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Federal Reserve Bank of St. Louis
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FEDERAL DEPOSIT INSURANCE CORPORATION
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Federal Reserve Bank of St. Louis
•
Bank Depositors' Guaranty Law of Kansas was passed by the 1909 Legislature
This law was repealed on the 14th
and became effective on June 30, 1909.
day of March, 1929.
High Point - in February, 1922, out of 1108 banks there were 714 banks
which were members of the guaranty fund
LOw Point - in January, 1929, out of 854 banks there were 54 banks which
were members of the guaranty fund
Approximate number of banks belonging to Guaranty Fund, 1911 to date of
repeal:
-44-4-4v
A1
1911
1912
1913
1914
1915
1916
1917
-
-
442
462
481
508
526
546
577
1918
1919
1920
1921
1922
1923
1924
714 Banks, December 31, 1921
.-
613
649
683
714
698
681
651
1925 - 611
1926 - 399
1927 78
39
1928 March, 1929 - 34
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$16,732,000.00 +7'4'14- °414.
,
77/Y.24 676
10,240,031.99 4
184,608,466.92,4(y,?.z_
203
Total Capital
Total Surplus
Total Deposits
/I
*Number of failed guaranteed banks by years:
1910
1919
1920
1921
-
1
1
2
8
1922
1923
1924
1925
- 15
- 18
- 10
- 14
40,/y/x
1926
1927
1928
1920
- 27
- 15
3
1
*** Total Guaranty Fund certificates issued
**** Dividends paid
Balance unpaid certificates involving 52,029 creditors
Income into Guaranty Fund from all sources including
assessments paid by banks, interest paid on
accounts, forfeited bonds and collections
Disbursements from account (dividends paid from
Guaranty Fund)
Total costs to state banks as above
Total loss to guaranteed banks in reorganization
of American State Bank, Wichita, Kansas
Total cost to guaranteed banks
p-el‘t
$13,704,391.86
'
4.7,053,520.16 (77)
6,650,871.70
$ 2,788,774.14
2,771,445.41
$ 2,788,774.14
1,500,000.00
$ 4,288,77411
'
*31 of above number closed, paid in full
in full, 2 banks paid from final
amount
29
paid
of
banks
were
Out
this
forfeiture of bonds, paying 93% to creditors.
Only one bank, however,
out of the 29 participated in full from the Guaranty Fund, the other 28
paying from 14% to 90% out of their own assets.
Dividends paid from assets and Guaranty Fund
This amount includes total liability of Guaranty Fund.(
Total deposits assessed
Total assessments on banks
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
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S
GUARANTY OF BANK DEPOSITS
-
KANSAS
From Federal heserve Bulletin, Spetember 1925
VOLUNTARY PARTIOIPAT ION
•
more than five such assessments in any one
year. The number of banks participating and
Under the laws of two States—kansas and the
amount of the depositors' fund as given i
,filaranty
the
in
tion
Washington —participa
State
reports are as follows:
the
fund is optional. Under the Kansas law only
cent
per
10
of
surplus
d
uninapaire
banks with an
Number of
and generally only those which have been achanks
tively engaged in business for at least one year
Year
have been permitted to qualify for participation
Part
Total
'
in the.guaranty fund. These safeouardingtoroexpreverit
to
visions of the law were intended `
4[.7
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tension of the guaranty to unsound institutions, 1912_ -$41030!
499 i
9:;9
$117,537
SrC7, 838
_
arirt that they were fairly effective may be in- 1914
' 488,563
n79, 508
191,005
I
539
9k,7
1918_
601
cii.n.e
t
1,044
banks
hree
only
1918_
that
fact
the
from
ferred
676 I
1, 113
1920
1, 143, 292
733,430
703 I 1,876, 722
1, 094
on the fUnd.in the first 10 years of its operalltn. 1922
A ban*, entering the syStem is required to
1.deposit:bonds or cash in lieu of bon
In reply to inquiries recently submitted to
Of
or
o
amount
in
the
faith,
good
of
deuce
Kansas banking department it is stated
the
•le
every $100 6 of its average deposi
ticting.frOm such d sit he that the number of participating banks in
for guaran
e bonds May, 1925, was 649. The Kansas la,* does
'tatfind surplus.
aniount of
its not require immediate payment in fill of
or cash so epo ted are to be carri
s
I
th deposits in failed banks. When any. hank is
frt
"Guaranty
under the hea
as
ne
corn
e- found to be insolvent, the bank co
i
bank
the
'Idition
I.
easurer."
St,i
ates
cc
issues
and.
affairs
of
its
charge
takes
its
of
cent
per
1
of
:th
quit. • • pay one-tw
ets
•tal and surplus) to be upon which' dividends are paid as th
.. posits (less
aver
fun
the
,
of
are
liquidated
the
bank
fund,
guaranty
'tors'
• the bank
cre
efitnegr
qual approximately drawn upon for any balances left unp
also an arn.o
and
exbee
have
the
bank
of
resources
the
fund
the
in
oney
sh
a
ortionat
to i
the
y
of
present
the
In
May
hausted.
bar
• ipating
ucting losses.
afte
ailed
department had in hand 60 estates
tieth of 1
'ed annually oneare git :Ss
ount
tile
and
,
of
liquidation
process
in
banks
surpl
•
cent of average deposits less capital and
hitt not less than $20 as a minimum assessm • in the fund included only a balance tp cable
to the payment of ecrtilicataifillued on account
until the cash fund amounts to approxima
of one failed bank, and it is stated that one
$1,000,000 (not including cash deposited in
possibly two assessments would be required
or
dis
be
to
are
s
of bonds), when assessment
to complete payment on this estate. Accordtinued. Whenever the cash-fund is red u
ing to the last State report, 20 State banks,
below $500,000 additional Assessments of
including 16 institutions participating in the
twentieth of I per cent must be levied to
guaranty fund, failed in the two years ended
but
payable,
claims
and
'losses matured
September 1, 1922. As only three"banks
come on the fund prior to 1920, it is apparent
that a large proportion of the 60 estates now
in process of liquidation in the 'department
represent failures during 1923 and 1921.
•
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Federal Reserve Bank of St. Louis
S
KANSAS
Institutions inoluded.—Any bank doing business in
the State with an unimpaired surplus of 10 per cent
of its capital and any bank authorized to do business
in the State after the passage of the act which shall
have been actively engaged in business for one year
and having such surplus.
Participation.—Voluntary.
Character of deposits guaranteed.—A11 deposits not
otherwise secured; but the guaranty shall not apply to
•
a bank's obligations as indorser upon bills rediscounted,
to bills payable, to money borrowed, from its correspondents or others (any deposit on which a greater
rate of interest is paid than the rate approved by the
hank commissioner shill he considered money borrowed), or deposits or credits obtained by fraud or in
violation of law or evidence of debts fraudulently
issued, ,
11,10117and rate of (a) regular and (b) special assessmeVa.-z-(a) One-twentieth per cent of average guaranteed deposits less capital and surplus, minimum
assessment $20 annually. (b) When the guaranty
fund falls below $500,000 additional assessments play
be made to pay losses that have matured and become
(•laims payable on demand against the guaranty fund.
Not more than five such additional assessments of
one-twentieth per cent shall be made in any one year.
.1.n initial assessment of one-twentieth per cent of
average deposits eligible to guaranty less capital and
,urplus is made on banks entering this system at its
inauguration, and banks entering later are rellired to
contribute their proportionate share of monef then in
the guaranty fund after all losses have been paid.
Method of payment of depositors.—liank commissioner shall at earlietatilioment issue to each depositor
a certificate upon proor‘of claim. Any balance due on
ch_certificate after assets of bank have been realized
I dividends declared shall be paid by checks
dr
on the depositors' guaranty fund. If the guarant fund is not sufficient to pay all depositors of the
ba ,the special assessments provided for having been
male, then the depositors shall be paid pro rata and
the balance due shall be paid when the next assessment
is available.
Powers of State board or commissioner.—The bank
commissioner is authorized to levy assessments each
year until the fund is $1,000,000, and thereafter, if the
fund falls below $500,000, he is authorized to levy
additional assessments, not exceeding five in any one
year, in sufficient amounts to pay losses that have
matured and become claims payable ageing the guaranty fund. The commissioner is also ailthorized to
take charge of insolvent banks and wind up the affairs
of such banks and to issue certificates to depositors
upon proof of claim. The commissioner is also authorized to examine banks failing to pay assessments, and
if such banks are insolvent to liquidate them and if
solvent to cancel their certificate as guaranteed banks.
;la case of violations of the act the commissioner is
Mithorized to require compliance and if compliance is
not had to cancel the certificate of membership of the
bank.,
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Federal Reserve Bank of St. Louis
Disposition .of guaranty fund. --Th( guaranty fund
shall be deposited with the State treasurer subject to
the order of the bank commissioner.
Maximum assessment in any one year.- -Not more
than five assessments of one-t \cent it Ii per cent each
of the average guaranteed deposits less capital and
surplus shall be made in any one year.
Rate of interest on outstanding warrants or certificates of indebtedness.-Six per cent tiniest; a contract
rate exist on the deposit, then the certificate shall bear
the contract rate.
NOTE.—The State of Kansas, in addition to the
contributions to the guaranty fund as set out above,
requires each bank to deposit and maintain with the
State treasurer as .an evidence of good faith certain
securities (enumerated" the act) to the amount of
$500 for every $100,800 or fraction thereof of its
average deposits eligible' to guaranty less capital and
t irplus.
KANSAS
[Article 2 of Chapter 9 of lievised.Statutes of Kansas of 197.3)
Sec. 9-201. Application of guaranty act.
"Any incorporated State bank doing business in this
State imder the general banking laws of Kansas, having
a paidkup and unimpaired surplus fund equal to 10
per cent of its capital, and any bank which may after
the passage of this act be authorized to do business
in this State, and which shall have been actively
engaged in the business for at least one year, and
having such surplus fund, is hereby authorized and
empowered to participate in the assessments and
benefits and to be governed by the regulations of the
bank dat:itors' guaranty fund of the State of Kansas
herein
provided for: Provided, That before any
•
644
•
bank shall become a guaranteed bank within the
meaning of this act, a resolution of its board of directors, authorized by its stockholders, duly certified
by its president and secretary, asking therefor, in
form ta 'be provided by the bank commissioner, shall
be filed with said bank commissioner, who shall, upon
the filing of such resolution, make a rigid examination
of the affairs of such bank, and if it is found to be solvent, to be properly managed, and conducting its
business in strict accordance with the banking la
he shall, after the bank aliall have de osited with t
State treasurer bonds qiir money,
ereinafter provided ' e to such bank a certifi
stating in substatic
bank has cornplied„, h the provisions
of thi
that its deposito
e guaranteed by
the bank deposrtors' guaranty f
of the State of
Kansas, as herein provided."
Sec. 9-202. Deposit of bonds
money—Assessments—Guaranty of deposits. -.
"Before receiving such certificate from the bank
commissioner each bank entitled to the same adcording
to the preceding section shall, a8.n evidence of good
faith, deposit, and shall at all t
s maintain with the
St ate treasurer (subject to the o r of the banknominissi)ner, when countersigned -, y the auditor of
state I United Sta
bonds, Ka
State bonds, or the
bonds of any co
y, township,chool district, board
of education or
within the State of Kansas, to the
amount of $500
every $100,000 or fraction thereof
of its average d osits eligible to guaranty (less its
capital and surpl
as shown by its last four published
statements: Provided, That each bank shall so deposit not less than $500 and the State tr
aruser shall
issue his receipt therefor in triplicate, one o the bank,
one to the auditor of state, and one to , bank commissioner. Such bonds only shall be accepted as the
school fund commissioners of the State øf Kansas are
permitted to buy, and shall bear the certificate of the
attorney general of the State of Kansas stating that
in his opinion said bonds have been legally issued.
Said bonds, or cash in lieu thereof, shall bpt be charged
out of the assets of the bank, except is hereinafter
provided, but shall be carried in its assets under a
heading 'Guaranty fund with State Treasurer,' until
such time as said bank shalniefault in payment of
assessments hereinafter proviali for. In lieu of bonds,
the bank at its option ma deposit money, which
deposit shall be exchangeab for acceptable bonds
when the bank elects to ma
the substitution. In
addition to _above, each ban shall pay in cash an
amount equal% to one-twenti
of 1 per cent of its
average deposit% eligible to
ranty less its capital
and surplus, and the same
all be credited to the
bank depositors' guaranty fund with the State treasurer
subject to the order of the bank commissioner, and the
State treasurer shall issue his re
t therefor in triplicate, one to the bank, one to
*tor of state, and
one to the bank commiss.
*ded, That the
minimum assessment to s
rom any bank
shall be $20: Provided fur
y bank seeking
to participate in the szse
benefits of this
act after tin first *gaga
the year 1910
shall have bean„bliffO, sh
ass
an amount
approximatelrequal to its oportionate share of the
money then in the btkok epositers
uarant
after all losses shall loge been d
' the
t
of such assessment to be deter
the bank
commissioner. , The last above-mentioned assessment,
however, shall not be required of new banks formed by
the reorganization or consolidation of banks which
have previously complied with the terms of this act.
•
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Federal Reserve Bank of St. Louis
FEDERAL RESERVE BULLETIN
SEPTEMBER, 1925
Upon the deposit and acceptance of such bonds (or
money) and the payment of said assessment, then the
payment of such deposits of said hank as are specified
in this act shall be guaranteed a: herein provided and
the batik entitled to its certificate."
Sec. 9-203. Guaranty fund—Annual assessments.
"The bank commissioner shall, during the month of
uary of each year, make assessments of oneentieth of 1 per cent of the average guaranteed
osits, less capital and surplus of each batik (the
minimum assessment in any case to be $20), until the
cash fund accumulated and placed to the credit of the
bank depositors' guaranty fund shall be approximately
$1,000,000 over and above the cash deposited in lieu
of bonds, when he shall disoontinue such assessments.
Whenever said cash find has been reduced below
$500,000, additional assessments shall be made as
herein provided and then only in sufficient amounts to
pay losses that have matured and have become eliding
payable on demand against said guaranty fund: Prot.
vided, That not ore than five such assessments of onetwentieth of 1 r cent each shall be made in any one calendar year.
e treasurer of the State of Kansas shall
hold this fun n the State depository banks as provided
by law gove ng other State funds, subject to the order
of the bank mmissi ner, to be countersigned by the
auditor of ate, for the payment of depositors of failed
guaranteed banks aslhereinafter provided. • The State
treasurer shall credit this fund quarterly with its proportionate share ofInterest received fr.)m State funds,
upon the average
balance of said funds."
4
Sec. 9-204. Insol
"When any ba=all be found to be insolvent by
the bank commis
or, he shall take charge of such
bask, as provided
jaw, and presseed to wind up its
affairs; and he sh
the earlier* moment, issue to
each depositor a ce
ate upon proof of claim, bearing
6 per cent interest
annum, upon which dividends
shall be entered wh
aid, except where a contract
rate exists on the dep
in which case the certificate
shall bear interest at th contract rate. Notice of the
amount of each dividend to be paid creditors and the
date when such payment is to be made shall be published in two consecutive issues of a paper of general
circulation in the county or city in which said failed
bank is located, and a corresponding notice posted on
the doer of the receivers' office, and interest shall cease
on eaelexlividend on the day named in such notice.
The bank commissioner shall likewise publish a notice
of the ditte upon which he will make payments of any
balance due on such proof of claim, and intereiit shall
cease on the day so advertised and said proof Of claim
shall so state. After the officer in charge of the bank
shall have realized upon the assets of such bank, and
exhausted the double liability of its stbckholders, and
shall have paid all funds so collected in dividends to the
creditors he shall certify all balances ,lue on guaranteed
deposits'
Of any exist) to the bank commissioner, who
shall then, upon his approval of such certification, draw
checks upon the State treasurer, to be countersigned by
the auditor of state, payable out of the bank depositors'
guaranty fund in favor of each depositor for the balance
due ou such
of of claim as hereinafter provided.
If at any time tbe awsilable funds in the bank depositors' guaranty fund shall not be sufficient to pay all
guaranteed deposits of any failed bank, the five assessments herein provided for having been made, the bank
commissioner shall pay depositors pro rata and the
remainder shall be paid when the next assessment is
available: Provided, however, That whenever the bank
•
SKPTEtiBIM, 1925
FEDERAL RESERVE BULLETIN
commissioner shall have paid any dividend to the
depositors of any failed bank out of the bank depositone.
guaranty fund, then all claims and rights of.action of
such depositors so paid shall revert to the bankeommissioner for the benefit of said bank depositors'
guaranty fund, untit.said fund shall have been .fully
reimbursed for payttlents made on account of such
failed bank, witkonterest thereon at 3 per cent per
annum."
•
645
deposit not eligible to guaranty under the provisions
414-thiS act, and in assessing such bank this amount
shaii,be deducted from the total deposits."
Sec. 9-207. Record of deposits; rate of interest.
'Each guaranteed bank, and each State or private
bunk not guaranteed by this act, shall keep a corre,.t
rest rate and terms Of each deposit
record of the on which it has liaid or agreed to pay interest, andel:tall
,a statement theilof under asth to the bank
Sec. 9-205. Failure to pay assessments.
.
saioner quarterly.' 'After the Passage of thiseist
"A penalty of 50 per cent of the amount of sait *IVA:officer of any bank who shall pay interest :on,
assessments shall be added to the assessment of any different terms or in excess of a rate (which rate
bank not remitting as aforesaid within 30 days after be uniform within each county) that shall be appr
receipt of notice of such assessment from the bank by the bank commissioner from time to time, on a
bank, which shall have been form of deposits or pays any interest on any aavi
commissioner, and if ihan
assessed and notified
' foresaid, shall fail to remit deposit withdrawn before July 1, or January 1, next
the amount of said as
cut as herein provided, a following the date of. the deposit, or on any time
sufficient amount of its bonds (together with the un- certificate cashed before maturity, shall be deemed
expired coupons) shall be immediately sold by the to he reckless and may be removed from office as
bank commissioner at public sale and the proceeds provided by law, and such bank shall not be.perinitted
used to pay said assessment. Any balance remaining to participate in the benefits of this act: Provided,
from the proceeds of such sale after the payment of however, That any existing contract for higher rates
such assessment shall remain to the credit of the bank of interest entered into before the passage 0,this act
in the depositors' guaranty fund. The said balance, may,.„heyearried out unimpaired, and sugar existing
together with the remainder of the bonds (or cash in conteletiehall not disqualify a bank from participating
lien thereof) shall be forfeited to the bank depositors' in the benefits of this act. Any managing officer of
guaranty fund if the bank does not, within 60 days any bank guaranteed under this act, or any person
from defaultin payment of such assessment, remit the acting in its behalf or for its benefits, who shall herefull amount of such assessments and penalty to date, after pay or promise to pay any depositor, either
different
and restore the amount of its bonds, or money pledged, directly or indirectly, any rate of interest
as evidence of good faith. Upon the bank's failtre to terms'or in excess of or in addition to the ammum
this
of
terms
remit its assessments, according to the
rate of intereet permitted bY this act, or ho shall,
this act,
act, the bank commissioner shall immediately examine with intilmt to evade any of the provisions
inbe
to
such bank, and.if it is found in his judgment
pledge file time certificate or other obligatibn of such
bank
said
solvent, he shall take charge of and liquidate
hank as security fol the personal obligation of himself
according to law. If said bank be found solvent, the or any other person, or who shall display tiny card or
a
as
bank commissioner shall cancel its certificate
other advertising tending to convey the impression
guaranteed bank, and cause to be displayed in its that the deposits of the bank are guaranteed by the
place,
continuously
banking rooms, in a conspicuous
State of Kansas, either directly or indirectly, shall
for six months, a card not smaller than 20 inches by disqualify the bank from fer participation in the
as
reading
follows:
type,
bank depositors' guaranty fttillti and forfeit its bonds
30 inches, and in large, plain
'This bank has withdrawn from the bank depositors' or money deposited in lien thereof with the State
will
deposits
its
of
treasurer for the benefit of such fund. Any managing
guaranty fund and the guaranty
.' The date on this card officer of Any bank, or any Person acting iii its behalf
cease on and after
shall be a date six months after the first posting of such or for Re benefit, who shall display airy card or advertisement, or make ally statement tp the effect
card.
"Any bank electing to withdraw from the bank ithat its deposits are guaranteed by the; bank deposidepositors' guaranty fund may do so by giving notice to 'tors' guaranty and ef the State of Ka as, when the
the bank commissioner and displaying a card as afore- bank is not au °tired.so to do under e provisio.
six , , onths as afore- of this act, shall tiergyilty of a misdeme or, and u
said,
and at the expiration of the I
said may receive its bonds (provided , ways that said conviction thereof, shall be subject to a no of not leas
to date) when than $500 nor more than $1,000."
bank shall have paid assessments in f
the affairs of all failed banks in liquidation at the ex- Sec. 9-208. Reorganizations.
piration of said six months shall have been closed up
"Any trust company heretofore organized under the
and the bank shall have paid its assessments on account
laws of this State, and now in operation, may reorof same."
ganize as a State bank, under the laws of this State, b%
See. 9-208. What deposits secured.
tiling with the secretary of state an emended charte:
"All deposits not otherwise secured shall be guaran- signifying such purpose, to be approved by the charter
teed by this act; but such guaranty shall not apply board, and any private bank or national bank having
to a bank's obligations as indorser upon hills redis- the required capital and being otherwise qualified, may
counted, to bills payable, to money borrowed, from reorganize as a State bank, or any newly organized
its correspondents or others, and any deposit on which bank taking over the business of another bank, othera greater rate of interest is paid directly or indirectly wise qualified, may immediately *come a guaranteed
rio,approved by the bank com- bank by depositing bonds or money and paying its
x
by any one than the
pose of this act be considered assessments and otherwise complying with the promissioner, shall for t
art."
posit4 or credits obtained by visions of t
money borrowed; 6
fraud or in Violation of law or evidence of debt fraduBank retiring from business.
