lent report of the condition of anv bank whfch shall
have been examined by him, with the intent to aid
or abet the officers, owners or agents of such
bank, in continuing to operate an insolvent bank;
or it any such examiner shall receive or accept
any bribe or gratuity, given for the purpose of
inducing him to not file anyreport of an examin
ation of any bank made by him, or who shall
neglect to make an examination of any "bank by
reason of having received or accepted an: bribe
or gratuity, he shall be deemed guiitv of a" felony,
arid, on conviction thereof, shall be imprisoned
in the state penitentiary for not less than two, nor
more than, ten years. Provided, further, that such
bank examination shall be in the presence of at
least two of the board of directors of the bank
undergoing said examination, and it shall be the
duty of the examiner to incorporate in his report
herein referred to. the names of the directors in
whose presence the examination was made, and
such examination shall include, at least annuallv,
a verification from, sources outside ot said bank
of at least ten per cent in number of the, de
posits and loans. ... . ,k- -
Sec 9. Every person thus appointed to examine
into the affairs of banking corporations; shall re
ceive as compensation for bis services at the rate
of eighteen hundred ($1S00) dollars per annum
and all necessary traveling expenses incurred and
actually paid out in the performance of his duties
as such examiner, not to exceed one thousand
($1,000) dollars per annum, such traveling expenses
to be paid out of the general fund, upon his filing
with the state auditor an Itemized report of such,
expenses approved by the state banking board, or
any two members thereof. Every bank thus ex
amined shall pay to the state treasurer, for credit
of general fund, within ten days after the com
pletion of such examination, the following fees
?n.ba,5?c?. wlth a capital of fifteen thousand
($lo.000) dollars or less, fifteen ($15) dollars; for
a?-13?KIUL,caplt1 o more than fifteen thousand
5S'22R Jd9lIars .and less than fifty thousand
(150,009) dollars, twenty ($20) dollars; for banks
with a capital of fifty thousand ($50,000 dollars
ana less than one hundred fifty thnuvanri
($150,000) dollars; thirty ($30) dolbSs; SSd "?
banks -with one hundred fifty thousand ($150,600)
dollars or more, fifty ($50) dollars; provided that
not more than two such fees shall be paid in any
one calendar year. The examiner shall reportto
the state treasurer and state banking board within
five days from the completion of examinaUon. the
date thereof and the amount of fee due. Every
P apP&ted M uch examiner shall nSkc
SnSe.endonLevery year!, to tne ate banktag
boardideaned report under oath, of all feesre
ported by him under this act. and of all his neces
sary traveling expenses in the performance of hfs
duties as such examiner; and shall give a bond
K8. S3"! AM?? JS8& X&
fbra&Poved by the governor, condltioned for
Sarnie? Performan ot his SuTisucb
Sl10' ly du,y Qualified bank examiner an
polnted as aforesaid shall have authority TeTPn
Scered br the slate banking boa?a to teke pos
lawif thisasntlt.baftn iotafbMtotfffie
bank for a tVi ?? T2tia Possession of such
oanK ior a time sufficient to- make n. thnrnnch
examination into Its affairs and financial coSd?Sf n
?mfneUrPOthat t&fiftlllmt " " oS.Oby laid
v m , x ,at .sal" bank is insolvent, or Is ron-
SJ!Si.? itS buslness an unsafe or unauthorized
manner, or Is endangering the Inter fita ST
and 'authirftv n&lPfiF f uVgre?
the ron?rirht!hSad reta,n Possession of all
S!rT aScAfiS Sffi&iTft su2hProankty al
Jo'urt'ala'ins?6!0 filVal Processissued'by an?
P?SSertv hal hUnhtovankv or corporation whose
the ifato hfnv?S keri by such examiner, until
the ?Sorl mihS80? Can receive and act on
and have maJ?L the examiner of said bank,
provided. receiver appointed as hereinafter
co?DoV?UonTtoSi.b,e.unlawf,ul for anv Person or
t?a?act 2 linfc??1 a bank or to engage In or
haInff firs? :Jn buf ness In this, state without
naing first obtained 'a charter from the stata
lyE3