See.
9-208.
certify
shall
bank
guaranteed
Each
lently issued.
retiring fnqii
"A solvent guaranteed bank,'
under oath to the bank commissioner at the date of
each called statement the amount of money it has on business and liquidating its affairs:1S be entitled t,
•
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Federal Reserve Bank of St. Louis
S
646
FEDERAL RESERVE BULLETIN
receive back from the State treasurer its bonds or
money pledged, after.ell depositors in such bank and
all assessments on account of the guaranteed banks in
liquidstion have been paid in full, but not any part of
any Le' ised assessments that may be in the bank
depositor,' guaranty fund."
Sec. 9-210. Exchange of bonds or cash pledged.
"Banks may be permitted, in the discretion el the
bank commissioner, to exchange their boncia for others
acceptable under this net, or be allowed to deposit in
lieu thereof an equal amount in cash, which may in
turn be withdrawn upon the substitution of bonds
acceptable under this act."
•
Sec. 9-211. Violations of act.
If a guaranteed bank shall violate any provision of
the guaranty fund act, the bank commissioner* shall
require it to comply within 30 days with such provisions and if compliance is not had the bank commissioner shall cancel its certificate of membership in
I he guaranty fund and forfeit to said guaranty fund
its bonds deposited with the State treasurer. Such
cancellation of membership shall not relieve the bank
from the payment of assessments levied on account of
banks that failed or that were in charge of the-. bank
commissioner prier to the cancellation of such membership.
Sec. 9-212. Duties and liability of State treasurer
•
"All bonds placed in the State treasury under this
act shall be kept in said treasury separate from all
ether bonds and moneys and to the credit of the bond
account of the bank depositors' guaranty fund and
sliall be used for no other purpose. The State treasurer
shall'cause the coupons upon.the said bonds to be cut
30 days before maturity and sent or delivered to the
bank which deposited them, provided said bank shall
have paid all assessments in full to date. The State
treasurer shall deposit all moneys deposited in lieu
of bonds under the provisions of this act in some bank
the deposits of which are guaranteed under the provisions of this act, and all interest received thereon shall
be credited to the bank depositors' guaranty fund.
The State treasurer shall not be personally liable for
any money so deposited by him in a guaranteed bank."
Sec. 9-213. National banks.
Any national bank doing business in KanSasi upon
the approval of the State banking cemmissioner as to
its financial condition may participate in the assessments and benefits of the guaranty fund upon the
same terms and conditions as apply to State banks,
provided such national bank shall forward to the
bank commissioner detailed reports of its condition on
the dates of the usual call statements of State banks,
and shall submit to examination each year by his department as provided by the banking laws of Kansas,
and pay the usual fees therefor. Should a national
bank refuse to comply with any recommendations
made by the bank commissioner in conformity with
the provisions of the guaranty fund act, it shall be
subject to the penalties of the act and its certificate of
membership in the guaranty fund shall be canceled.
Sec. 9-216. Bonds not required from depositories.
"That all officers in this State having the custody
of county, township, city, or school funds, or who
may be charged by law with the duty of requiring
specific bonds for the security of such funds, when
deposited in banks or trust companies of this State,
shall not require such bonds from banks or trust corn-
•
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Federal Reserve Bank of St. Louis
SEPT1.101BEII, itc2.d
panies participating in the bank depositors' guaranty
fund of the State of Kansas, or from banks or trust
companies whose entire deposits are guaranteed by
a bond of indemnity issued by any surety company
authorized by the insurance commissioner of this
State, whenever such funds are protected by such
guaranty fund or surety company bond of indemnity.
Sec. 9-217. Officer requiring bond in violation of act.
"Any officer violating any of the provisions of
tion 1 of this act, upon complaint made by any persol,
interested to the county attorney of the county in
which such officer has his office or resides, shall he
removed-from his office, and it is made the duty of such,
county attorney to forthwith commence and prosecut
an action in the district court of his county for his
removal, mut upon csirriction thereof such court shall,
by its decree, remove such officer from his office :old
declare said office vacant."
DEPOSIT GUARANTY IN KANSAS
•
(FROM FEDERAL RESERVE BOARD FILES)
April 29, 1926
Memorandum - Mr. Van Fossen
Kansas:
•
Law became effective June 30, 1909.
The number of banks participating in the deposit guaranty plan,
which it will be recalled is voluntary, was 611 on December 10, 1925.
A recent decision of the Supreme Court of Kansas holds that participating
banks may withdraw on giving the required 6 months notice of their
intention to do so and that any unpaid assessments cannot be collected
from a bank after withdrawal, although the bonds deposited and carried
on the books of the banks as "Guaranty fund with State Treasurer" may be
retained and applied toward the payment of any unpaid assessments. It
is understood that at the present time there is about $1,000,000 in the
guaranty fund and approximately an equal amount of bonds deposited, against
which there are outstanding about $4,500,000 of certificates. The decision
of the Supreme Court referred to above it is thought is likely to result
in the wholesale withdrawal of participating banks and to mark the end
of the Kansas system. On December 10, 1925, the "Guaranty Fond with State
Treasurer" amounted to $960,910 as reported by state banks and trust companies, this item representing the amount of bonds deposited by such ban' .
On the same date the Bank Commissioner reported cash in fund $74,070.49
and bonds, $988,724.56.
January 31,_ 1927
Memorandum - Mr. Van Fossen
Kansas- The Kansas law was amended to discontinue interest on the liability of the guaranty fund to depositors of failed banks. If this amendment is not upheld by the Courts, interest charges will amount to about
$350,000 per annum as against total assessments of 1/2 of 1 percent of
$341,000 prior to recent withdrawals of banks from the system. If interest
is not paid, it would take something like 11 years to pay the obligations
on the basis of assessments levied. (See Commercial West, Oct. 23, 1926).
Summary of the Guaranty Bank De2ppkt_Law
Voluntary
compulsoiy
or
Date
effective
State
Compulsory
1909
Kansas
October 1, 1929
Remarks ImMr. Van Fosser
On September 1, 1926, all but
225 banks out of 973 in the
State had withdrawn or defaulted
on the last assessment. Withdrawal was made possible by decision of State
Supreme Court, but each bank agreed to forfeit the amount of bonds pledged
as the maximum penalty of the withdrawing member. Repealed in March, 1929.
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Federal Reserve Bank of St. Louis
-1-
•
Kansas - Continued - Page 2.
Memorandum of Mr. Foster
October 2, 1929
- The third State to remove the Guaranty Fund Law from its
statute books during the early part of 1929 was Kansas.
Unlike other States operating under the System, Kansas had at the time
of its adoption (1909) inserted the voluntary clause in respect to menbership. So many banks had withdrawn by September 1926 that the assets of
the fund had fallen far below the liabilities. Forfeiture of pledged
bonds as raximum penalty of withdrawal was more favorable than eventual
insolvency.
Kansas
Memorandum of Mr. Foster
•
Aril .11 .
1930
- The Kansas guaranty fund system, enacted in 1909, was
Kansas
voluntary as to membership, but most of the larger banks and the net
banks joined. On Septemler 1, 1926, all but 225 banks out of 973
in the state had withdrawn or defaulted on the last assessment. Withdrawrl was made possible by decision (April 10, 1926) of the State Suprene
Court, limiting the liability of the member banks to the amount of bonds
or cash they had on deposit in the guaranty fund. Law repealed on March
14, 1929. On February 18, 1929, the net liability of the fund amounted
to $7, 175, 314. During the twenty years' operation of the systen there
were 134 failures of guaranteed banks, five of which paid their depositcrr
in full out of their own assets. Depositors in 29 banks have been paid
in full and in 2 banks have been paid partially from the guaranty fund.
The amount paid from the fund during its life was $2,683,573. At the
time of repeal 31 state banks were active and had paid all their assessments.
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
Excerpt from
THE COLLAPSE OF BANK-DEPOSIT GUAT-aNTY IN OKLAHOMA kND ITS
PaITIO ,- i IN OTHER STATES
(From Quarterly Journal of Economics, Nova 19,3, a . l21-144)
KANSaS
Kansas adopted deposit guaranty in 1908. It wiia
remeabered
that it is optional with Kansaa state banks ahetner to pat theit deposits
under the arotection of the Guaranty Fund or not. The fiaures below
are from letuers from the Bank Commissioner's office, ten years apart.
June 1913
Number
Deposits
August 31,19a3
Number
DeaoAta
Guaranteea banks
Unguaranteed banks
472
446
71,040,906
42,707,937
691
381
3181,088013
63,412,082
All state banks
918
$113,748,843
1072
:244,500,a00
Total caaital at Lae latter date was 32.7,000,000 and surplus 114,000,000.
There here 266 national banks in Kansas June 30, 1923, with $18,004,000
capital, $9,0002000 surplus and 418a,000,000 deposits.
Most of the larger state banks rave always seemed hitherto to consider
it advantageous to have their deposits guaranteed. The relative gain
in the number of banks under guaranty is partially explained by the fact
that new hanks have found it easier to establish public confidence by
giving their depositors such protection.
Bank failures in Kansa:, have been comparable to those in Oklahoma.
Thirty-three banks were closed from January 1, 1919 to January 1, 1923.
One of them closed shortly after the retirement of its president, Vialter
Valson, as 3ank Commissioner. Mr. Wilson has stated that because of his
public auties ae was compelled to leave the management of the bank to
others. Eignt of the banks closed were not under guaranty. 2/
Kansas had a disaaaointing wheat yield this your, and corn was a
failure in the southern part of the state. Many banks that had been
holding on through the agricultural depression of the past three years
have finally succumbed.
Twenty-three state banks (four in one week) have been closed so
far this year, and four reopened. The Commisaioner has adopted the
8. Conversation with ex-Commissioner Foster.
9.
Circular Kansas State Bankers Association, July 2, 1923.
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Federal Reserve Bank of St. Louis
it
soon
policy of closin iana
reof,-hiz,Itions
less. He believes tnat
mor thoro housee clo3ed than while '
cleanings - can be haci erter they
LA, are oren
and runnin ,rithout ublir cbnAdence. 11 No Jioubt
ris.;ht.
With one Angie reccut exce,tion,2:7
bank failure in 14nS46 for ne.1.1; Len
under the considertions 3tated sn p. 10.
Lot Ot.i a
fact to o- interir
Some of the failure,) have been due to war :.nd readjustment, 8oz...a
to reckless disregard of the legi-.1 limitetion of borrowers' lines; n'
there is a distressins record of embezzlement, imsrisonment and sus .
The biggest failure Lh,t ever took place in Ksrisss occurred this &tamer
the American State Bank of Wienita. The bond account was found short
,500,000. It is said that, upon successive examirs.tions, bamn
with the bank for safekeepirk: wer.: exhibited z;.s the pro?ertj of
There were excessive loans to certsin oil interests, too, and the
Commissioner' says that the total losses will be over $2,000,000. The
bank had $4,000,000 deposits, less certain offsets, and its casital,
surplus, and profit accounts sere $400,000. Several officers are being
prosecuted.
Such a loss might wreck Lhe Guarnty Fund, and the Bank Commissioner
has a plan to reopen the bank. Citizens of '51chita have indicated
willingness to subscribe 5000 shares of new capital at $400 per seake, or
8.k,000m oloo, if the guaranteed bsnks of Kansas will agree to csrry 3 per
cent of their own deposits with the new bank, 46 part of their own legal
reserve. This agreement would be for a period of five years, but could
be terminated at any time if the ssnegement should prove unssiisfactory.
This would give the new bank $5,400,000 of deposits to start with. Many
guaranteed banks have sssented to the plan. Many nave not; and the
pression at the middle of October was that the plan might not succeed.
The Guaranty Fund has $860,0oo cash on hand, snd holds S1,140,000
of bonds to secure the payment of furture assessments. There are
t5,500,000 of Guaranty Certificates outstanding, two tSirds of which
the Commissioner ersects to be paid out of the assets of the failed
banks themselves. Meanwhile all the certificates are drawing interest
at 6 per cant if issued sgeiest non-interest bearing deposits, and i
the case of interest-bearing deposiss, at the rte such deposits b.,1
almost always 4 per cent. No certificates have Seen issued in the Ls
of the American State sans and some recent failures. ?„/ If it becomes
1. Conversation with Commissioher Peterson, and sress dispatches sin
la. That of the Bank of Beloit, Kansas, in Novemoer 1922.
about 1900,000 deposits.
It had
2. Address by Bank Commissioner Peterson, P,-rsons, Ksnsas,
October 1923.
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Federal Reserve Bank of St. Louis
-3-
necessary to issue, say, 4,500,000 in earrants in addition to the
alredy out, the intere:t, at an averao of 5 per cent,
:)e .500,000 annually, thi:, frdlin., of course, as liquivations
proceed.
Now the annual assesents for the Guaranty Fund are one
twentieth of 1 per cent of deposits. Four additional assessments,
making one quarter of 1 per cent in all, may be levied, ,rovided
that at the time of Lny levy-Tile cash in the Fund is below 1500,000.
The Commissioner has been criticised for not closing receiverships,
and thus depletin.; the Fund so us to make adaitional assessments
possible; but 'he sv3 that none are ready to be cloeed. Such asessments would of courle be unpopular with bankers. Only one additional
assessment has ever been levied. That wa,; by Commissioner Foster in
December 1922. Five assessments, :;he maximuft would brine in 1,450,000
against a possible interest bill of '4500,000. This calculation is
subject to many qualifications, but it suggeAs tie,t, the Kansas
experiment in guaranteeing deposits might go the wa.i of that in
Oklahoma. Confidence in the Fund has been well sustained. A Wichita
bankerd tells the writer thLA, when the American State Bank fbiled,
comparatively few depositors even went down to look in. Recently,
however, the numerous failures have disturbed some depositors; and some
banks, notwithstanding their deposits are guaranteed and themselves
strong, observe now and then a tendency to prefer national banks.
11 -7
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Federal Reserve Bank of St. Louis
140,.13,i,
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Federal Reserve Bank of St. Louis
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vol. 7 and Vol. 8. Nothing noted.
Vol. 9. Apr. 1913, p. 29. Notes U.S. Supreme Court decision on March 17 upholding
constitionality of law. (Abilene National 3ank case).
Sept. 1913, p. 24. Brief note--that of 919 state banks in Kansas, 473 are under
guaranty law. Amount in fund by books of state treasurer, $111,159.54. One assessment each year has been levied since law went into effect in middle of 1909, and
ftnd not yet drawn on. Amount of bends and cash inthe #good faith" fund, $355,977.19.
With Oct. 1913 issue, journal became (was succeeded by) The St. Louis Banker.
Vols. 11, 12, /3
Vols. 14-22.
Not received from Library of Gongress.
VolJ. 23-25, for 1927-1929.
•
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Federal Reserve Bank of St. Louis
Nothing noted
Nothing noted.
VII. KANSAS
Three other states enacted non-compulsory plans. A voluntary system
was set up in Kansas in 1909, providing that any bank that had been in
business a year and had unimpaired surplus of 10 per cent could qualify for
membership in the fund. On entry, banks were required to deposit bonds
or cash of $500 for each $100,000 of average unsecured deposits, to which
the guaranty was restricted. In addition, assessments were fixed at 1/20
of one per cent a year on average guaranteed deposits, less capital and
surplus, until the fund should total $1,000,000. Further assessments in
the same ratio, not exceeding five in one year, could be called for, to meet
payable claims should the fund fall below $500,000.
The minimum capital required for organizing a bank in this state was
$10,000 in places with population less than 500, with a rising scale for
larger places. In 1918,the State Bank Commissioner in his biennial report,
in commenting on bank chartering policies and on the increase in the number of state banks from 987 in 1916 to 1044 in 1918 said that "this increase
has been brought about by the Charter Board taking a broad view of the
needs of our state, and granting charters wherever there has been a showing made that there was need for increasing banking facilities."
When the guaranty plan went into effect in 1909 there were 757 state
banks with deposits of $84,800,000 in Kansas. National banks numbered
202 with deposits of $61,700,000. There were about 1760 persons per bank
in the state at this time. By 1912 the number of state banks had increased
to 890, a gain of 133 units, while their deposits rose to $96,900,000, a gain
of $12,100,000. The figures for the national banks in Kansas were virtually
unchanged during this period.
Membership in the Voluntary Plan
Of these 890 state banks in 1912, 456 had become members of the
voluntary guaranty plan. The larger banks entered the system more generally than the small banks so that whereas about 50 per cent of the state
banks as to numbers were under the guaranty plan, it covered about 60
per cent of the deposits in state banks as a whole.
[32)
•
•
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Federal Reserve Bank of St. Louis
Between 1912 and 1920 the number of state banks grew to 1096. This
was an increase of 206 units or 23 per cent. They held deposits of $291,400,000, an increase of $194,500,000, or 200 per cent. In this period the
number of guaranteed banks grew from 456 to 676,an increase of 220 units
or 48 per cent. Guaranteed state banks in 1920 had come to represent
through these increases over 61 per cent of all the state banks in the state,
the volume of their increases comprising all of the growth in the number
of state bank units. The guaranty banks held about 68 per cent of the
deposits in state banks, or approximately $199,600,000.
In this same period the number of national banks in Kansas grew
from 204 to 240, an increase of 36 units or a fraction over 17 per cent.
Their deposits rose from $60,700,000 to $143,100,000, a gain of $82,400,000
or almost 136 per cent.
These data show that in 1920 there was an aggregate of 1336 banking
units in the state. This made one bank for each 1320 persons as compared
with one for each 1760 persons ten years earlier. Ninety per cent of the
net increase in the number of banking units in the state during this decade
consisted of state guaranty plan banks.
•
A Three-Fold Banking Structure
At this point, on the eve of the 1920-21 depression, the banking structure in the state was made up as follows:
There were 240 national banks with deposits of $143,100,000; this represented about 18 per cent of the banks and 33 per cent of the deposits.
There were 420 state banks that were non-members of the guaranty system holding deposits of $91,800,000; this was 31 per cent of the banks and
21 per cent of the bank deposits in the state; it was 38 per cent of the state
banks and 31 per cent of their deposits.
There were 676 state guaranty fund banks holding $199,600,000 in
deposits; this was over 50 per cent of all banks in the state, and 46 per cent
of total deposits; it was 62 per cent of the state banks and 69 per cent of
their deposits.
This was the three-fold structure that was to face the test of the depression that began in 1920.
During the preceding ten years, embracing the first decade of the
guaranty plan in Kansas, there had been but eight state bank suspensions
there,of which six were non-guaranty banks and two were guaranty banks.
Depositors of the failed banks had promptly been paid in full and the plan
was hailed as an unqualified success as a means both for strengthening
banking and facilitating and insuring prompt payment of depositors.
[33)
•
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Federal Reserve Bank of St. Louis
Guaranty Banking Makes the Poorest Showing
aIMMIPMEINO.
In the ordeal of hard times that was now to come however, the guaranty system was to prove the weakest of the three parts of the banking
structure. Both the unguaranteed state banks and the national banks
made a better showing in the bank failure record.
During the two year period September 1920 to September 1922 there
were 23 suspensions of state chartered banks. Of these, 17 were members
of the guaranty plan and 6 were not. This was in the ratio of 2.5 per cent
of the number of guaranty banks in operation and of 1.4 per cent for the
non-guaranty state banks. During this period no national banks failed.
During 1922-24 there were 54 suspensions of state banks in Kansas.
Forty-two were guaranteed banks and 12 were unguaranteed. This was a
ratio of 5.9 per cent for the guaranteed banks, and of 3 per cent for the
unguaranteed state banks. In the same interval 4 national banks closed,
a ratio of 1.5 per cent of those in operation.
In 1924-26 there were 35 guaranteed banks suspended, a ratio of 5.3
per cent; 10 non-guaranteed state banks, a ratio of 2.6 per cent; and 2
national banks, a ratio of 8/10 of 1 per cent.
The State Bank Commissioner officially attributed these failures to incompetency,dishonesty,over-banking and the general fall in values of the
period. Thus, the guaranty plan, since the bulk of the failures occurred
in this part of the banking structure, plainly fostered by means of the blind
public confidence and lack of discrimination which it created, the entry
of these first three major causes of weakness into the banking situation,
instead of serving as a source of stronger banking conditions.
The Collapse of the Plan
•
•
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Federal Reserve Bank of St. Louis
Following this debacle of the guaranty plan, and under a court rule
fixing the liability of guaranteed banks at the amount of bonds on deposit
in the fund,an exodus of the members began, there remaining only 255 in
good standing in September 1926. The State Bank Commissioner expressed
the belief that under these conditions the fund could never meet its obligations and formally recommended repeal and liquidation of the scheme.
By 1928 the membership had fallen to 42.
The financial position of the fund at the end of 1926 showed total net
liabilities, mainly in the form of outstanding 6 per cent guaranty certificates issued to depositors of failed banks, of $6,500,000, with assets of
$1,115,000, leaving a deficit of over $5,000,000.
The Kansas plan was repealed in 1929. During the 20 years of its
existence there had been 212 failures of state banks in Kansas, of which
number, 152, or almost 72 per cent, were guaranteed banks. At no time
did the proportion of guaranteed banks to the total ntimber of state banks
amount to a ratio comparable to 72 per cent. During this 20-year period
the number of banks in the guaranty system ranged from 51 to 64 per cent
of the total number of state banks, with an average of less than 58 per
cent, so that the guaranteed part of the state banking structure contributed a disproportionate share of the number of bank failures in the
state.
The records of the fund show that guaranty certificates in the amount
of $13,595,000 had been issued to depositors of failed member banks.
Dividends to depositors to the amount of $6,420,000 were paid, of which
$2,685,000 came from contributions to the fund on the part of banks
through assessments and deposits in it. Five of the failed guaranty banks
were able to pay their depositors in full out of their own assets; in all, the
depositors of 29 guaranty banks were paid in full in the order of liquidation, and those of two others were paid in part. The depositors of the
remaining 121 banks received nothing. The deficit amounted to $7,175,000
at the abandonment of the plan.
•
Kansas Guaranty Law Faces
a Serious Crisis
By C. M. HARGER
Supreme Court Decides That Banks Operating Under the Law
May Withdraw by Forfeiting Bonds Deposited With State for the
Faithful Payment of Assessments,and That After Such Forfeiture
They May Not Be Again Assessed. Expected Effect of Ruling.
TER sixteen turbulent years, in
which the legislature made numerous amendments, the Kansas
bank guaranty law received its
most serious blow when on April 10
the Supreme Court ruled that banks
operating under the law may withdraw by
forfeiting their bonds deposited with the
state ($500 for each $100,000 of average
deposits eligible to guaranty, less capital
and surplus) for faithful payment of assessments and cannot be further assessed
to liquidate the claims pending against the
fund through the failure of other banks.
It is expected as one immediate tffect
of the decision that many banks will withdraw from the fund,eventually leaving less
institutions to assess, consequently less funds
from which to redeem the certificates issued to depositors of the failed banks be:owl the bonds held by the state and whatmay be recovered from the assets of
the suspended banks.
The Kansas guaranty law was the outgrowth of the progressive movement in politics. Adopted in 1909, it was made voluntary and about 700 banks joined the list of
guaranteed banks. They were permitted to
place signs reading, "Depositors are guaranteed by the depositors' Guaranty Fund of
the State of Kansas" but mostly they condensed this to "Deposits Guaranteed." An
assessment of one-twentieth of one per cent
of the average guaranteed deposits less capital and surplus was provided, with four
more assessments possible in one year if
needed to maintain the fund at $500,000.
Later the size of the fund was made $1.000.000, then reduced to the former figure. Certain deposits such as time certificates drawing interest were eliminated from the fund's
protection.
Three failures occurred prior to 1920 and
depositors were paid $83,050—in full. From
that date until January, 1923, eighty-six
banks of all kinds failed: since then there
have been other failures. The bank commissioner has now in the hands of his insolvency department—a general receiver in
control of all failed institutions—fifty
estates. The state, in its brief in the case
just decided, gives the condition of the
guaranty fund August 20, 1925, as follows:
qatutionalit). So it has not becti
of effort that the present sittia,po:
reached.
AF
/
Certificates issued to depositors
810.417,319
tificates outstanding Aug 20, 1925
5,484.052
..;e
:
fmtested
r
certificates (later held valid).
300,000
Estimated value of failed banks' assets.
2.236,000
Estimated interest accrued on certifi•
cates
685.506
Par value of bonds deposited by banks
1,005.224
Amount in guaranty fund
17,996
Deposits guaranteed June 2, 1925
140,707,759
Capital and surplus in guaranteed banks 24.581,313
Avatlal.le annually by assessments
350,000
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Federal Reserve Bank of St. Louis
'ack
The Right to Withdraw
ffin. •i
„,.
, 4'17;0!I
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Mal=••
HESE figures are stated to be approxTimately
correct, though some records
have not been perfect. The brief states that
on March 5, 1926, there were about $4,500,000 of certificates in the hands of depositors
of failed banks plus accrued interest at 6
per cent. Since then there have been other
failures and court decisions adding to that
amount while the assets' value is problematical. The attorneys representing eighteen
banks which refused to pay assessments and
declared their intention to withdraw from
the fund, estimate the obligations at $7,085.000 and the value of the failed bank assets
at $1,122.558, or a net obligation of $6,000.000. It is claimed that the utmost possible
revenue from assessments is $341,445. With
630 banks on the fund list and with interest
adding to the obligation (the legislature of
1925 abolished the interest on certificates but
the banks claim the act unconstitutional)
they declare it would take over 100 years
to pay out: without interest and with no
more failures it would require over twenty
years.
At a meeting of the bankers in the fund,
held April 19, the bank commissioner made
his estimate of the situation to date. This
gaie gross liabilities of $6,748,202 and the
probable value of the assets at $600,000.
These assets with the cash on hand and the
bonds up for deposit make a total estimated
resource of $2,565,580 and leaves the guaranty fund "in the red", if settled up now,
$4,182,622. The bankers in their meeting
adopted after long discussion a resolution
that they stand by the law until all claims
are paid or the legislature "strengthens or
repeals the law." If the law is repealed.
the bonds will be automatically returned to
the banks—but this was considered an unfair position for the bankers to take, according to the discussion at the meeting.
In 1925, responding to a strong message by Governor Ben S. Paulen who set
forth the fund's perilous condition and
urged some definite action in rescue, there
was enacted an amendment abolishing the 6
per cent interest on depositors' certificates
—a measure, however, of questioned con772
rrHE basic principle upon which the case
in the Supreme Court was argued related to the right of a bank to withdraw
from the guaranty fund, and the conditions
under which it might do so. affecting
the bonds on deposit with the state and
the assessments thereafter to be levied. The
state held that a bank could not be relieved
until all claims against the fund at the time of
withdrawal were liquidated and that the
bonds were forfeited tc pay these assessments so far as they would reach. The
banks held that under the original law' of
1909 withdrawal involved only paying assessments to date of withdrawal: posting, as required by law, a notice for six months.
stating intention to withdraw: notifying the
bank commissioner of such action, and then
the bank had a right to the return of its
bonds.
Back of this argument of the banks was
the contention that the acceptance of the
guaranty law b.y 700 banks was a contract
made in 1909 and the state could not by
legislation change that contract by later
legislation through amendment to the law
attempting to continue assessments to cover
all claims due at time of withdrawal. The
state held that the operation of the law was
under broad police powers and that the
intent of the law must be follom eel. The
Supreme Court decision allows the banks
to withdraw on six months' notice and sets
the amount of the bonds deposited as their
maximum liability.
Another decision given at the same time
holds that deposits in banks which have
sought to withdraw but where no public
notice was given are still under the guaranty. In the specific case a bank which had
been notified that it had been taken out of
the guaranteed list but no public notice
given, failed; the court held that the deposits were still guaranteed and that the
condition of the bank did not disturb the
depositors' rights and protection—such as
it is.
Still Has Advocates
r‘OUBTLESS
some plans will be proL.
,
posed for the rehabilitation of the
guaranty system, for it yet has advocates.
But many withdrawals are inevitable. Of
the 1013 state banks of the state only 630
t Continued on page 7871
/ay, /926
AMERICAN BANKERS ASSOCIATION JOURNAL
787
Kansas Guaranty
(Continued from page 772)
are in the list and by May 1st 53 had served
notice of intention to withdraw. With the
assets of the failed banks, the $1,000,000 in
bonds deposited by the banks and forfeited
and whatever fund is on hand, over $4,100,000 in depositors' certificates will have to
be paid. Roughly it will be one-fourth as
expensive for the guaranteed banks to forfeit their bonds as to submit to further
assessments. Any attempt to increase the
assessments materially would cause hardship
on many institutions. Proposals to have
the state assume the deficit would hardly
make headway as there is a feeling that the
guaranty system was on the whole a somewhat dubious policy, whatever may have
been its value in steadying public confidence
in time of stress. That it led to reckless
banking is held by many bankers who saw
institutions managed on expansive plans that
could have no basis in sound finance
receive liberal deposits because they were
"guaranteed."
Another problem which yet may have to
be settled by the supreme court is the
priority of claims of the $4,182,000 in certificates held in the state. Some are in the
hands of original owners; others have been
passed around or have been deposited for
collateral for loans in banks. If these are
paid pro rata, about 50 per cent of their
value will be realized. But if the certificates are paid in the order of issuance onehalf of the holders will get nothing. This
.opens a fine legal question on which the
: statutes are silent, their only reference being that when the guaranty fund is not
sufficient to meet claims against it depositors shall be paid pro rata and the remainder raised from future assessments against
the guaranteed banks. If no more assessments can be made, the court might hold
that only the pro rata shall be paid.
Public Funds Without Bonds
rrHAT the legislature next winter will
repeal the guaranty law seems now
probable though it may seek to reestablish it in some improved form. In
Oklahoma where a similar law was repealed two years ago no provision was made
to remunerate the holders of some $8,000,000 of certificates, though in that state the
membership in the guaranty list was compulsory. The Kansas statutes have even
provided that guaranteed banks may hold
public funds without giving bond as is required from national banks and state banks
not guaranteed. As a result of this law a
large amount of public funds is tied up in
the claims against failed banks which because guaranteed gave no bond for protection. Withdrawal from the fund will necessitate that many banks now public depositaries give bonds for protection of such
deposits.
This financial crisis of the guaranty fund
is what has been prophesied by many leading bankers of the state since its inception.
They admitted that as a fair weather law
it might work but that a period of stress
would engulf it in overwhelming debts, as
has been done. The frozen loans of the
past five years brought heavy burdens and
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Federal Reserve Bank of St. Louis
Nalt Peott,
Bureau of Canadian
Information
T
HE Canadian Pacific Railway through its
Bureau of Canadian Information, will furnish you with the latest reliable information
on every phase of industrial and agricultural development in
Canada. In our Reference Library, maintained at Montreal, are
complete data on natural resources, climate, labor, transportation, business openings, etc. Additional data is constantly being
added.
DEVELOPMENT BRANCH—If you are interested in the mining wea!th and industry of Canada or in the development or supply of industrial raw materials available from resources along the
Canadian Pacific Railway, you are invited to consult this Branch.
An expert staff is maintained to investigate information relative
to these resources and examine deposits in the field. Practical
information as to special opportunities for development, use of
by-products and markets, industrial crops, prospecting and
mining.
"Ask the Canadian Pacific about Canada — is not a mere
advertising slogan. It is an intimation ofservice—without
charge or obligation—that the information is available
and will be promptly forthcoming to those who desire it.
Canadian Pacific Railway Company
Department Colonization and Development
Windsor Station
J. S. Dennis
Montreal, Can.
Chief Commissioner
Official Notice
ISTATEMENT OF THE OWNERSHIP, MANAGEMENT, CIRCULATION, Etc., REQUIRED BY THE ACT OF CONGRESS
OF AUGUST 24, 1912, of the AMERICAN BANKERS ASSOCIATION JOURNAL., published monthly at New
York, N. Y., for April 1. 1926.
1State of New York, County of New York, ss. Before me, a Notary Public in and for the State and
county aforesaid, personally appeared James E. Clark, who, having been duly sworn according to law,
deposes and says that he is the editor of the AMERICAN BANKERS ASSOCIATION JOURNAL and that the
following is, to the best of his knowledge and belief, a true statement of the ownership, management (and
if a daily paper, the circulation), etc., of the aforesaid publication for the date shown in the above
caption, required by the Act of August 241 1912, embodied in section 411, Postal Laws and Regulations.
printed on the reverse of this form, to wit:
11. That the names and addresses of the publisher, editor, managing editor, and business managers are:
Publisher, F. N. Shepherd, 110 East 42nd Street, New York, N. Y.; editor, James E. Clark, 110 East 42nd
Street, New York, N. Y.; managing editor, none; business manager, James E. Clark. 110 East 42nd
Street. New York, N. Y.
V. That the owner is: (If owned by a corporation, its name and address must be stated and also
immediately thereunder the names and addresses of stockholders owning or holding one per cent or
more of total amount of stock. If not owned by a corporation, the names and addresses of the
individual owners must be given. If owned by a firm, company, or other unincorporated concern,
its name and address, as well as those of each individual member, must be given): The American
Bankers Association, 110 East 42nd Street, New York, N. Y. (A voluntary, unincorporated association
of banks: Oscar Wells, First National Bank. Birmingham, Ala., president, and Fred N. Shepherd, 110
East 42nd Street, New York, N. Y., executive manager.)
13. That the known bondholders, mortgagees, and other security holders owning or holding 1 per cent
or more of total amount of bonds, mortgages. or other securities are: None.
14. That the two paragraphs next above, giving the names of the owners, stockholders, and security
holders, if any, contain not only the list of stockholders and security holders as they appear upon the
books of the company but also, in cases where the stockholder or security holder appears upon the books
of the company as trustee or in any other fiduciary relation, the name of the person or corporation for
whom such trustee is acting, is given; also that the said two paragraphs contain statements embracing
affiant's full knowledge and belief as to the circumstances and conditions under which stockholders and
security holders who do not appear upon the books of the company as trustees, hold stock and securities
in a capacity other than that of a bona fide owner; and this affiant as no reason to believe that any other
person, association, or corporation has any interest direct or indit ...t in the said stock, bonds. or other
securities than as AO stated by him.
15. That the average number of copies of each issue of this publication sold or distributed. through the
mails or otherwise, to paid subscribers during the six months preceding the date shown above is.
(This information is required from daily publications only.)
JAMES E. CLARK
Editor
1Sworn to and subscribed before me this 15th day of March, 1926.
[SEAL]
Lucille P. Gropp. Notary Public.
1(My commission expires March 30. 1927.)
failures resulted as anticipated. Whether
or not it universally helped to obtain and
to hold business is also an open question.
In the average town are banks both guaranteed and not guaranteed; both have their
normal amounts of deposits, frequently the
non-guaranteed bank having the lead. Some
banks that have posted notices that they
would withdraw from the fund report that
it has made no noticeable difference in their
AMERICAN BANKERS ASSOCIATION JOURNAL
Get Long Profits
from Short Seasons~
The "Caterpillar" is
ready for work the
minute the frost is out
of the soil—when
winter rains are over.
The wide tracks ride
the soft spots. The
farmer works his soil
while it's"right"—
City and County and
State repair roads before the rush of traffic.
Plenty of power
crowds the work into
fewer days—the owner of a"Caterpillar"
Tractor finds less to
worry in short or wet
seasons!
May, 1926
has disposed of about one hundred ; consolidation is going on moderately; eventualrelaly the state may get back to a normal
tion of its banking power to the demands
of the state.
The elimination of the guaranty feature
should have a helpful effect on the business.
For years it has been a bone of contention,
the guaranteed bankers charging unfriendliness on the nationals and those outside the
fund. It has resulted in two banking associations, one for all the bankers and one
for those having guaranteed banks. These
will now doubtless coalesce, making a more
united front in the promotion of the financial
interests of the state and eliminating the
natural rivalries frequently appearing in
the varied ambitions of the members heretofore. Altogether it is salutary that the
air has finally been cleared and the exact
status of the guaranty fund established.
One of the Best Ways
to Build Business
HIS department is very firm in
its belief that one of the best ways
to build stronger and better banks
in lowa is to have greater interest taken
by the directors in their banks. In making
an analysis of the banks which have closed
in this state we find, almost without exception, that they were banks in which the
directors did not direct, and knew very little,
if anything, of what was going on until the
bank got into serious trouble. Officers of
banks owe it to themselves to divide the
responsibility by insisting that the directors
give proper attention to their bank."
The foregoing is quoted from a circular
letter to the state banks of Iowa by L. A.
Andrew, superintendent of the Department
of Banking of Iowa, to the state banks
under his jurisdiction, but that part of it
concerning the best way to build stronger
and better banks applies with equal force
to banks everywhere.
The department last September ordered
that meetings of directors in all banks under
its jurisdiction be held once a month, and
that reports of the meetings be forwarded
to the department within five days after
the meeting. As an aid to the directors the
department furnished a tentative program
for these monthly meetings, which is as
follows:
"Reading of oath of directors.
"Report by the active officers on the business of the bank during the past month to
include the main items of expense; comparison of earnings and expenses with the
previous year: a resume of earnings and
expenses since January 1; and a statement
of the general condition of the bank for
comparison with last year.
"Loan committee and officers to report .to
the directors the condition of the loans,
particularly the excess loans, if any, for all
of which they are directly responsible; also
in regard to bills payable, rediscounts, loans
which may become other real estate. etc.
"Discussion of the real estate item:. possibilities of disposing of the same and their
proper handling.
"Interest rate paid on deposits.
"Have one of the directors give a talk on
what he advises for increasing the business
66
Prices on
"Caterpillar"
Tractors
F. 0. B. Prort•,III
Sixty . • $5500
5-1 on . . 3650
2-Ton . 1950
P.O.B.Saa Ltandr•.
Calyern.
Sixty . $5500
Thirty . 3+00
CATERPILLAR TRACTOR CO.
Executive Offices: San Leandro,California,U.S. A.
Factories: Peoria,Illinois - San Leandro,California
New York Office: 50 Church Street
sm...L.
Beat
L
Co.
BEST CTractor
luring Company
HOLT
42116
ONOINOWIWARSIONON
deposits. The public which in the beginning perhaps was somewhat interested long
ago lost that interest. If any banks were
aided, it was those of small capital and
resources and in rural communities where
the assurance of "guaranty" perhaps held
deposits—may, be in the end proving a
liability rather than an asset when came
a time of depression. Certainly it did not
prevent failures, though it is claimed it did
lessen runs, for about the same proportion
of state banks that were guaranteed failed
as of those that were outside the list.
It will require six months before the withdrawals now going in can become effecThose taking this action do so
tive.
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because they pre fer to lose their deposit of
bonds, averaging large and small about
SI.600. to being responsible for five times
that amount in assessments—provided none
withdrew—and greater as the number of
guaranteed institutions decreases.
Kansas is admittedly over-banked. Counting state and national, it has 1270 banks,
an average of a bank to every 1400 persons or to every 350 families. They are
not quite so numerous as filling stations
but run the drug stores a close race. A
mushroom growth in the days of high prosperity in war times added hundreds of needless institutions, making the havoc of the
deflation period the more disastrous. Failure
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Federal Reserve Bank of St. Louis
•
•
oi
fr week ol,ded. October 5
gui.kranty in Aght
LAt68 (fru
Topea, Kansa,s,„ Oct. 4)
posit guaranty
copletine2; tiu-s voak hare on the Kansas
Alnd this morning. 'Ale rest of the orking v.eek will be my i offioial
traveling time back to Washington. Additi,nal time net week (as Itie will
go via anneapolis to spend another day or two with Peter and his family)
will be charged to annual leave.
;ork this wefk includes entering withdrawal ..ates of the banks
from the guaranty fund, and etttanscribing from the original emetics=
claim registcrs the total guaranteed deposits (as represented by gua:anty
fund certificates isued) and of other claims in the banks that, failed,
together Abla the amounts of pgyments by receive a and by the guaranty
Lund,as totalled in the CLUm registers. Xlso, obtained consi.erable
ilfolzation (not quits complete) on the bonds forfeited by tha banks that
withdrew, the 2roceede of which went to the fund i4ieu of additional
assessments.
•
•
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Federal Reserve Bank of St. Louis
•
/4C;,
..21.
4:1•.A(V.
Ledtr b
A,
/
....X, • • 4.3
Deposj.t
.L
,
t
.rived le.xe ionday
Bwik Coeisaioner the rest of the
records of the de;)osit guaranty fund.
.or_..•:d in t
in4iudn
offi
of the
f-reu.),n, on
In Kansas the fudd was adeinistered by the
eomuleA ner,
no guaranty fund cowLisaien, s- there are no winutes te go ever
as there were in the De.etas. The records that I h,ve been usinL are
two huge volu:..0e sh.evigg for each bunk that waa a Lember of the fund
the deposits on which oath assessment was based, an the azioent
the ascesemento and such informatien as dates of entry and terminathn.
In the back of the volumes are sumeary tables, which
not, heeL:ver,
cover the initial aesesee,eet nor tee first three of tIA) subsequent
annual aweezements. In order
have be recei.,ts fron: aseessments
comelete, I decide' to transcribe the data for the individuai banks
fo... tee) early annual as3essmerts„ add also for the initial 11380a1/0111,O.
The latter was importatt not on -yat the very beginning of :he fund, in
I909, bet also for subsequent years into the early 19201s. This XASX
is because the bunks entering later had to contribute a Hpropoetionate
sare of tie fttrid n, i. effects to Ay up that would have been the atieess—
;:.ents he.1 the joi:ed at th2: beginting or iueeidately won o;)enta7 in
,e ease .f new bans. This, with t.ko dates ef spatial asseonts, gives
us uod data on assessnent colloctions, Previously we had only recei.ts
by ZIONik fiscal years as reported 71“tx by the State Treasurer, enich
prxsan.,e1451:Auciviztely:11ux
.
!shoved la go annual fluctuatione that I had
to
net been able
understand.
Next ws;ek I All oA,er withdrawal dates on sk, worksheets, which
A.11 giv. us eotter data on the nul,ber of banks participating each y - se what informatien I can find on the bonds that most ol the tan e
2orf4ted u n Athdrawal (L. lieu of future asseeemente to pay dfkoaiter
of bz.eies that had failed). Also, receiv.:xship records in storege will
give better information that I obtained last year from .- .he ou.mry sheete
In the Bank Conrissionerts cffice.
Ixstimmld bov.
ocebt to finish the work here and be ready to start on
the j urney hoe beA.ore the end of himmankxx next week.
•
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Federal Reserve Bank of St. Louis
•
CW:jk
Stat
MEMORANDUM
TO:
Dr. Cramer
/r
FROM:
Clark Warburton
SUBJECT:
Report of work for week ended December 9
December 12, 1955
Reports of work of the staff of the Banking and Business Section are
attached. Sick leave - Mts. Payne, December 5; Mrs. Bergquist, December 9.
Economic develqpments and banking history
(Omitted from report of work for last week). Spent most of Sunday,
November 27, reviewing the Nebraska report written in 1942-43 and the
materials collected at that time, with notes on additional data needed.
Wednesday morning talked a few minutes with Earl S. Fullbrook, Dean of the
School of Business Administration cf the University of Nebraska, and also
with Professor C. B. Thoman, who teaches money and banking. Neither was
acluainted with the operations of the deposit guaranty system nor knew of any
studies of its operations.
Spent about a half day on Sunday, December 4, reviewing the Kansas report
completed and mimeographed in 1943 and the materials collected at that time,
with notes on additional data neeed.
Monday worked all day at the Kansas Department of Banking. Talked briefly
with Mr. Lindley, and then with Mrs. Elizabeth Moore, his secretary who is now
In charge of receivership data. She has a large binder with a sheet of data
for each failed bank, giving deposits at date of failure and percentage dividends paid with dates paid. Transcribed these data for the banks--both
guaranteed and nonguaranteed--that failed during the period of operation of
the guaranty fund, completing the task Tuesday morning. Was not able to
obtain the other data I wished--a more detailed annual statement of the receipts and expenditures of the fund than the figures we have from the annual
reports of the State Treasurer. The old records of the banking department
are now practically inaccessible, in storage in the capitol basement. The
Banking Department is now housed in a building off the capitol grounls, to
which the records were not moved. The Department expects to move in a few
months into the new State office building, no under construction; and after
that is done, to be able to have access to the old records. Mrs. Moore took
notes of the materials we would like, and will write us when she is able to
examine the records.
After completion of the work at the Department of Banking Tuesday forenoon,
visited the library of the Kansas Mate Historical Society for two hours.
Looked at the items listed in a letter we had received from the acting
librarian, and also at a file of newspaper clippings relating to banking.
Took notes on these but did not find anything of much importance. In the
afternoon drove to the University of Kansas at Lawrence. At the University
library I found no references to material on the guaranty or insurance of
deposits which we did not already know about. Talked with Prof. Leland
Pritchard, who teaches money and banking, and is to be head of the Department
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-2of Economics, which is to be separated from
the School of Business Administration. He did not know of any studies of
the Kansas system except the pamphlet
by Blocker (which we have at FDIC). However,
he introduced me to a student,
Wayne Angell, just beginning to work on a
history of banking in Kansas, who
will assist in obtainang further infor
mation that we may request.
On Wednesday drove from Topeka to Oklah
oma City. Thursday reviewed the
Oklahoma report completed and mimeo
graphed early in 1942, and the materials
collected at that time, with notes on
additional data needed; and called at
the office of the Bank Commissioner and
that of the Oklahoma Bankers Association. Talked a few minutes with Mt.
Mothersead, the Commissioner, who said he
thought the best material regarding the
results of liquidation of the failed
banks and operations of the deposit guara
nty fund would be in the court records
at the time of the settlement of the affai
rs of the fund. Arranged to come in
Monday morning to look at this material.
At the Oklahoma Bankers Association talked with
Mary Chapman, assistantsecretary, Thursday afternoon; and with Charles
L. Fuson, the executive-secretar.j,
Friday morning, who had just come back from a visit
to Washington, D. C. They
have not only a file of The Oklahoma Banker,
published by the Oklahoma Bankers
Association since 1909, which we had not been able
to locate at the Library of
Congress or any other library, but also of the
Bank Deposit Guarantee Journal
(1910-1914) and State Banker (1)1-1918) published
by the State Bank's. Section
of the Oklahoma Bankers Association and the succe
ssor State Bankers Association.
Mt. Fuson very kindly permitted me to bring these
journals, and annual reports
of the conventions of the Oklahoma Bankers Associatio
n, to the Clock Inn Motel,
where we are staying, as he did not hlve a very
good place for me to work. By
Friday night I had reviewed, taking notes, the issue
s of The Oklahoma Banker
for the years 1910-1919; and expect to spend consi
derable time over the week-end
on the remaining issues up to 1929 and the other journ
als.
Will remain in Oklahoma City long enough next week
to complete the review
of the jouraals and the material at the Bank Commission
er's office. Will also
visit the library of the Oklahoma Historical Society,
and that of the University
of Oklahoma at Norman, a few miles south of Oklah
oma City.
I am assuming that it will be appropriate for me
to take two or three days
compensatory leave, after completing work at Austi
n, for the time spent week-ends
on the deposit guaranty studies.
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Federal Reserve Bank of St. Louis
KANSAS STATE HISTORICAAOCIETY
NYLE
H.
MILLER, SECRETARY
•
OFFICERS
F. D. FARRELL, MANHATTAN, PRESIDENT
WILFORD RIEGLE, EMPORIA, VICE-PRESIDENT
ROLLA CLYMER, EL DORADO, VICE-PRESIDENT
EXECUTIVE COMMITTEE
WILL T. BECK, HOLTON
CHARLES M. CORRELL, MANHATTAN
JOHN S. DAWSON, TOPEKA
FRANK HAUCKE, COUNCIL GROVE
T. M. LILLARD, TOPEKA
EDGAR LANGSDORF, ASSISTANT SECRETARY
MRS. LELA BARNES, TREASURER
HELEN M. McFARLAND, LIBRARIAN
ROBERT W. RICHMOND, STATE ARCHIVIST
KIRKE MECHEM, EDITOR
TOPEKA
October
20, 1955
Mr. Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
I am afraid I did not realize when I wrote you before that the Kansas
State Rankers Association was an entirely different organization from the
Kansas Bankers Association. We do not have the proceedings of the Kansas
State Bankers Association meetings for the years in which you are interested and I have not been able to find them in any of the Topeka libraries.
S
We are prohibited by law from lending our material unless we have it
in duplicate. I am listing below some of the entries in our catalogue on
the deposit guaranty law:
Kansas State Bankers Association. A new argument on the
guaranty question. n.d. 4p.
Bradley, J. T. Guarantee of deposits, administered by the
state. (in Proceedings of the Kansas Bankers Association. 1909. p. 70-76)
--•
Kansas State Bankers Association. A discussion; a farmer- '
depositor learns much about the Kansas bank guaranty law.
Washington, D. C. (1911) 16p.
Kansas Bankers Association. Executive Committee. (Letter
relative to the deposit guarantee law sent to bankers
in the state. Dated Topeka, Jan. 16, 1908. (Topeka
Capital, Jan. 2h, 1908.)
Bankers' Association defends guaranty bank deposit law.
(Topeka Capital, Sept. 2, 1909)
v
Lt-fl
y
04,4 ori -
If any of the articles listed above interest you we can have photostatic copies or microfilm copies made. Photostatic copies are approximately .35O a page for the first copy (negative) and microfilming is
somewhat less expensive but there is a minimum charge of 0.00.
Yours very truly,
a)z,e,„,t,
•
Pcc—t-t-L-
Alberta Pantle
Acting Librarian
AP:jb
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_J
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Federal Reserve Bank of St. Louis
AT
CW:EVP
MAY 17) 1956
Mr. G. W. Lindley
Assistsnt Bank Commissioner
Banking Department
State of Kansas
Topeka, Kansas
Dear Mr. Lindley:
In February I wrote you that I hoped to visit the Dakotas
IL the early summer, and to stop at Topeka to make use of the
records of the bank depositors' guaranty fund that you have located.
This trip has been postponed until the late summer or autumn, and
I now expect to be in Topeka for this purpose sometime in October.
Very truly yours,
Clark Warburton
Chief, Banking end Business Section
Division of Research aud Statistics
STAT
CW:evp
February 13, 1956
Mr. G. W. Lindley
Assistant Bank Commissioner
Banking Department
State of Kansas
Topeka, Kansas
Dear Mr. Lindley:
Your letter of February 9, stating that you have located
some of the records of the bank depositors' guaranty fund, is most
welcome indeed.
For the next three months I will be busy here making use
of the material I collected from the four States I visited in
December and January. However, I hope to be able to visit the Dakotas
in the early summer, to obtain unpublished information on the
deposit guaranty systems of those States, and will plan on visiting
your office at that time to make use of the materials you now have
available.
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Federal Reserve Bank of St. Louis
Very truly yours,
Clark Warburton
Chief, Banking and Business Section
Division of Research and Statistics
NNW
R.
B.
Medlin
NAXIOCKAtNa
I w Ar9)
BANK COMMISSIONER
STATE OF KANSAS
NN\NP
G. W. LINDLEY
ASST. BANK CaMISSIONER
BANKING DEPARTMENT
TOPEKA
•
February €;),
Mr. Clark Warburton
Chief, Bankino and Business Section
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Warburton:
Some time ago when you were in our office you asked
if we could obtain some additional information for you relative
to the bank depositors' guaranty fund.
•
lie have located some old records concerning the
guaranty fund, which we believe will (Ave you most of the
information you asked for; however, this data is contained
in several books and it would take some little time to compile
it.
We are wondering if you are going to be in this
locality in the near future, and, if so, if you would care
to stop and check the records for the desired statistics.
Very truly yours
G. W. Lindley
Assistant Bank Commissioner
EM
•
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CW:jk
Stat
January 26, 1956
Mr. G. W. Lindley
Acting State Bank Commissioner
Topeka, Kansas
Dear Mr. Lindley:
Mr. Clark Warburton has returned from his
trip to
several States that formerly had deposit guaran
ty systems
in operation. He has told me about the
material that he
obtained from your office. On behalf of
the Corporation,
want to thank you and Mks. Moore for your
splendid
cooperation in making it possible for him to
obtain so
much information about the Kanadiftua2.
Very truly yours,
Edison R. Cramer, Chief
Division of Research and Statistics
•
UNIVERSITY OF KANSAS
SCHOOL OF BUSINESS
•
LAWRENCE
DEPARTMENT OF ECONOMICS
March 23, 1956
Dr. Clark Warburton
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Dr. Warburton:
To date I have been able to uncover the assessment payments of only one
banks the State Bank of Ottawa. Mr. C. W. Hegberg, president, did me
the favor of searching through the minute books of the 1920s, as well
as is earning and expense reports. They showed the following assessments:
1921
•
1922
1923
1924
1925
1926
$284.34
446.07
213.49
647.07
1,500.00 (approximate; other items were grouped with this assessment)
217.75 (The Ottawa bank withdrew April 28,1926)
Bonds amounting to $2,500 were charged off.
Deposits ran from $470,000 to $550,o00 during this period.
It appears that a special assessment of 1/20 of 1 percent was paid in 1922,
1/10 of i percent in 1924, and of 1/5 or 1/4 of 1 percent in 1925. I am
sorry to not be able to supply you with the dates of these assessments.
In the event that I am able to acquire additional material, I will forward
it to you.
Sincerely yours,
•
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Federal Reserve Bank of St. Louis
UNIVERSITY OF KANSAS
SCHOOL OF BUSINESS
S
LAWRENCE
DEPARTMENT OF ECONOMICS
February 24, 1956
Dr. Clark Warburton
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Dr. Warburton:
I want to thank you for sending the two copies of your study of deposit
guaranty in Kansas. This study is very helpful in my assimilation of
material for a history of banking in Kansas.
To date I do not have information concerning the levying of special
assessments. I do expect to receive some material in the next two
or three weeks as a result of the interviews made this past week.
The chief difficulty seems to be that many of the banks have not kept
journal records or profit and loss statements on hand, consequently
the data cannot be easily secured. Nevertheless, I am hopeful that
several of the bankers will be able to supply the needed information.
I will forward the information procured, whether possitive or negative,
at the earliest date.
Please inform me of any other task in which I may be of service to you.
Sincerely yours,
Wayne Angell
•
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Federal Reserve Bank of St. Louis
•
•
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D. C.
February 17, 1956
Please make the following changes in the List of State Banking
Authorities dated January 3, 1956:
KANSAS
From - Gordon W. Lindley
Acting Bank Commissioner
Topeka, Kansas
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Federal Reserve Bank of St. Louis
To - Ralph B. Medlin
Bank Commissioner
Topeka, Kansas
UNIVERSITY OF KANSAS
SCHOOL OF BUSINESS
•
LAWRENCE
DEPARTMENT OF ECONOMICS
Febr. 1, 196
Clark Warburton, Principal Economist
Federal Depnsit Insurance Corporation
Washington 2t, P.C.
Pear
Clark:
The dupll_cate copies of PrPOSIT MAPANTY IN YAMAS
came today, and I want to express my very sincere
appreciation of this favor.
I have turned your letter over to Mr. Wayne Angell who
as you know is working on the history of commercial
banking in Yansas. He will attempt to get the informatinn requested as son as possible.
If there is anything we are able to do for you do not
hesitate to call on us.
With best regards,
Sincerely,
TP:cf
•
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Federal Reserve Bank of St. Louis
Leland J. Pritchard
Professor of Finance and
Ch. Pent. of 7conomics
Stat
CW:jk
January 27,
1956
Professor Leland Pritchard
Department of Economics
University of Kansas
Lawrence, Kansas
Dear Professor Pritchard:
By this time you must think I have forgotten my promise to send
you our study of deposit guaranty in Kansas, in the form in which it
was prepared in the early 19401 s. Two copies of the report are being
sent to you under separate cover. my trip took more time than I had
anticipated, and I did not return to my office here until this week.
After I talked with you and Mr. Angell, one point occurred to me
on which Mt. Angell might possibly find a bit of information for us.
In Table 11 of our study* (page 50), figures are given of the amount
of assessments collected each year. The regular assessment (which
would be the minimum) was 1/20 of 1 percent of deposits covered by
the guaranty, and special assessments could be levied when needed to
make a maximum of not more than 1/4 of 1 percent (see pages 5 and 47
of the report). But the rates actually levied during each calendar
year are net available In the published data regarding the fund.
/f Mt. Angell should run across a bank, in his travels through the
State, which participated in the deposit guaranty system and which has
a record of its assessment payments and how they were computed, it
would be very helpful to US to have a listing of the number of assessments and rates each year.
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Federal Reserve Bank of St. Louis
With my best regards to you and to Mr. Angell.
Sincerely yours,
Clark Warburton
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CW:Ik
Stat
January 26, 1956
Mr. J. Floyd McLain
Director of Banking
Lincoln 9, Nebraska
Dear Mr. *Lain:
Mr. Clark Warburton has returned from his trip to
several States that formerly had deposit guaranty syste
ms
in operation. He has told me about the material that
he
obtained from your office. On behalf of the Corporatio
n,
I want to thank you and Mr. Haines for your splendid cooperation in making it possible for him to obtain so much infor
mation about the Nebraska fund.
Very truly yours,
Edison R. Cramer, Chief
Division of Research and Statistics
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Federal Reserve Bank of St. Louis
Uncoln, ,ebraska
December 1, 195f
r. Gordon W. LAndley
Acting Bank Corrvissioner
Topeka, kansas
Deer •r.
Referring to
!-nd to your kind reply
expect to be in opeke
to call at ypur office
Dr. jramer's letter of november 7
of the 10th, this is to say that I
11, pnd will plan
next Monday, t e
in the morning.
Very sincerely yours
31prk ':,arburton
STATE OF KANSAS
G. W. LINDLEY
ACTING STATE BANK COMMISSIONER
BANKING DEPARTMENT
•
TOPEKA
November 10, 1955
Mr. Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
We are in receipt of your letter of November 7, 1955,
and are pleased to receive the mimeographed copy of the report
on deposit guaranty in Kansas, which was compiled by one of
your staff, Mr. Clark Warburton. I am sure this gives a great
amount of constructive information, and I will be more than
happy to study it at my leisure.
Concerning Mr. Warburton obtaining further information from our records pertaining to the guaranty fund and the
results of liquidations of failed banks, I would say that this
would be rather problematical, as this information has been
filed for many years and just how complete the details are I
could not say at this time.
We will be glad to have Mr. Warburton call on us the
latter part of this month, or the first of December, and will
assist him in every way to obtain the desired information.
Very truly yours
G. W. Lindley
Acting State Bank Commissioner
GlEtEM
)2
•
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Federal Reserve Bank of St. Louis
aka ivro,(,:,
),9
AAcif-rm
Stet
CW:jk
November
7, 1955
Mr. Gordon W. Lindley
Acting Bank Commissioner
Topeka, Kansas
Dear Mr. Lindley:
Soon after the beginning of Federal deposit insurance, we
began to collect information on the experience of various States with
deposit guaranty. Our studies of these State systems were not brought
to completion at that time. They have recently been resumed, and we
are now preparing reports on each of them which we plan to complete for
publication.
In the ease of Kamm, a report prepared by Clark Warburton,
of our staff, vas almograybad but given very little circulation. A
copy of this report is enclosed. We are particularly anxious to revise
and amplify the annual data in Table 11, page 50, adding a column showing
the assessment rate levied in each year.
We are writing to ask whether records pertaining to the guaranty
fund and the results of li:]uidation of the failed banks, which we presume
may now be in archives or Storage, would be available for the use of a
member of our staff? Mr. Warburton is expecting to be in Topeka at the
end of this month or the first of December, and if useful material is
available mould like to spend a day or a few days amplifying and correcting
our worksheets dealing with this material.
We shall be very grtefIll to you for any material that can be
made available, and also for any criticisms or other comments on the
report as adimaographad.
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Very truly yours,
Edison N. Cramer, Chief
Division of Research and Statistics
Lincoln, -ewracta
December 1, 1945f,
Gordon W. LAndley
Acting Bank Commissioner
Topeka, Kansas
Dear .r.
Referrin7 to
,nd to your hind reply
expect to be
_opeke
to cell nt pp-r office
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Federal Reserve Bank of St. Louis
Dr. Cromer's letter of November 7
of the 10th, this is to say that I
next Monday, t e 5th, and will plan
in the morning.
Very sincerely yours
Clork 'A'arburton
HISTORY OF KANSAS BANK DEPOSITORS GUARANTY LAW
The Kansas Bank Depositors Guaranty Law went into effect June 30, 1909.
Membership was voluntary, and, in order to participate in the Guaranty Fund, it
was necessary for a state bank to make application and submit to an examination.
When the applying bank was found eligible for membership, it paid the initial
assessment and put up with the bank commissioner $500 in Kansas or Government bonds
for each $100,000 of its average deposits, less capital and surplus, as a guarantee
that it would pay all assessments. Said assessments were to be one-twentieth of
one per cent of the guaranteed deposits and not to exceed five assessments in any
one year. Most of the large banks and all of the new banks took membership. The
maximum number of banks that came under the Guaranty Law during its existence was
714.
Prior to 1920, only two guaranteed banks failed and the depositors were
paid $83,050 in full. However, between 1920 and 1926, 108 guaranteed banks failed
and certificates bearing six per cent interest were issued to the depositors.
This resulted in the Guaranty Fund being hopelessly involved with a net liability
of $6,503,817.99, less assets of $1,114,832.58. To complete the breakdown of the
system, a number of guaranteed state banks brought suit in the State Supreme Court
in order to determine their liability to the Guaranty Fund. The oourt handed down
an opinion on April 10, 1926, limiting the liability of the member banks to the
amount of bonds or cash they had on deposit in the Guaranty Fund. Immediately the
guaranteed banks began to withdraw from the fund and forfeited their bonds to an
average amount of $1,600 each.
On - July 10, 1928, there were only 40 banks paying their assessments. The
Guaranty Law provided that the banks should be paid in full in the order in which
they were finally liquidated. On April 7, 1928, the State Supreme Court directed
the State Bank Commissioner to sell the bonds remaining and pay depositors. The
question involved was the order in which depositors should be paid. There were
26 banks fully liquidated but there was only money enough to pay in full the
depositors of 9 banks, basing priority on the date of liquidation. The 10th and
11th banks were held to have liquidated on the same day, so they divided what was
left after the first 9 banks had been paid in full. Holders of certificates in
other failed banks received nothing.
According to the records of the Bank Commissioner, on February 18, 1929,
the certificates outstanding in the hands of depositors in failed banks totaled
$13,595,249.19. Dividends had been paid to these depositors to the extent of
$6,419,935.64, leaving a net liability of the Guaranty Fund of $7,175,313.55.
During the 20 years of existence of the Guaranty Fund in Kansas, there
were 204 failures of which 134 were of guaranteed banks. Five of the 1934 guaranteed
bank failures paid their depositors in full out of their own assets. Depositors
in 29 banks were paid in full and 2 banks have been paid partially from the Guaranty
Fund. The total amount of money paid from the Guaranty Fund during its life was
$2,683,572.82. At the time cf the repeal of the Guaranty Law, March 14, 1929, only
31 state banks were active and had paid all of their assessments up to that time.
Bonds and money, totaling $24,000, deposited by these banks with the State Treasurer
as security for payment of assessments, were ordered returned.
•
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
Stat
October 10, 1955
Miss Alberta Fantle, Acting Librarian
Kansas State Bistorical Society
Topeka, Kansas
Dear Miss Fantle:
We want to thank you very such for your letter of
August 30 regarding material on the Kansas State Bankers
Association. Would you be able to make this material, or portions of it which relate to deposit guaranty, available to us
on inter-library loan? We will be glad to pay the cost of
sending it to us.
Very truly yours,
Edison I. Cramer, Chief
Division of Research and Statistics
KANSAS STATE HISTORIC. SOCIETY
NYLE
OFFICERS
F. D. FARRELL, MANHATTAN, PRESIDENT
WILFORD RIEGLE, EMPORIA, VICE-PRESIDENT
ROLLA CLYMER. EL DORADO, VICE-PRESIDENT
EXECUTIVE COMMITTEE
WILL T. BECK, HOLTON
CHARLES M. CORRELL, MANHATTAN
JOHN S. DAWSON, TOPEKA
FRANK HAUCKE. COUNCIL GROVE
T. M. LILLARD, TOPEKA
H. MILLER, SECRETARY
EDGAR LANGSDORF, ASSISTANT SECRETARY
MRS. LELA BARNES, TREASURER
HELEN M. McFARLAND, LIBRARIAN
ROBERT W. RICHMOND, STATE ARCHIVIST
KIRKE MECHEM, EDITOR
TOPEKA
August 30, 1955
Mr. Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
•
We have considerable material on the Kansas State
Bankers Association. This material consists of an extensive
clipping file, the proceedings of the Kansas State Bankers
Association covering the period in which you are interested
and some special subjects and studies issued by the organization. There is no mention in the way of special studies
on the deposit guaranty question but the clippings and proceedings have a great del on the subject in 1908 and the
years following.
Sincerely yours,
Alberta Pantle
Acting Librarian
AP:jb
•
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Federal Reserve Bank of St. Louis
H1':evp
bzwr
August 23, 1955
Mr. Kyle Miller, Secretary
Historical Society
Topeka, Kansas
Dear Mr. Miller:
In connection with our study pertaining to the history
of deposit guaranty in Kansas we would like to obtain as much
material as possible about the Kansas State Bankers Association.
We understand that this Association operated for a period about
the time when deposit guaranty was being launched in Kansas (1909),
that it had annual conventions and carried on a great deal of
publicity with respect to deposit guaranty.
We would like to know whether you have any published
material originating with the Kansas State Bankers Association in
your archives. If so, can you give us any indication of its
character (such as pamphlets, annual reports, special studies,
papers, etc.)?
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Federal Reserve Bank of St. Louis
Very truly yours,
Edison H. Cramer, Chief
Division of Research and Statistics
OFFICERS
•
OFFICERS
M. R. YOUNG, PRESIDENT
FRED M. BOWMAN
PRESIDENT, FIRST NATIONAL BANK
EXECUTIVE SECRETARY. TOPEKA
DODGE CITY
CARL A. BOWMAN
SECRETARY. TOPEKA
C. W. STARR. VICE-PRESIDENT
MARIE ERESCH
PRESIDENT. CITIZENS STATE BANK
ASSISTANT SECRETARY. TOPEKA
ELIZABETH PROCTOR
HIAWATHA. KANSAS
OFFICE MANAGER. TOPEKA
HELEN MILLS
B. C. MORRIS. TREASURER
FLORENCE METZGER
PRESIDENT, LYNDON STATE BANK
OFFICE SECRETARIES TOPEKA
TOPEKAJEARIUA
LYNDON. KANSAS
August 17, 1955
OFFICE OF
EXEOUTWESEORETARYANOSEORETARY
AIR MAIL
SUITE 624
NATIONAL BANK OF TOPEKA BUILDING
PHONE 5-3448
Mr. Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
Replying to your August 15 letter.
THE KANSAS BANKER began publication in 1911.
The proposal and the subsequent continuing promotion respecting the Bank Depositors'
Guaranty Fund of the Stated Kansas occurred with a relatively small group of state
bankers in Kansas. In connection they organized the Kansas State Bankers Association
as an organization independent from the Kansas Bankers Association, which later was
organized in 1887. The Kansas State Bankers Association was organized for the reason
that the Kansas Bankers Association did not see fit to sponsor such a program.
•
The Kansas State Bankers Association held annual conventions, conducted a vast amount
of promotional publicity and undertook to influence many Kansas state banks into joining the fund, which was optional in the act for both state and national banks located
in Kansas.
Because of the foregoing reasons, the Kansas Bankers Association was not connected
in any way with any of the processes involved with the fund; and accordingly, there
was little published in the columns of THE KANSAS BANKER concerning it.
It turned out that the fund was an ill-advised venture and it ultimately became
defunct with some resulting litigation by the authorities of failed state banks in
the fund as to whether the next failed bank in order after the failure of the fund,
or a pro-rated distribution to the several such banks, would participate in the relatively low remaining reserves in the fund. As I recall, a failed participating bank
at Leavenworth, Kansas, was the next bank in order and the court directed all of the
remaining reserves paid to the depositors of such Leavenworth bank, although this was
insufficient to cover their insured balances. Depositors in the remaining failed
banks received nothing.
If you would wait until about September 1, I think you might write to Mr. G. W.
Lindley, Assistant State Bank Commissioner, 510 West 10th Street, Topeka, Kansas,
inquiring as to what information he might be able to supply you.
Respectfully,
•
Fred M. Bowman
Executive Secretary
FMB:hm
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Federal Reserve Bank of St. Louis
641.1414
igust 15, 1955
Mr. Carl A. Bowman, Secretary
Kansas Bankers' Association
Suite 624, National Bank of Topeka
Building
Topeka, Kansas
Dear Mt. Bowman:
This Division is making a study of the history of deposit
guaranty in Kansas, 1909-1926, and we would like to examine the
Kansas Banker for material pertaining to the deposit guaranty
experience of this State.
Was the Kansas Banker being published during the above
mentioned period, and if so could you tell us where a file might
be available?
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Federal Reserve Bank of St. Louis
Very truly yours,
Edison H. Cramer, Chief
Division of Research and Statistics
•
CWOJD
(
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Federal Reserve Bank of St. Louis
March 17, 1943
MFTIOANOUM
TO:
Mr. Thompson
lohUM:
Clark Warburton
3UBJFCT:
Report of deposit guaranty in Kansas
The mimeographed copies of the report of deposit
guuranty in KL,64..s ALIVU been here for some time. Ou looking:
them over I have found a few typographical errors whic!1 need
to be corrected, and is Dearborn in now worxib on them.
The foreword appears to have been inadvertently
omitted. I suggest, therefore, that a sautement from you,
perhaps in the form of a letter, should be sent with each
copy distributed, irAir to Ulu foreword in the Oklahoma
report. A copy is attached. Snould this also be armeographod?
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Federal Reserve Bank of St. Louis
Dear Mr.
The accompanying report on deposit guaranty in
Kansas, 1909-1929, prepared by Clark Warburton, iu the
second of a projected group of reports on the character
and operation of deposit guaranty systems in various
States prior to the adoption of Federal deposit insurance.
A study of the previous sisters of deposit guaranty in the
United States was undertaken in the belief that a knomledge
of the character and operation of those systems would be
helpful in the formulation of policies contributing to the
success of deposit insurance.
In collecting oata for the report, Mr. Warburton
has been asuisteu by Mrs. Ethel Bastedo and other members
of the clerical ana statistical staff of the Dividion. He
has also had the advice and criticism of other member*, of
the Staff of the Division in the preparation of the report.
Donald S. Thompson, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
March 17, 1943
October 231 1934.
KANSAS INTERVIEW
Mr. C. L. Brokaw, President,
Commercial National Bank,
Kansas City, Kansas.
Mr. Brokaw was referred to in the conversation
with the other Kansas bankers aSa man who could furnish information concerning the operation, of the Bankers Deposit and Insurance
Company, an insurance company which insured the deposits of National banks in Kansas for a number of years.
Mr. Brokaw talked over the telephone and said that
he had no definite information concerning the operation of that
company with him and that he did not know what rate was charged
for the insurance. He referred to John T. Morrisey as the man
best able to furnish this information.
Mr. Brokaw stated that in his opinion there existed
certain essential factors which must be observed if any plan of insurance of deposits was to succeed:
1. Sufficient reserves must be accumulated during
periods of prosperity to meet losses in periods of depression.
2. The administration should be in the hands of
a non-partisan board similar to the Inter-state Commerce Commission.
3. The insured should have some part in the
management of the plan and it should be kept entirely free from
political influence of any sort.
4. There should be a definite diference in the
rates charged banks according to the risk that they offer.
•
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Federal Reserve Bank of St. Louis
.
•
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Federal Reserve Bank of St. Louis
•
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
•
•
•
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
October 14, 1939
Ur. . A. Brooks,
Bank .7.ommissioner,
Topeka, Kansas.
Dear Ir. Brooks:
Five years ago this Division collected some material
relLting to gurant, of bank dei:osits in various States prior
to the creation of the Federal De.,:osit Insurance Cori,oration. It
was impossible to complete our study at that tile and we are now
attempting to obtain further informatLon regarding the various
State funds.
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Federal Reserve Bank of St. Louis
Your office supplied as with information rgarding the
final results of the operation of the olaranty fund in Kansas, and
we have obtained a record of the annual receipts and disbursements
of the fund from the reports of the Treasurer of State. We would
like, however, to obtain the information described below which we do
not have. We sh1211 be glad to supply clerical or stenoexa,hic
assistance or reimburse you for ex. ,inties incurred in compiling the
material or having copies made.
The information which we desire is a table showing the
name of each guaranteed bank which failed to.;ether with
and
location
the followin,: data for each bank:
a.
b.
c.
d.
e.
Total deposits at date of failure;
Guaranteed deposits (that is, certificates issued);
Dividends peid by bank on certificates issued;
Certificates paid from the .Iusranty fund;
Losses to depositors (that is, certificates never paid).
Very truly yours,
Donald S. Thompson, Chief
Division of Research and Statistics
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Federal Reserve Bank of St. Louis
F
October 16, 12174
Hon. -,
Koeneke,
Ken_rAte Bank Commisioner,
c/o Mationel Conforence of Aate
Supervising Officials,
Lord Baltimore Hotel,
Baltimore, Maryland.
Dear Ur, Coeneket
In oonnection with our stuaiea of the
L)nicing laws and their operation in the states which
have in the past had depoAt insurance or guarasft laws,
it would be of valuable essi.ltance if one of the members
of this Division could have alpersonal interview with
you while you &re In this neighborhood.
Your firA hand knowledge or the situp..
tion in Etavaa would shed light on how the verious parte
of the law operated.
Will you please advise vs a. to when
and where this interview may he had, either hare in
Washington or in Baltimore. As the time is no short a
telegram :sent collect to the St&tistical DIVIAOU,
Federal Depoait ImAirange Corporatioa, Washington, D. C.
would be appreciated.
Very truly yours,
Masai) list Pomo Jr.
Mortimer J. Fox, Jr.,
Chief StatisticiFn.
•
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Federal Reserve Bank of St. Louis
MOAB
October 1,14
Brip Vred M. Bowman, Secretrry,
Unmet Bankers losocirtion,
American Bankers Asao:!..ietion Convention,
Willard Rotel,
Washington, D. C.
Dear Br. Domani
In 7onne.-tton with our etuOlos of the bank—
ing laws sad their operption in the stete whch
huve in
the peat had Mo?o3It i:IAArnce or enaranty
lees, it wo,lid
be of valuable e:istfinre if one of the membe
rs of t!lie
Divi3ion old ?mere a ,,,eir)mel interview
with you Ahlio
you are in rashington.
k?bovied7e of the •,.itustion
in Kenesa 'mild abed Licht on how the variom
parts of the
law opernted.
The offices of the Federal Deposit insur
ance
Corpor•tion tre located in the National
Plreas Building,
whic.h
juA across the street from the tillerd
Hotel.
Our room number io 4315 and war telephone nua,e
r is District
1240, Extension 112.
woul! approcinte your cranting me an Inter
—
view rnd adviAng u rhea and where it
may be had.
Very truly yours,
.iied)M.J.F
,J.
Mortimer 3, Fox, Jr.,
Chief Statistician,
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Federal Reserve Bank of St. Louis
FROM
October
1934
Mr. M. L. breidenthel. President.
Kansas beakers Association.
American Seekers Associatioa Convention,
Willard Rotel,
Tia:.hingten. D. C.
breidenthals
In connecti.:An with our studies of the bunk—
ing laws nc. their operation in tht st,,tes which lure in
the pest hnd deposit insurance or guaranty laws, it would
be of valuable astlistence if one of the members of this
Division could have a personal Lnte,rview with you while
you are in Washt4tone
Your firsthand know1e4,e of am situation
in Kansas would 4hed light on how the van US ports of the
law operated.
The offices of th. Federal Deposit ImAarance
Corporation are locA41:: in the 1Lti,.Anal Press Building,
which in just acroom the street from the Willard llotel.
Our room number is 433 and our telephone is District 140,
Extension U.
We woul6 appreciate your granting us an inter—
view and adviein6 ux wen ..nd whore it may be had.
Very truly yourc,
(41.1krzka,::
j
Mortimer J. Jox, Jr.,
Chief Statisticirn.
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Federal Reserve Bank of St. Louis
Nona
October 27, 1934.
Ur. Thornton Cooke' President,
Colunbia Setioost Sauk
4ans.4 City p Misbour"
Dcr
Cooket
We are very eorry not to h-we hed the
opportunity of talking with you eh Lie you were in
lashington. Mr. Reyes tells us th.t you let him heve
materiel which you had collected concerning suataPty
ol! deposits in the various etstast hut that he hes
returned this to you.
The Statistical Division of this Corr)r
tto t ow *Jodertoting a stintr of the state r....v-:.rYAlt7
of brait deposits' We would appreciate it very nu-!!1 if
you wf,uld good to le the informetieo which Sr. Fiyas
formerly had. rs are enclosing A fmok to cover the
2ostsgs in sending this oateriel to us.
ne would like) if possible, to keep this
sateriel for two or three months, but will return it
sooner if yr=1.1 (iesire, nu?. coeperstioe in this lI'ter
will be of great ceiettnee to !Is.
•
Wry truly yours,
Aortiser J. lox, Jr..
Chief Stctisticiun,
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Federal Reserve Bank of St. Louis
Melia
bTAT
December le, 19154
H. r. It.oeneks,
Firak (;omr:LL,Ionr,
To,:eke, Kuma.e.
724,47x Mr. Koonekes
Pivision of the
Innur;:nce Ceroeretion while eele.
Federal Depc
pletinE its tudy of the Guaranty of Bank Depomits
Lte hz experianed difficulty
of the vt.riuu
nrn1rc the aeount :If 4ein ceouriLl 171.:\ircr.
Ts.t r;..11e1 1.vnk.7 !rt KrIv;a:: ar21 the amount
fsrom tn liquiestion of tire
r-41f0 1:wwcst ivAsets.
Is zny report oublillhed by the
General Rfcelvvr of ;irtzt Liquiting repartment?
publi.::hf,d by
Has any report on this rul-ject
e
A
,
conneccosui
i
n legislative investigatia
moult
tha
UJ
ur
taon with any 1c4a1 2recwedinvn
of rcmsereh studies?
Vie should hr very sit(' if you
would give us any information you eey have on this
subject or would dirtct us to printed sources from
which re might obtuin such information.
Very truly yours,
(Sliftei..; bit J Fox.
Mortimer J. Fox, Jr.,
Chief Statistician.
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Federal Reserve Bank of St. Louis
STA?
November 12, 1934.
atr. Thornton Cooke, Pr*eident,
Columbia National hank,
Kansas City, 111souri.
Dear Jr. Cooke:
The Quarterly Journela of Econaaica
containing your articles on dosit guaranty 1.1ve
been received. e Ere Intixe3ted Um having the
aLtisritl
tch they c=tv..in, en;ecirl/y ea it represents the viewpoint during tht .r1y years of the
e7periilents.
We will be vk,ry glad to keep those
1bere of which iou have duplicate Davie. fad will
return V. other issues us seen as possible.
mo hop* that you will be La 14ohiukton
sometime in the neer future and that we may hbve the
pleasure of discussing this question aith yrni. Thtnk
jou very mueb for your corporation in thia Auttcr.
try truly youra,
($iglied) M. J.
Mertimer J. Fe).), Jr.,
Child' Et titlt,cial.
THIN
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Federal Reserve Bank of St. Louis
STAT
February $o MS
Mr. B. 11. Meemeke,
hank Deemiseiemer,
Topeka, lassem6
Dear Ur. bisaskes
Ole de/ey in sending to you the deimilei
tables shish we dismissed while yen were in Illaskinghst
has been meeselemed hy our attempt te arremge figures
ehish meld he eseperable in all of the sight states
which gemeenteed beak deposits.
Vithin the sours. of a week es should be
able to seed to you our questions carefully defined so
as to oopaeiee you me undue effort in furnishing us the
information we require.
Very truly yours,
Mortimer J. Fox, Jr.,
Chief Statistician.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
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No.-5210 PADDED
(From Rand McNally Bank Directories,
D
-tot:isusJ
l et 0 q •
1
12/20/26 Abilene
The United Trust Company
2
/
2/1
1/10
Atchison
The Commerce Trust Co.
3: 9/12/18
Eureka
The Pioneer Trust Co.
4 , 4/21/15
2/21/23
The Fontron Loan and
Trust Company .
Independence The Kanaas 6avings and
Trust co.
Junction City The Jellison Trust Co.
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Kansas City
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1410/28/11 Leavenworth The Leavenworth Savings
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11 . 11/24/22 Salina
The Putnam Trust Company
9
12
4/9/14
Topeka
The Central Trust Co.
13
5/1/18
Topeka
The Farm Mortgage Trust Co.
14
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Topeka
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16 L 3/18/20
Topeka
16
17
1/12/21
Topeka
The Columbian Title and
Trust Co.
The Security Trust Co.
18
2/25/2o
Topeka
18
19
4/8/25
Topeka
The Union Trust Company
The International Mortgage
Trust Co.
The First Trust Company of
Wichita
The Guarantee Title and
Trust Co.
The Ranchmenis Trust Co.
The Home Mortgage Title and
Trust Co.
20
: 5127113
Michita
21
12/16/14. Wichita
22
9/14/18
23
12/21/21
24.
3/29/26
Michita
4/14/27
Michita
9/1/10
Lawrence
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.
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ADDED
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9,R 0
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12/20/26 Abilene
The United Trust Company
2/11/16
Atchison
The Commerce Trust Co.
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Eureka
The Pioneer Trust Co.
4/21/15
Hutchison
11/9/17
The Fontron Loan and
Trust C
Independence lguitiravings and
2/21/23
Junction City The Jellison Trust Co.
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Kansas City
11/17/06 Kansas City
Topeka
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5/1/18
Topeka
The Farm Mortgage Trust Co.
7/23/15
Topeka
The Inter-Insurers Trust Co.
5/4/06
Topeka
The Prudential Trust Co.
Topeka
2/25/20
Topeka
4/8/25
Topeka
5/27/13
Wichita
12/16/14
9/14/18
12/21/21
Wichita
Wichita
Wichita
The Columbian Title and
Trust Co.
The Security Trust Co.
The Union Trust Company
The International Mortgage
Trust Co.
The First Trust Company of
Wichita
The Guarantee Title and
Tryst Co.
The Ranchmen's Trust Co.
The Hope Mortgage Title and
Trust Co.
3/29/26
Wichita
4/14/27
Wichita
The Wheeler-Kelly-Hagny
Trust Co.
The Union Trust Company
9/1/10
Lawrence
The Perkins Trust Co.
4,1/3/14
Lawrence
The Farmers mmi Loan 84
Trust Co.
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0/28/11 Leavenworth The Leavenworth Savings
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11/24/22 Salina
The Putnam Trust Company
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NUMBER AND DEPOSITS OF4STATE BANKS IN
KANSAS
1910-1928
Banks grouped by amount of deposits
gici900,
411a'
V
Number of Banks
1-1910
1914
1918
1920
192
I 9.2g
194
total
Banks with deposits of
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100 000 to 250,000
250 000 to 500 000
/7
500 000 to 100°,000
1 000 000 to 2 000 000
2 000 000 to 50000 000
5 000 000 and over
Deposits
411/
total(14 26;,14/
In banks with deposits of
100 000 or less
100 000 to 250 000
250 000
2.
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L7/
to 500 000
500 000 to 1 000 000
1 000 000 to 2 000 000
2 000 000 to 5 000 000
,-;69
5 000 000 and over
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NUMBER AND DEPOSITS OF ettzr BANKS IN
KANSAS
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Sept /4
17-1910
Number of Banks
2cTAL /,
1914
g) 44.-- 15—
C4-A13
1918
/
i
r 2
/1
7
2 000 000 to 50000 000
/
5 000 000 and over
total(
to 500 000
500 000 to 1 000 000
1 000 000 to 2 000 000
2 000 000 to 5 000 000
5 000 000 and over
I3/6 .3 .,-_-
IdA104.1
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100 000 to 250 000
79
1/6
500 000 to 1000,000
1 000 000 to 2 000 000
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1924
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250 000
rO•e.,
total
Banks woth deposits of
100,00 or less
100 000 to 250,000
Deposits
19°2
1920
O-a-- iO31
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NUWBFR AND DEMME OF eTATE BANK
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r
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100 007) to 250,000
250 000 to 501 /00
'02 /,
25' ,
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117-
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71 /
500 100 to 1000,000
1 000 100 to 2 000 000
2 000 000 to 50000 000
-5-900 0949-an4 owPi.
Deposits
/
//4A/t-14/
total(
774.0t,44-4 /
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100 000 to 250 000
250 010
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.500 000 iv
1000 • 0
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STATISTICAL DATA REGARDING DEPJSIT GUARANTY FUND IN
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reports
State
(State
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/
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Insured
Total
Total
Total
Total
'Lumber
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capit
deposits
deposit
capital
Total
Total
account
aocoun
deposits
capital
account
NuMber
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companies
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STATISTICAL DATA REGARDING D011IT GUARANTY FUND IN
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Year
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Federal Reserve Bank of St. Louis
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
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March 5-1942
Dr. Warburton:
Re;, Kansas
Three
Sete of size distributions of active banks.
A-
Guaranteed Banks;
In the individual statements
amount
they report the
of Guarantee funds with the Treasurer of the State.
In compiling this data I have used only the statements that have funds
with the treasuter;
In some cased the statements are marked members of the
Depositors guaranty fund,but have no f nde reported to the treasurer
these are not in the tabylation of Guaranty banks.
1909-
1910
Reports
855 State banks
3 Trust Co
4 Private abnks
862 Banks of which 208 are mambers of the
Fua- antee fund.
Deposits include.
Ind. Deposits
Bnnks Nad Bankers
Time
l'emand
Cashier's and Cer, Checks.
—
6669
years
1909-10
1911-12
1913-14
1915-16
1917-18
1919-20,
22
Reported by
state mem
fund
862
901
456
956
499
987
539
1044 161011
1113
676
1094 703
state
banks
855
892
925
973
1029
1099
1079
trust co
3
5
8
11
13
13
14
private
4
4
3
3
0
ke
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wo-‘,1,0
tabulated
as Guaranty
208
491
604
678
703
not
guaranty
661
445
440
434
391
total
962
936
1044
1112
1094
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Federal Reserve Bank of St. Louis
011
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years
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26
1!
1 7-28
Guaranteed Banks
Page 2
Reported ty
state
trust co
st-te
mem
abnkd
fund
16
1036
651
1021
17
973
564
956
18
39
845
863
Continued
Private
tab.as
Guarantee
660
555
45
not
gunranty
377
418
819
total
1037
973
864
All the above figures are as of sept 1.
b. Nonguaranteed;
See(A)
•
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National Bankd tabulated from the Comptroller of Currencj; 1910 to 1922
annual reports and deposits consist of the following items:
Demand and time deposits and u.s. Deposits.
1922-1928 Deposits consist of the following items
and U.
Deposits,
Due to banks, Time nnd Demand,
192g-1928 tabulated from the individunl statements of national banks and the years
are as of december 31 . 1910 -1924 are as of September 1.
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Federal Reserve Bank of St. Louis
LIST OF GUARANTEED BAN:CS IN KANSAS CLOSED BECAUSE OF FINANCIAL DIFFICULTIES
A. Banks closed June 30, 1909, to February 28, 1925, and completely
liquidated during that period--I. e., with remaining guaranty rand certificates
paid by f.and upon completion of liquidatJon (18 banks)
•
11.44
Date of
Location and name
j'a dr-a.46
closing
0_0044-
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c“
Abilene: The Abilene State Bank
2i742.
Sept. 1910
III ,3alina: The Kansas State Bank
May 1919
Aulne: The Aulne State Bank
7(4
May 1920
Homewood: The Homewood State Bank
- Dec.
• 4
Le Loup: The Farmers State Bank
6, 1920
201636
Feb. 4, 1921
Salina: The Peoples State Bank
McCunc: The Farmers State Bank
IPNwne,> Pock: Th. Farmers ag4AgrsitifiRts
rm.
July 13, 1921
Sept.22, 1921
Dec.
‘2,J374.`
.V.?0
9, 1921
/3 -c
2+
( 4/ 7.6
7/7 V
/71 70
sy
Oswego: The C. M. Condon & Co State Bank Mar.1, 1922
Apr.20, 1922
Hope: The State Bank of Hope
Aug.19, 1922
Belmont: The Farmers State Bank
2,
Chetope: The Farmers & Merchants SM.i
411
sept.18, 1922
Oct. 3, 1922
Bank
Labette: The Labette State
Ounningham: The Cunningham State Bank:: Oct. 7, 1922
Apr. 25, 1923
/
July 14, 1923
Cunningham: The Farmers State Bank
Adam: The Farmers State Bank of Adams: Aug. 27, 1923
/J7?
;2.3
Florence: The Marion County State BankJan. 28, 1924
.2.NL.-
Wright: The Wright State Bank
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Federal Reserve Bank of St. Louis
I
•
•
_A
LIST OF GUARANTEED BANKS IN KANSAS CLOSED BECAUSE 0
B. Banks closed June 30, 1909, to date of Bloss
and completely liquidated between Feb. 28 1925
*44o:opt-i.e., listed in Bloss report to Supreme Court
,anks with remainina fitziranty fund certificates
guaranty fund after Supreme
pail in full
Court decision (11 banks), and paid in
part'(2 banks)
Paid in full
Manhattan: The Citizens State Bank
4,414,
Nov. 18, 1921
Feb. 18, 1922
Mar. 21, 1922
queneno: The Farmers State Bank
Geuda Springs: The Citizens State Bank
Washington: The Farmers State Bank
-0649rdsi7s.
Sept.19, 1921
III Lake City: The Lake State Bank
' Apr. 24, 1922
"'Harper: The Citizens State Bank
Runnymede: The Runnymede State Bank
DIFFICULTIES
27
i,tirt, yr
date of that e4.01i41
6 banks)
Sept. 7, 1922
Nov. 10, 1922
Mar. 6, 1923
Halls Summit: The Halls Summit Stank
Eudora: The State Bank of Eudora
Mar. 31, 1923
Olivet: The Olivet State Bank
Oct. 8, 1923
360
syt6
196
77
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.5
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Farlingtm: The Farlington State Bank' July 26, 1924
11,1tt_id in part (93 percent)
May 23, 1922
July 26, 1923
Leavenworth: The State Savings Bank
Cherryvule: Thd American State Bank
/ 276
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,7.6-331
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-Arkansas City: Traders State Bank
Lamed: The Farmers State Bank
1-92.1i
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pr
6 iov. 15, 1922
Hairv-r: The Peoples State Yank
Js0awatomie: The Ossawatomie State BanXioirr. 19, 1923
Lane: The Citizens State Bank of Lane / June 14, 1923
.24, 1923
ink ScOttsville: The State Bank of Scotts4f1Wt
Gridley: The Gridley State Bank
Smith Center; The Farmers State Bank/:
Bartlett: The Citizens State Bank
Dwight: The Dwight State Bank
e-
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Sept. 15, 1922
Sept. 27, 1923
/7/ /7/7e)
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.277
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Zenda: The Farmers State Bank
Mar. 28, 1925
Peck: The State Bank of Peck
Apr. 14, 1925
Kanapolis: The Exchange State Bank
May 2, 1925
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Oct. 31, 1923
Nov. 5, 1923
Aug. 8, 1924
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Federal Reserve Bank of St. Louis
A
r.
LIST OF GUARANTEED BANKS IN KANSAS CLOSED BECAUSE OF FINANCIAL DIFFICULT17,8
C. Banks closed to July 1, 1927 (date of gorlsfioner's call for !7.oring
on order of priority of completion of liquidation; welarwere mot pieced in;
liquidaticrirbythe usual process.
*Banks reopened or succeeded - no Tertifa
icates raid
gliarantI fund and no
loss to depositors
Burlingeme: The Pioneer State Bank
Osawatomie: Osawetomie State Bank
Date closed
4,-4142 LiSept.1,1922
Feb.23,1922
41, Elgin: The Elgin State Bank
Chautauqua: The Chateugua State Bank
Bill City: The Bird city State Bank
Apr.25,1923
Apr.26,1923
Aug.20,1923
Langdon: The State Bank of Langdon
McDonald: The State Bank of McDonald
Oct.19,1923
Cedar: The Cedar State Bank
Oct.22,1923
Lebo: The Peoples State Bank
Fldorado: The Kansas State Bank
Jan.7,1924
Jan.29,1924
(
Oct.9,1923
Garden City: The Peoples State Bank
Apr.15,1924
Wichita: The Industrial State Bank
Jan.25,1926
Elk Falls: The Elk Falls State Bank
Waverly: The Commercial State Bank
Apr.12,1926
June 26,1926
July 15,1926
Rantoul: The State Bank of Rantoul
Amh Partridge: The Partridge State Bank
Sept.7,1926
41, Clifton: The Citizens State Bank
Thayer: The Thayer State Bank
Sept.20,1926
Nov.15,1926
33.6
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750
3-7
93
5:9<b
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,2.F6
7/
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Wamego: The Kaw Valley State and SavA,Rio Dec.17,1926
Spring Hill: The Spring Hill Banking Co. Jan.3,1927
Quinter: The Farmers State Bank
Feb.16,1927
Cherokee: The First State Bank
Feb.24,1927
Mulberry: The Miners State Bank
Feb.24,1927
Clearif.ater: The Home State Bank
Nov.22,1927
Caldwell: The Caldwell State Bank
Mar.5,1.928
•
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1
o-
LIST OF GUARANTEED BANKS IN KANSAS cLosEr BECAUSE OF FINANCIAL DIFFICULTIES
D. Banks closed to July 1, 1927 (date of Commissioner's call for hearing on
order ofpriority of completion of liquidation) which had not been completely
liquidated by that date.
,
'
49-0-61
ate closed
Spring Hill: The Farmers State Bank
Viola: The Viola State Bank
Aup.26,1921
Oct.21,1921
El Dorado: The Butler County State Ba126;
Vernon: The Vernon State Bank
Wichita: The American State Bank
Mar.30,1923
May 4, 1923
June 18,1923
Minneola: The First State Bank
Sept.20,1923
GreensburE: The Home State Bank
Burlingame: The Pioneer State Bank
Oct.10,1923
Nov.R2,1923
Kingmen: The Farmers State Bank
Kansas City: The Central State Bank
Jan.16,1924
Feb.4,1924
Garnett: The Farmers State Bank
Mar. 31,1924
Riverdale:The Riverdale State bank
Oct.6,1924
Moran: The Moran State Bank
Nov.10,1924
Jan.9,1925
Blue Mound: The Bank of Blue Mound
°8awat°mie:The Farmers and Mechanigglay Feb.24,1925
7.2
/pz,61
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,
Sr)) tart cri
/06
2b-
8
/3
Apr.16,1925
May 11, 1925
Scranton: The Strantm State Bank
/
July
s67
7,1
/
Ceder: TheCeder State Bank
Aug.19,1925
Hope: The Farmers State Bank
Sent.5,1925
Geneseo:.Central State Bank
Barnes: The Barnes State Bank
Goddard: The Goddard State Bank
Oct.7,1925
Nov.7,1925
Dec.5,1925
Randall: The State Exchange Bank
Mulvane: The Farmers State Bank
Jan.11,1926
hewins: The Hewins State bank
Apr.9,1926
New Albany: The New Albany State Bank
Colony: The Colony State Bank
Apr.19,1926
Dennis: The Dennis State Bank
Esbon: The Farmers State Bank
May 5, 1926
June 1, 1926
Fbntenac: The Frontenec State bank
June
•
Multerry: The Mulberry State Bank
Chanute: The Ficelity State Bank
Stockton: The Citizens State Bank
411 Kenona: The Kanona State Bank
Feb.8,1926
Apr.20,1926
4, 1926
June 9, 1926
.2.2 F77
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1190ii/
SI'70‘
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July
6, 1926
Aug.7,1926
Aug.7,1926
Pleinsville: The Farmers andAgighsaer
Aug.14,1926
X-?1,141a6
A5-9/91
ti 71.6-3
61
/6 4'36
q7/7
38701
-5-cv
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/6 7
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June 14, 1926
Webster: The Webster State Bank
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
/03
/7'
/3
3, 1925
Hareyville: The iciarveyville State Benly, July 14, 1925
6/
171G2
33 769
.5-0/
Tonganoxie: The Farmers andAgEghtihtite Mer.26,1925
Haddam: The Haddam State Bank
Dunlap: The Farmers bank of Dunlap
/03 6?-533 3F1
'/,6 873
7
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31774
6,2e)
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7/ '7161
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•••
LIT OF GUARANTEED BANKS IN KANSAS CLOSED BECAUSE OF FINANCIAL DIFFICULTIES
D. Banks closed to July 1, 1927 not completes liquidated by that date--continued
•
411
40
Date closed
Saxman: The Saxman State Bank
Winifred: The Winifred State Bank
Oct.13,1926
62
Oct.2$,1926
3s"
Hays City: The Citizens State Bank
Valeda: The Valeda State Bank
Nov.10,1926
Nov.16,1926
Altoona: The Altoona State Bank
N0v.19,1926
Lansing: The First State Bank
Olathe: The Olathe State Bank
Topeka: The Peoples Stat Bank
Nov.29,1926
Nov.29,1926
Earlton: The Farlton State Bank
Dec.4,1926
Otego: The Otego State Bank
Dec.10,1926
4iLwood: The L,nwood State Bank
Kansas City: The Pm:1WD° State Bank
Dec. 17,1926
Dec.21,1926
Dec.3,1926
,21/3/ 7
36 96/
97 73
3
20 s-o6
0283
2.366
39%
/7
/0 7
/67
/63
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70 /9/
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,
Jan.5,1927
Jan.31,1927
.
278
Arnie: The Commercial State bank
Englevale: The Farmers state bank
Feb.24,1927
70
/4L033.5' 56
36-41Y/
//
Fort Scott: The Midwest State Bank
Opolis: The Farmers State Bank
Feb.24,1927
Feb.24,1927
oqd
Pittsburg: The Pittsburg State Bank
Feb.24,1927
Coffeyville: The American State Bank
Burlington: The Burlington State Bank
1ar.31,1927
Apr.7,1927
/V
670
/5
Tribune: The Kansas State Bank
Altamont: The Altamont State Bank
June
K5-76
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Kansas City: The Peckers State Jiank
Garnet: The Citizens State Bank
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Federal Reserve Bank of St. Louis
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Kansas City: The Intercity State Bank.''Dec.30,1926
•
31 733
31,L077
G.21
LIST OF GUARANTTED BANKS IN KANSAS CLOSED BECAUSE OF FINANCIAL DIFFICULTIES
E,
tanks closed subsequent to July 1, 1927 - excluding those reopened or succeeded
•
Date closed
LI-
Angola: The Angola State Bank
40
July 14,1927
Summerfield: The State Bank of syTiRTE:. Aug.2, 1927
la
Rossv lle: heRossvil1e State Bank fAug.18,1927
Mound Valley;The Mound Valley State BiAk ug.26,1927
1,Z6
3
7?76
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Anthony: The Home State Bank
Council Brove: The Citizens State
•
Sept.19,1927
banktSept.23,1927
New cambrie:
The New Cambria State
McCracken: The Bank of McCracken
Sept,27,1927
Sept. 29, 1927
Lehigh: The State Bank of Lehigh
Lovewell: The Lovewell State Bank
Oct.28,1927
Nov.4,1927
Mound Valley: The Peoples State bank
Severy: The Greenwood Cowity Bank
Dec.19,1927
Jan.12,1928
1-
Lucien: The Ludell State Bank
Manhattan: The Farmers & Stosign eta i
Feb.7,1928
McDonald: The Farmers State Bank of
c onald
Kensington: The Citizens State bank
kar.2,1928
aar.3,1928
•
Jan.18,1928
Sabetba: The Citizens State Bank
Msr.22,1928
Cummings: The Farmers State benk
44ar.27,1928
Bird City: The Farmers State bank
K; Apr.4,1928
Atwood: The Rawlins County State bank
Apr.10,1928
Hartford: The Farmers State bank
Powhattan: The Bank of Powhatten
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
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Jan.11,1929
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DEPOSITS OF NATIONAL BANKS IN KANSAS
In tho-Isands of dollars
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5
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336
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1,317
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2,067
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1,680
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120
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1,471
1,607
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2,071,215$ 700,215
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$1,118,212
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Table 8. CAUSES OF BANK FAILURES IN KANSAS REPORTED BY THE BANK
COMMISSIONER, PERIOD OF OPERATION OF THE GUARANTY SYSTEM
Biennial
period
ended
Sept. 1
Total
Number of failures ascribed in full or in part to:Z14*R.
number of.j
cx,
failuresV Dishonesty
Excessive Depreciate' IncomOtherli
of officials
loans to
of values
1 petence 1
favored
interests
Cause
not
given
Guaranteed banks40
1912
1914
1916
1918
1920
1922
1924
1926
1928
1930
•
1
None
None
None
1
17
42
35
55 ,
1
152
Total
1
••
••
••
••
••
GO
00
••
06
••
••
••
••
••
15
5
5
9
••
••
1
1
••
••
••
••
••
..
5
4
14
24
••
••
••
••
1
••
••
••
••
••
••
••
3
10
00
••
••
••
••
••
33
29
45
1
00
00
00
108
47
35
2
1
13
Nonguaranteed banks
1910
1912
1914
1916
1918
1920
1922
1924
1926
1928
1930
None
None
7
2
2
2
6
12
10
17
Total
63
••
••
••
••
••
••
••
••
••
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0•
••
1
••
2
••
..
..
SO
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SO
4
1
1
3
2
1
..
1
2
..
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•
..
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••
..
11
8
14
___I
••
n
2
••
..
••
••
641
Oil
00
5
7
••
..
4
••
2
••
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18
4
39
16
4
3
5
1
1
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------ 27' •Includes causes described as "bad loans" or "frozen assets." Some of
,--these
,
should undoubtedly be classified in the preceding column.
/ Includes failure of correspondent bank, other bank failures, and
insufficient volume. .
\ip4- Excludes two guaranteed banks and three nonguaranteed banks which Were
isted as suspsions
en
by theLederal Reserve Committee on Bacm4xtax Branch, Group
and Chain Banking, but not ifiaiennial Reports ar the Commissioner.
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Nupber of cEses
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item
no.
CeUSC
,
Dishonesty ef officials - total
Defalcation
Dishonesty, miseto:ropriation, shortazes
Fxcessive loans, spculation, irregularities
Failln-e ef lrrN,,, debtor
Leavy or f=7..,n loans to officers or stockholders
2
1
specul,Aion
2
6
7
3
7xcess loans
heavily ov-rloanad
Irregularities .
1
11
12
13
14
15
16
17
18
19
'Co
21
22
23
Other causes
aeevy withdrawals
Failure of affiliated institution
Failure of corresrondent
Purchased paper, Idthour recourse raner
Insufficient earnings
Volume of bupiness too small
Depleted reserves
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Fv.rsel of prosp?rous conditions in on
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Decline in real estate values
Unforeseen agricu:tural or industrial
disasters, such as floods, droAght, boll
weevil, etc.
Crop failure, general farm conditions
Bad loans, poor loans, frozen loans,
Inability to make collections
Excessive reel estate holdings
or poo
Incompeteab management
Incompetent•meriagenant
Insufficient diversification
1.
44
3
6
3
1
3
167
166
1
7-
21
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LIST OF NONGUARANTEED BANKS IN KANSAS CLOSED BECAUSE OF FINANCIAL
DIFFICULTIES DURING PERIOD OF DEPOSIT GUARANTY SYSTEM
•
Amh
On this page-failures to
Sept. 1, 1926
Ellinwood: The Citizens State Bank liol ,IDee.20,1913
1913
Beattie: Bqnk of Beattie (private bank) Dec.
Cedar Point: The Farmers State Bank
Jan.10,1914
'rEinsas City: The Mianesota Avenuedt
uay 9,1914
Chautauqua: The Citizens State Bank 1/•
1915
Russell Springs: The RussellsREPlignk
1915
Lehigh: The Menno State Bank
1918
Williamson: The Williamson State Tank
v1
Hanover: The Hanover State Bank
1918
wriap-o1(
J
el, 1919,
1919
Salina: The Continental Trust CoAlihir.)
Wamego: The Farmers State Bank
vfOct.13,1920
Wellsford: The Wellsford State Bank
/Dec.16,1920
Coffeyville: The Peoples State Bank
City: The Banking Trust Co.
7 Jan.20,1921
/ Anr.23y1921
*Kansas
52.
1/4
83
/ 03
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5
43
.5-35
nit
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/ Apr.21,1922
/6i
7 Oct.11,1922
Arrinton: The State Bank of Arrinton (
33
Audele: The Audale State Bank
Havana: The Havana State Bank
Hutchinson: The Fourth State Bank
Hallowell: The Hallowell State Bank
Dec. 1,1922
/ July 5, 1923
, Sept.17,1923
O 77
p,Oct.9,1923
57
Argonia: The Citizens State Bank
70ct.18,1923
g2
• Oct.23,1923
/4Nov.23,1923
,2,2
17
Groveland: The Farmers State Bank
4kor.25,1924
Oswego: The Oswego State Bank
d'Apr.14,1924
Belvue: The Belvue State Bank
/Feb.13,1925
6/
/-Sept.8,1925
/Sept.30,1925
36
Belle Plains: The Valley State Bank
Wetmore: The Wetmore State Bank
"Emmett: The Emmett State Bank
II
Westmoreland: The Farmers State Bank
Kirstn: The Exchange State Bank
TrAmbell:
Kiriboll State Perlr
Digitized forDarner:
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Federal Reserve Bank of St. Louis
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Bloom: The Farmers State Bank
Cunningham: The First State Bank
Wilson: The Farmers State Bank
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11
/May 28, 1926
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LIST OF NONGUARANTEED BANKS IN KANSAS CLOSED BECAUSE OF FINANCIAL
DIFFICULTIES DURING PERIOD OF DEPOSIT GUARANTY SYSTEM - Continued
I
Banks which were guaranteed on Sept.
1926, but withdrew prior to August 31,
1928 and failed subsequent to withdrawal V•a&c.".......1
are excluded (they are on list of failed
guaranteed banks)
Westmareland: The Citizens State Bank . Oct.16,1926
i,,-Nov.10,1926
Ellsworth: The Ellsworth State Bank
III 1,
40
Walker: The Farmers State Bank
,'
ov. 10,1926
vif
Kansas City: The American Title &
Pierceville: The Pierceville State B
Ada: The Ada State Bank
Holton: The State Bank of Holton
Horace: The Horace State Bank
De c.6,1926
Jan.12,1927
- Jan.24,1927
./Mar. 10, 1927
0
,.,' .July
Zarah: The Zarah State Bank
9,
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7?/
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1.1
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1927
Sept.22,1927
Elkhart: The Morton County State Bank %"Oct.11,1927
,r
1927
. March
, Jan.13,1927
Burns: The Exchange State Bank
Kingman', The Citizens State Bank
Jan.11,1928
Zurich: The Zurich State Bank
.
Savings
FirstState
Seneca: The Seneca
'"Jan.30,1928
Bank y
d/ Feb.ti,1928
Covert: The Covert State Bank
27
G3 39e?
1/2
/ 3/ 569
)t-sle.t
3(
6 SW
3
-3v 7
46 /
eS
/ga73
-1
Phillipsburg: The Phillips County Bankijeb.13,1928
AlliKansas City: The Farmers Union State Bank Feb.27,1928
Ilmr Lawrence: ThilinilmgigtskCITAMsrusf) e7eb.28,1928
Wheeler: The Farmers State Bank
/0 6Y93
16
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9.6
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2-6 t‘o
,
7
A/Apr.23,1928
Lyndon: The Lyndon FarmmiViii2nbalif . Apr.30,1928
31 7,21
Neosho Rapids: The Neosho Rapids sma 7Nov.2,1928
Tipton: The Home State Bank
Longton: The I,,,ngton State Bank
/
MC:1,1928
a_
DelAran: The Del,pvan State Bank
Ford: The Ford state Bank
a-
/0029?7
Ii2C'.14?,1928
.22 o3 F
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'Jan.1,1929
-IJan.23,1929
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Table 12. RECEIPTS, EXPENDITURES, AND DEFICIT OF lifi;
KANSAS DEPOSITORS' GUARANTY FUND
1P,Laid_s#.
12-,/
aaailiment
Guaranty
cost
fund
Receipts
Assessments collected, 1909-1929 2../
Other contributions by participating
banks 2/
Interest received
ed 4/
Source not identifil
Total receipts 5/
Expenditures
Payments to depositors of failed
banks, as tabulated from data
for the individual banks:
Principal of deposits
Interest g
Additional payments or unidentified
expense V
Total expenditures 8/
Unpaid obligations
To depositors of failed participating
banks 9/
$1,703,36Q
$1,703,360
2,220,750
796,762
143,423
143,423
178,24;€
178,246
American
State Bank
reorganization
de, es
$1,423,988
IP a* •••
•••
$4,245,779
$2,821,791
$1,423,988
$3,859,;- i67
361,302
$2,435,379
$1,423,988
361,302
la. NO IMI•
7 144
7,144
MID SM..
$4,227J,13
$2,803,825
$6,051,150
$6,051,150
$1,423,988
MI MD 11•1
1/ As tabulated from entries in the "Guaranty Fund Individual Ledger" in the
office of the Bank Commissioner. For the years 1925-1929, assessments paid were
less than the amounts levied.
..2
.
/ Of guaranty fund, forfeiture of deposited bonds and cash by withdrawing
banks, consisting of $733,900 forfeited by banks that withdrew by the end of
October 1927 (statement in records in Bank Commissioner's office), $51,922 forfeited by banks that withdrew subsequent to October 1927 or participated to repeal
of the law (estimated), and $8,940 premiums and interest received by fund on the
sale of forfeited bonds sold in December 1927. In American State Bank reorganization,
of deposit liability assumed by participating banks.
Includes amounts reported as "interest" and as "transfers from general
fund," both apparently representing interest on the fund balance.
Total received from Bank Commissioner, as given in biennial reports of the
Treasurr.q.
State, less reported receipts from assessments and forfeiture of
deposited bonds and cash. This amount probably consists in part of collections
on delinquent assessments, in part of additional receipts from sale of forfeited
bonds, and in part of receivers collections on assets of failed banks after payment
of depositors by receivers and the guaranty fund.
I/ From biennial reports of the Treasurer of State from beginning of fund to
June 30, 1956. The excess of receipts over expenditures, amounting to $17,966, remained to the credit of the depositors guaranty fund as of June 30, 1956.
6/ Includes court costs of $15,631 which were met from the fund and deducted
from theamount due depositors in the banks benefitting from the court decision
regarding disposition of the assets of the fund.
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Federal Reserve Bank of St. Louis
11.
Notes to Table 12 continued.
7/ Difference between total warrants redeemed (see note 3) and payments
to
depo5iitors as tabulated for the individual banks.
Total warrants redeemed, as shown in the biennial reports of the
Treasurer
of State from the beginning of the fund to Jena 30, 1956.
2/ Banks with no payments, or less than full payments, from the guaranty
fund. Estimated from guaranty fund certificates issued, adjusted for
percentage
dividends paid by receiver.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
y
Table 15.
OBLIGATIONS TO CREDITORS PAID AL UNPAID, FAILED BANKS INVOLVING OBLIGATIONS ON
KANSAS DEPOSITORS GUARANTY FUND, BY YEAR OF FAILURE 1/
Thh
Year 2/ Total 1/
Insured deposits paid 2/
Directly from By fund or
Unpaid (loss
liquidation
participato deposiof assets
ting banks
tors)
4/
$6,051,15o
y
$3,763,185
$1,805,042
$1,958,143
28,702
108,594
56,469
52,125
94,351
402,233
150,951
28,681
122,270
93,388
1,484,781
1,050,565
2,459,402
328,512
1,040,738
1,790,121
1,409,531
172,709
96,977
545,431
1,575,151
643,915
36,855
328,8°7
500,151
1,461,713
91,399
15,479
141,163
244,038
634,791
69,533
826,922
21,866
864,401
1,616,939
655,121
41,636
11,579
242,425
431,140
389,882
18,596
2,672
145,668
203,808
247,484
15,527
2,1401
96,757
227,332
142,398
3,069
271
$21,151,418
$11,240,901
$3,859,367
1910
46,810
18,108
1919
496,584
1920
1921
1922
1923
1924
189,740
1,910,270
2,636,734
5,824,674
2,226,155
1925
1926
1927
1928
1929
2,080,697
3,229,600
2,244,030
197,203
68,921
1,216,296
1,612,661
1,588,909
155,567
57,342
Total
Noninsured deposits and other liabilities
Total 2/
Paid.
Unpaid
96,352
-COM,
amele
!Olt
21,376
187,644
256,113
Tabulated from data for the individual failed banks published in the biennial reports of the Bank Commissioner,
or shown in individual claims registers, receivership reports, or other surviving records in the Office of the Bank
Commissioner. In a few cases some estimation has been necessary.
2/ There were no failures of participating banks in 1909 nor 1911-1918.
3/ Guaranty fund certificates issued, plus the portion of receivers' certificates issued in the American State
Bank case estimated to have represented unusual deposits.
It/ Paid by fund, except for $1,423,988 assumed by participating banks in the reorganization of the American
State Bank, Wichita, in 1923.
2/ Receivers' certificates issued, excluding those in the American State Bank ease estimated to have represented
insured deposits.
§/ Preferred claims, assumed to have been paid in full, plus payments on receivers certificates estimated from
percentage dividends paid.
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Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
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Noninsured deposits and other obligations, failed banks involving obligations
on the Kansas depositors guaranty fund, by year of failure
./
Total
Year
Preferred Receivers'
claims
certificates
incqq-
1 Og
15095'1
// Igi'
f(?z)
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0/376
f?6,1/1/
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Total
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1977
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STATISTICAL DATA REGARDING DEPOSIT GUARA.ITT
FUND IN KANSAS
VI. Receipts, Disbursements and Balance
(From Biennial Reports of the Treasurer of State)
c-
Receipts
'1-111cInterest
or
Cownissione;
cr receipts transfers
err
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June 30
9
Qisbursements Balance
We.rrants
on
redeemed
June 30
Bonds
deposited
276,376.89
56,846.05
16,064.90
56,846.05
1,340.84
81,682.51
81,682.51
336,749.10
28,194.11
1,282.92
111,159.54
111,159.54
341,502.10
1914
32,595.71
1,639.36
A/5,394.41
28,701.76 116,692.65
406,158.22
19152
1916
30,716.78
40,567.35
2,521.76
149,931.19
190,4C7.74
149,931.19
190,498.54
1917
51,928.53
242,427.07
/J-9.1
10404 242,411.15
429,801.32
485,463,58
584,113.58
71,551,64
313,962.79
313,962.79
725,868.58
91,863.43
405,826.22
105.826.22
800,046.81
107,169.78
546.36 512,449.64
631,689.89
946,584.00
119,iib.25
512,996.00
631,689.89
1,135,622.00
1922
101,587.03
735,276.92
735,276.92
1,151,717.00
1923
1924
173,117.45
906,694.37
60,794.52 845,599.85
1,106,998.00
1,062,824.56
1525
1926
546,786.47
146,126.50
0
7
1928
91,301.59
851,821.57
1910
1911
16,964.90
38,897.79
983.36
1912
23,495.62
1913
1918
3.23.3C
1919
1920
1921
02 7).
16,964.90
101,577.74
3/9701
947,177.59 480,929.93 157,247.66
1,004,034.13 971,462.64 32,571.49
178,697.99 22,844.07 155,853.92
7
.
5,270.46
247,155.51 218,592.90 28,562.61
880,384.18 220,044.77 660,339.41
1930
60,157.02
16,530.19
1,277.54
725,7
CIta 672,191,30
8,219.04
71,383.32
53,575.59
63,164.28
1931
1932
21,671.44
38,821.04
1,585.99
1,489.36
86,421.71
125,801.06
931.05
95,576.79
85,490.66
30,224.27
1933
704.62
30,928.89
3,994.41
26,934.48
1934
364.07
27,298.55
2,759.02
24,538.63
25,429.51
2,153.49
22,876.02
23,032.35
1,313.09
41,7/1.0
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.6 0,79
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1936
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V. ACCUMULATION OR rEFICIT IN FUND
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DCSIT GUARANTY IN KANSAS
by
Clark Warburton, Principal Economist
Division of Research and Statistics
Federal Deposit Insurance Corporation
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
TABLE OF :CONTENTS
DEPOSIT GUARANTY IN KANSAS
Character of the guaranty legislation
Admission of banks
Withdrawal from the guaranty system
Deposits guaranteed
Assessments
Method of paying depositors in failed banks
Indebtedness of guaranty fund
Administration and custody of the fund
Expenses of administration
•
Page
1
1
3
3
5
6
7
8
8
8
Crmstitutionality of the bank depositors 1 guaranty law
Decisions of the Circuit Court and of the Circuit
Court of Appeals
Decision of the United States Supreme Court
11
12
Supervision and regulation of guaranteed banks
Supervisory -cowers of the Bank Commissioner
Statutory limitations on bank operations
13
13
16
Number and de•osits of guaranteed banks
Number of participating banks
Deposits of participating and non—participating banks
Concentration of bank deposits
21
21
23
25
Bank failures
Failures of guaranteed banks
Failures among nonguaranteed banks
Failures by size of bank
Comparison with failures in other States
Causes of bank failures
27
27
28
31
31
35
Financial history of the guaranty fund
Sources and adequacy of information
Income and obligations of the guaranty fund
Annual assessments (or collections) and losses in failed banks
Adequacy of the guaranty fund
The burden of assessments
Losses in mismanaged banks
42
42
43
45
52
54
Effectiveness of bank supervision
59
Closing of the guaranty fund
63
Appraisal of the Kansas bank deposit guaranty system
66
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
57
LIST OF TABLES
411
Table
Page
Number of operating banks in Kansas participating
and not participating in the deposit guaranty system
22
Number anddposits of operating banks in Kansas
participating and not participating in the deposit
guaranty system
24
3. Number and deposits of guaranteed State banks in Kansas,
September 12, 1914, and September a5, 1922
n_
1.
2.
4. Number and deposits of guaranteed banks in Kansas closed
because of financial difficulties, June 30, 1909, to
March 14, 1929
29
5. Number and deposits of State banks in Kansas closed
because of financial difficulties, June 30, 1509, to
March 14, 1929, by years
6.
Size distribution of failed banks in Kansas compared with
average size distribution of operating banks, 1919-192S
32
7. Bank failure rates in Kansas, 1910-192S, compared with
rates in contiguous States and in the United States
S.
Causes of bank failures in Kansas reported by the Bank
Commissioner, period of operation of the guaranty system
33
3g
9. Causes of bank failures in Kansas, 1921-1930, reported
by the Federal Reserve Committee on Branch, Group and
Chain Banking
10.
11.
12.
41
Obligations, income, and deficit of the Kansas bank
depositors' guaranty fund
44
Amounts of assessments, and estimated losses from bank
failures, Kansas bank depositors' guaranty fund, by
years
50
Deposits in failed guaranteed banks in Kansas, paid and
unpaid, with sources of funds used in payment
53
13. Receipts and disbursements of the Kansas bank depositors'
guaranty fund, by years
14.
Number and deposits of guaranteed banks in Kansas,
1910-192S
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6g
70
LIST OF TABLES (Continued)
•
Page
Table
15.
16.
•
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Number and deposits of nonguaranteed State banks and
trust companies in Kansas, 1910-1928
71
Selected data from consolidated statements of earnings
and dividends, and total capital accounts, all State
banks in Kansas, 1909-1928
72
DEPOSIT GUARANTY IN KANSAS
•
The Kansas law for guaranty of bank deposits was approved on
March
6,
1909, and became effective on June 30 of that year.11
At the
time of enactment of this law, a deposit guaranty plan was in operati
on in
the adjacent
State of Oklahoma, and deposit guaranty legislation was in
process of enactment in Nebraska and Texas.
During the succeeding eight
years, four other States (South Dakota, North Dakota, Mississ
ippi, and
Washington) adopted deposit guaranty plans.
The Kansas law remained in operation until it was repealed in
1929.
However, it became of relatively slight importance in 1926, when
the great majority of the participating banks withdrew from the fund.
CHARACTER OF THE GUARANTY LEGISLATION
Admission et banks. Participation in the Kansas deposit guaranty
plan was voluntary.
Incorporated State banks which desired. to participate
in the guaranty system were required to be examined by the Bank Commiss
ioner,
and approval was dependent upon his finding that the bank was solvent,
properly managed, and conducting its business in strict accordance with
the
banking law.
Trust companies and private banks were not authorized to
participate in the guaranty system, but were specifically authorized
to
1/
"Bank Depositors Guaranty Act," ch. 61 of Laws of 1909.
Z
.
/ Of the eight States which created deposit guaranty systems
during the period 1907-1917, five made participation compulsory on all
banks operating under State law, two (Kansas and Washington) made participation voluntary, and one required participation in the deposit guarant
y
system or in a "bond security" system.
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Federal Reserve Bank of St. Louis
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•
reorganize as State banks, and thereby become eligible for membership in
the guaranty fund, by filing an amended charter.
Banks organized sub—
sequent to enactment of the guaranty legislation, if located in cities
or towns where all existing banks had failed to become guaranteed banks
within six months after tassage of the act, were eligible for admission
to the guaranty system; and, if located elsewhere, eligible after operating
for one year.
In 1921 the requirement of a year's operation was extended
to all newly organized banks.
A State banking department had been in operation in Kansas for
18 years prior to the adoption of deposit guaranty, and the banks had been
submitted to more careful examination than in many other States.
How
many banks which applied for admission to the guaranty system were rejected
•
by the Bank Commissioner is nnknown.g
At the close of the year 1911, the
earliest date for which the number of participating banks is available,
approximately one—half of the banks operating under State law, 442 out of
897, were guaranteed.
The law also provided that any national bank, at its option and
after an examination by and with the approval of the State Banking Commissioner
could participate in the deposit guaranty system.
However, the ruling of
the Attorney—General of the United States with respect to participation by
national banks in the deposit guaranty system in Oklahoma was applicable
to national banks operating in other States.
•
Consequently no national banks
1/ The tenth biennial report of the State Bank Commissioner, dated
September 1, 1910, p. xvi, states that applications were received from
several hundred banks to participate under the guaranty law, but gives no
information regarding the number approved or disapproved.
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Federal Reserve Bank of St. Louis
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were able to join the system in Kansas.
Withdrawal from the guaranty system.
A bank which decided to
withdraw from the bank depositors' guaranty fund was permit
ted to do so by
displaying a notice to that effect and by notifying the
Bank Commissioner,
effective at the expiration of six months.
The participation of a bank
which failed to pay its assessments was required to be termin
ated by the
Back Commissioner, under similar conditione.
In case of withdrawal from the fund, the bonds deposited as
surety for the payment of assessments were to be returned to the
bank after
the closing of affairs of all failed banks in liquidation at the expira
tion
of the sin months' period and the payment of assessments levied
to meet
losses in those banks.
•
These provisions, and decisions of the state courts regardirg
them, became important in 1525 when a large proportion of 'Lae partic
i]?ating
banks wished to withdraw from the syetem, and are discussed in
more detail
in another section of this report.
Slposits guaranteed,
Deposit guaranty in Kansas,
the
original late, ccnered all deposits not bearing interest, time
devoeits
payable in not more than one year nor in less 7ta7;12 six months
and bearing
interest not in excess of 3 percent per annum, and savings
aocounts not
exceeding $100 for any one person and bearing interest not in
excess of
percent.
At the same time payment of interest by guaranteed banks at
a
rate higher than 3 percent per year, except for existing contra
cts, was
prohibited.
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Federal Reserve Bank of St. Louis
3
In 1911 the limitation on the guaranty of savings deposits to
$100 per person was removed, and the guaranty extended to all deposits
not otherwise secured.
The prohibition of payment uf interest on deposits
by guaranteed banks at a rate in excess of 3 percent per annum was removed,
and a system was established for the setting by the Bank Commissioner of
maximum uniform rates of interest for each county by both guaranteed and
non-guaranteed banks.
County, township, city and school funds were brought under the
protection of the guaranty fund by a provision that no further security
was required for the deposit of such funds in a guaranteed bank.
This
provision was repealed in 1927.
The guaranty law, both in its original form and as amended,
•
provided that the guaranty should not apply to deposits which were primarily
rediscounts or money borrowed from this bank, nor to deposits otherwise
secured.
The law also provided that the guaranty should not apply to a
banks obligations as endorser upon bills rediscounted, nor to bills payable, nor to money borrowed temporarily from its correspondents or others.
An amendment to the law in 1923 defined any deposit on which a greater
rate of interest was paid than that approved by the Bank Commissioner as
"borrowed money" and therefore excluded from guaranty; and also excluded
from guaranty any deposits or credits obtained by fraud or in violation of
law or evidences of debt fraudulently issued.
Several court cases arose in connection with the definition of
deposits which were guaranteed.
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Federal Reserve Bank of St. Louis
In one case certificates of deposit
•
-5iswaed by a bank in connection with a land deal were held to have been
issued in transactions outside the business of the bank therefore not
protected by the guaranty fund.
In another case deposits at a rate of
interest higher than the maximum specified by law were held not to be
covered by the fund even though the excess of interest was in the form of
a bonus.' In still another case the depositors of a bank which had
complied with the depositorst guaranty act were held to be entitled to
protection by the guaranty fund even though the bank had been a persistent
and long,-continued violator of the banking law.'
Assessments.
Assessments for meeting the cost of deposit
guaranty were levied upon the banks on the basis of deposits covered by
the guaranty.
The law provided for annual assessments of one-twentieth
of 1 percent until the fund should reach a maximum of 8500,000.
Should
the fund become depleted, special assessments were to be made by the
Bank Commissioner, limited to five assessments of one-twentieth of 1
percent each in any calendar year.
A question arose, which was never
settled either by legislation or court decision, whether this number
included or excluded the regular assessment.
The maximum annual assessment
was thus one-fourth of 1 percent.
2/ Eourth National Bank of Wichita V. Wilson, Bank Commissioner
(1922) 110 Kansas 380, 204 Pat. 715.
2/ AmerIcan.. State Baals v. Wilson, Bank Commissioner (1922) 110
Kans. 520, 204 Pac. 709.
3/ Board of commissionmF of Labette County v. Bone, Bank
Commissioner (1926) 120 Kansas 673.
V Sixteenth Biennial Report of the Bank Commissioner, 1922,
p. 6; Thornton Cooke, "The Collapse of Bank Deposit Guaranty in Oklahoma
and its Position in Other States," Serterily Journal of Economics, Nov.
1923, p. 124.
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To secure payment of the assessments, each guaranteed bank was
required to deposit selected bonds, or cash, with the State treasurer
amounting to one—half of 1 percent of the bankts guaranteed deposits,
with a minimum of $500.
These provisions remained unchanged until 1921, when the
maximum fund to be accumulated was raised to $1,000,000.
Two years
later, another amendment provided that assessments in addition to the
regular annual assessment should be made whenever the fund was reduced
below $500,000, but only in amounts necessary to cover losses which
had become claims payable upon demand against the guaranty fund.
This
latter provision was of considerable importance because of the method
of paying depositors in failed banks, described below.
Method of paying depositors in failed banks,
In Kansas
the depositorst guaranty fund was not responsible for the immediate
payment of the deposits in a failed bank.
The fund was responsible
for the payment, upon completion of the liquidation of a failed bank,
of guaranteed deposits which had not been paid from the proceeds of
liquidation of the assets of the bank.
When a bank participating in the guaranty plan was found by
the Bank Commissioner to be insolvent, the Commissioner was required
to take charge of the bank and to wind up its affairs.
The depositors,
upon proof of claim, were given interest—bearing certifier.tas for itha
amount of their deposits (at the contract rate on interest—bearing
deposits, and at six percent on deposits with no contract rate), which
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Federal Reserve Bank of St. Louis
•
were paid so far as possible from the proceeds of sale of assets of the
bank and collections of double liability of stockholders.
When these
assets were exhausted, the balances due on guaranteed deposita were paid
from the bank depositors 1 guaranty fund.
Interest on certificates issued to depositors of closed banks
was abolished in 1925 by an amendment to the law.
This amendment as
enacted applied both to certificates to be issued in the future and
to
those then outstanding, but the elimination of interest on outstan
ding
1/
certificates was declared unconstituticnal by the State Supreme Court.Only one other State, among those which adopted deposit guaranty
plans during the period 1908-.1917, provided for payment of guaranteed
deposits upon completion of the liquidation of a failed bank.
•
The
other six States provided for immediate payment upon presentation and
proof of claim.
Indebtedness_cf guaranty fund.
borrowing by the depositors
No prnision was made for
guaranty fund, in the event that assess-
ments collected should be insufficient to meet the obligations of
the fund.
The law provided that, if the available money in the guarant
y
fund after collection of the maximum assessments should be insuffi
cient
to pay the guaranteed deposits of failed banks, the depositors
were to
be paid pro. rata to the extent of the money available, with the
balance to be paid from the next assessment.
17— Thomrson v. Bone
251 Pae. 178.
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Federal Reserve Bank of St. Louis
Bark Comm4 ssioner (1926) 122 Kans. 195,
_ortausw
Administration and custody of the fund.
The administration
of the Kansas depositors' guaranty law was placed in the hands of the
Bank Commissioner.
The Bank Commissioner was appointed by the Governor
with the advice of the Senate, and must have had three years' practical
knowledge of banking or have served at least one term as bank commissioner.
Assessments under the deposit guaranty law were paid to the
State Treasurer and placed in depository banks for State funds subject
to the call of the Bank Commissioner.
Expenses of administration.
No specific provision was made
in the depositors' guaranty law for expenses of administration.
The
cost of operating the office of the Bank Commissioner was met by
appropriations of State funds.
However, fees levied upon the banks
for each examination, which were collected by the Bank Commissioner
and paid to the State Treasurer, were approximately equal to the total
expenses of the Commissioner's office.
CONSTITUTIONALITY OF THE BANK DUPOSITORS 1 GUARANTY LAW
Banksoperating under the Kansas State law did not, so far
as has been ascertained, challenge the legality of the bank depositors'
guaranty law in the courts of the State of Kansas.
However, both State
banks and national banks operating in the State, and also a stockholder in a State bank, claimed that the law violated the Constitution
of the United States and brought suit in the Federal court to restrain
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the State officials from carrying out the law.
The complaints of
both groups of banks and of the State bank stockholders were heard
by the Circuit Court of the United States for the District of Kansas
in December 1909.
The State banks contended that the guaranty lay was in
:
21
conflict with the Federal constitution for the following reasons:
1.
That the effect of the law would be to drive them out
of business, thus depriving them of their property without due
process of law, unless they contributed to the guaranty fund.
2.
That in case they had given credit to a bank which
became insolvent, their rights of recovery would be impaired and
•
they would be deprived of property without due process of law,
since depositors in an insolvent guaranteed bank would be pre—
ferred creditors.
3.
That certain conditions of the guaranty plan were
unreasonable and arbitrary.
4.
That taxation was required to meet the expenses of
carrying out the guaranty plan.
1/ This list is based on the summary of the plaintiffs' arguments
given in the opinion of the United States Court in reviewing the case
(see footnote 3, p. 12). The contentions of the State banks are given
in greater detail in the opinion of the Circuit Court. (Larabee v.
Dolley, State Bank Commissioner, et al; Assaria State Bank of Assaria,
Kan., et al, v. Same) Abilene National Bank of Abilene, Kansas, et al,
v. Same, 175 Fed. 365). The State banks also claimed that the law
violated the Constitution of the State of Kansas.
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Federal Reserve Bank of St. Louis
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The national banks claimed that the guaranty law was in con—
flict with the Federal constitution for the following reasons:if
1.
That, since they could not avail themselves of the pro—
visions of the statute, the law operated to deny them the equal
protection of the law.
2.
That the efficiency of the national banks as instrumen—
talities of the Federal government would be impaired, since the
effect of the law would be to attract depositors from the national
banks to the guaranteed State banks.
The contentions of the stockholder of the State bank were
similar, namely, that the act violated the national Constitution because
it impaired the obligation of his contract as a shareholder in the bank
411
by applying the property of the bank to the payment of private debts not
contracted by the bank or by himself and without his consent and therefore
took his property without due process of law.
----17=In'ontentions were held to be in violation of the fifth and
fourteenth amendments to the National Constitution. This statement of
the arguments of the national banks is based on the summary given in the
opinion of the United States Circuit Court of Appeals, Eighth District
(Dolley, State Bank Commissioner of Kansas, et al, v. Abilene National
Bank of Abilene,_ Kansas, et al, 179 Fed. 4607—The contentions of the
national banks are given in greater detail in the opinion of the Circuit
Court (Larabee v. Dolley, State Bank Commissioner, et al; Assaria State
Bank of Assaria, Kan., et al, v. Same; Abilene National Bank of Abilene,
Kansas, et al, V. Same, 175 Fed. 3'65).
gi The stockholder contended that the law was in violation of
article 1 of section 10, and of the fourteenth amendment of the Constitu—
tion of the United States. Larabee v. Dolley, State Bank Commissioner,
et al; Assaria State Bank of Assariat Kansas, et al, v. tame; Abilene
National Bank of Abilene, Kansas, et al, v. Same, 175 Fed. 365.
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Federal Reserve Bank of St. Louis
-11 Decisions of the Circuit Court and of the Circuit
Court of
Appeals.
The Circuit Court of the United State
s for the District of
Kansas agreed that the bank depositors' guara
nty law was unconstitutional
on the grounds claimed by the national barivs
and by the stockholder of the
State bank, and granted a temporary injun
ction restraining the State
officials from carrying out the law.
With regard to the complaint of the
State banks, the Circuit Court held that
they did not have a case within
the jurisdiction of the court, on the
ground that they did not show that
their rights were infringed.
They could, the Court pointed out, meet the
conditions necessary to obtain the benefit of the law,
and could withdraw
any credit outstanding to guaranteed banks, and thus
could avoid loss of
property on account of the act.1/
The Bank Commissioner and Treasurer of Kansas appea
led to the
United States Circuit Court of Appeals, Eighth Circu
it, which reversed the
opinion of the Circuit Court and dismissed the injun
ction.
The grounds
for this action were summarized by the Circuit Court
of Appeals as follows:
"The fourteenth amendmant provides that no State
shall 'deny to
any person within its jurisdiction the equal prote
ction of the laws.'
A conclusive answer to the objection to the Kansa
s statute now being
considered would seem cleorly to appear from the
face of the amendment itself...The amendment does not profess to secur
e to all persons
in the United states nor all persons in the same
State the benefit of
the same laws. ...Jurisdictional limits are an
obvious and sufficient
zeason for lack of universal uniformity in legis
lation. The equality
clause of the amendment does not require indis
criminate operation of
State laws, but proceeds upon due consideration
of the relations of
persons to the State and to the legislation in
question....Such has been
the consistent holding of the Supreme Court....
2/
21,.. cit. 175 Fed. 365.
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- 12 "The national banks owe their existence to the laws of the
United
States...Their exclusion from the operation of the statute
in question
is not from any design on the part of the State to discriminate
against
them, but results from the limitation of governmental powers.
..
"The effect of the Kansas statute upon the business of
the
national banks will at the most be indirect anci inciden
tal...
"We have not considered the merits of the guarant
y plan, whether
practically beneficient, experimental, or illusor
y. Such matters are
for the State Legislature. Our province is confine
d to the question
whether the exercise of its powers is within constitutional
limits so
far as the national banks is concerned. We think the objecti
ons they
urge are so clearly witt9ut foundation, the temporary injunct
ion was
improvidently granted."-/
Decision of the United States Supreme Court.
State bankers in
Kansas were dissatisfied with the dismissal of their case by the
Circuit
Court of the United btates for the District of Kansas and appealed
to the
United States Sunreme Court.
•
The United States Supreme Court heard the
arguments of the Kansas bankers at its fall term in 1910, along with
cases
regarding the constitutionality of deposit guaranty laws in Oklahoma and
NebraRka.
The Court rendered its decision on January 3, 1911, that the
Oklahoma law was constitutional, and stated that the opinion was applicable
to the Kansas law, except so far as the Kansas law showed certain minor
differences from that of Oklahoma.'
These minor differences were also
dismissed as not affecting the constitutionality of the Kansas bank depositors' guaranty law.
State Bank Commissioner of Kansas, et al v. Abilene
National Bank of Abilene, Kanst7-73171:177717-Wat-4617-16ecided May 20, 1910.
Z
./ For a summary of the decision of the United States Supreme Court
regarding the Oklahoma depositors' guaranty fund law see the memorandum,
"Deposit Guaranty in Oklahoma," pp. 11-13.
•
Assaria State Bank of Assaria, et al v. Dolley, Bank Commissioner
of the State of Kansas and Tulley, State Treasurer, United States Supreme
Court Reports, 55 Law ad, U. S. 219-221, pp. 123-28.
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SUPERVISION AND REGULATION OF GUARANTEED BANKS
State banks in Kansas had been subject to supervision by a
bank commissioner, with power to conduct examinations and to require
reports, for eighteen years prior to the enactment of the bank depositorst guaranty law.
No changes of major importance occurred during the
life of the guaranty fund in the powers of the Bank Commissioner, and
comparatively few in the legislative restrictions on the operation of
State banks.
Supervisory powers of the Bank Commissioner.
Except for the
special examination required for admission to the guaranty fund, and the
power to terminate membership in the guaranty fund for violation of the
•
guaranty law, the guaranteed banks were subject to the same supervision
as other State banks.
The absence of information regarding the results
of examinations of banks for admission to the guaranty system has been
mentioned above.
However, the Bank Commissioner, in his Biennial Report,
September 1, 1920, indicated that high standards were adhered to in examining banks for admission to the guaranty system.
"We now have 676 State banks whose deposits are guaranteed by
the Bank Depositors' Guaranty Fund of Kansas, and there are continual
requests from the State banks to come under the law. The department
has made the requirements for operation under its protection very
stringent. The qualifications of the management and the condition
of the bank's books, notes and records must be of the highest standard.
It is our opinion, that as longlas the law is optional, that these
requirements should be rigid.'./
1/ Fifteenth Biennial Report of the Bank Commissioner of the State
of Kansas, 1920, p. 5.
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Federal Reserve Bank of St. Louis
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A similar lack of information occurs with respect to terminations
of membership in the fund for violation of law.
So far as is known, no
action was taken by the Berk Commissioner daring the entire period of the
fund to terminate the membership of any bank.
The powers of the Bank Commissioner over all State banks related
chiefly to examinations, bAnk personnel, and the closing of banks.
The
Commissioner also had limited powers relating to the organization of new
banks and to the maintenance ofcapital and reserves.
The Bank Commissioner was required to make two examinations each
year of each operating bank, and additional examinations at any time
deemed necessary.
Fees for examinations were specified in the law,
ranging from $15 to $35 for each examination.'
•
The Commissioner was also
empowered to call for reports of condition as often as he considered them
necessary.
The Commissioner was authorized to order the directors of a bank
to remove any official found to be dishonest, reckless, or incompetent,
and to order any excess loan to be reduced to the legal limit within sixty
days.
He was required to notify a bank to make good, within ninety days,
any impairment of its capital, and within thirty days, any impairment of
the required lawful money reserve.
In 1915 the Commissioner was given
power to suspend reserve requirements for a limited period of time, and
V In 1917 the basis for fees was changed from capital stock to
loans, and the range In amount changed to $15 to $100; in 1919 the basis
was changed from loans to total resources and the range from $20 to about
$110; in 1925 the minimum fee was increased to $40.
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to regulate the conditions under which checks could be drawn on the portion
of reserves held in other banks.
No bank was permitted to open for business without authorization
by the Bank Commissioner, but the Commissioner was required to issue such
authorization if the bank had been organized in the manner prescribed by
law and its capital fully paid.
HoweTer, in 1911 the Charter Board, con—
sisting of the Attorney—General, the Secretary of State, and the Bank
Commissioner, was given authority to prohibit the organization of a bank
except where an investigation showed a new bank to be a public necessity.
The Bank Commissioner was given authority to close a bank if,
upon examination or from reports submitted, it appeared that the bank was
insolvent, or had willfully violated any requirement of the banking law.
The law specified that a bank should be deemed insolvent when the actual
cash market value of its assets is insufficient to pay its liabilities,
when it is unable to meet the demands of its creditors in the usual and
customary manner, or when it fails to make good its reserve as required
by law.
The Bank Commissioner could also close a bank for refusal of any
offir.er to submit the books or affairs of the bank for inspection, or for
the interference by a bank officer with the discharge of the Commissioner's
duty.
Any bank which refused or neglected to comply within ninety days of
any requirements lawfully made by the Commissioner in writing was deemed
to have forfeited its charter, and the Commissioner was required to close
the bank.
The Board of Directors of a bank could place a bank in the
hands of the Commissioner by posting a notice on the door.
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Upon the closing of a bank, the Commissioner was required to
make a thorough examination of its condition, and if it could not reopen
or liquidate its business to the satisfaction of all its creditors, he
was required to appoint a receiver subject to the approval of the
district court.
Sale of the bank's assets, and compounding of bad or
doubtful debts, were subject to the order of a court of competent jurisdiction.
Statutory limitations on bank operations.
The principal
statutory limitations on banking operations, under the banking law in
force at the time of enactment of the guaranty law and amendments adopted
while the guaranty law was in operation, are summarized below.
Res2onsibility of officers, directors,
and stockholders:
Losses resulting from loans
made in violation of legal
limits
NO provision
Liability of stockholders
Additionally liable for a
sum equal to the par
value of stock owned
Bendtiag of sative officers
and employees
Bonding of cashier and officers
(1919, and employees) handling
the funds of the bank to be
required by directors
Meetings of directors
At least four each year, with
copy of record forwarded to
Bank Commissioner
Examinations by directors
Thorough examination of books,
records, funds and securities,
at each required meeting, to
be recorded in detail
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Federal Reserve Bank of St. Louis
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17 -
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Limitations on loans and investments:
Loans to officers and employees
1909, no provision; 1927, loans
to active managing officers
and employees must be approved
by a majority of the Board of
Directors, no loan to 'Feed
5 percent of capital or surplus
and the aggregate of such loans
not to exceed 10 percent of
capital and surplus
Loans to directors
No provision, except when director
is active managing officer
Loans to stockholders
No limitation
Maximum to single borrower
15 percent of paid-in capital
and surplus
No provision
Maximum secured by real estate
When reserve is deficient
Any increase prohibited, except
bills of exchange, nayable at
sight
LAmitations on ownership of property:
Maximum value of banking house and
fixtures
One-third of paid-in capital;
1921, one-half of paid-in
capital and surplus
Ownership of other real estate
Prohibited, except acquisition
for collectiont of debt
Ownership of corporate stock
Tortiadel except as follows:
acquisition for collection of
debt; in 1915 stock in Federal
Reserve banks; in 1921, stock
of other banks up to the maximum of 5 percent of paid-up
capital and surplus in the
case of banks having a capital
of $50,000 or more.
Time limit on ownership of assets
acquired by collection of debt
Five years for real estate; six
months for corporate stock
and goods and chattels; 1917,
one year for holdings of real
estate, other than banking
house, in excess of one-third
(1921, one-half) of capital
and surplus
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Limitations relating to deposits
Maximum amount of deposits
Ten times paid-up capital and
surplus for a period longer
than six months (repealed in
1910
Maximum rate of interest on deposits
1909, 3 percent on guaranteed
deposits; 1911, maximum rate
for all banks in each county
to be set by Bank Commissioner
Receipt of deposits when insolvent
Prohibited
Preference
Prohibited, except for pledge
of assets to secure public
funds or, in 1911, postal
savings deposits
Limitations on borrowiugF:
•
Maximum
50 percent of paid-up capital
Power of Bank Commissioner
May require reduction if bank
is borrowing habitually to
re-loan
Mamimum value of assets which may
be pledged for borrowings
One and one-fifth times amount
borrowed
Limitations on payment of dividends:
411
Percentage of earnings to be carried
to surplus prior to dividend
One-tenth of net profits until
surplus reaches 50 -percent
of capital stock
When losses equal or exceed undivided
profits
Losses in excess of undivided
profits to be charged to
surplus account, and future
dividends not to exceed onehalf of net earnings until
surplus has been restored;
1927, surplus must not be
reduced by dividends below
50 percent of capital stock
When reserve is impaired
Prohibited
When capital is impaired
Prohibited
If bank is in danger of insolvency
No provision
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Federal Reserve Bank of St. Louis
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Required reserves:
Total amount
1909, ao
Proportion to be held in actual cash
1909, one-fourth; 1915, one-third
in places over 1,000 population,
one-fourth in places under 1,000
population; 1927, none, but onehalf to be either in vault or in
balances with correspondent banks
Permissible character of remainder
1909, due from solvent banks at
places approved by Bank Commissioner; 1927, one-half in
specified types of bonds,
portion of other one-half not
in vault in balances with
correspondent banks with no
stockholders who are stockholders of depositing bank
except when approved by Bank
Commissioner
•
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Federal Reserve Bank of St. Louis
percent in places under
5.000 population, 25 percent in
places over 5,000 population
and also any reserve depository
bank; 1915, 12 percent demand
deposits and 5 percent on time
deposits in places under 50,000
population when credits due
other banks are less than onefifth of deposits, 15 percent
of demand deposits and 5 percent of time deposits in places
over 50,000 population and any
bank when credits due other
banks are one-fifth or more of
deposits; 1919, foregoing percentages reduced to 7 and 10 percent, respectively, on demand
deposits and 3 percent on time
deposits; 1927, 15 percent of
demand deposits and 5 percent of
time deposits, by all banks
•
—20—
Required fully—paid capital:
In places with —
Less than 500 inhabitants
500 to 1,000
1,000 to 2,000 (third class)
2,000 to 15,000 (second class)
Over 15,000 (first class)
$10,000 (1925, $15,000)
15,000
20,000 el927,--$20T0001
:000 (1927, $30,000)
50,000
Required. reports:
Resources and liabilities
At least four each year,
oftener if called for by
Bank Commissioner
Earnings and dividends
Annual statement of receipts
and disbursements; each dividend declared and amount
carried to surplus and un—
divided profit accounts
Deposits
No specific provision
•
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Federal Reserve Bank of St. Louis
•
- 21 NUMBrR AND DOSITS OF GUARANTEED BANKS
Number of particiRating banks.
The number of banks operating in
Kansas which participated in the guaranty system, the number eligible for
participation which did not do so, and the number ineligible for participation, are given in Table 1.
The ineligible institutions include
national banks, trust companies, and private banks.
By the beginning of the year 1912, after two and one-half years
of operation, about one-half of the banks Which were eligible for admission
to the guaranty system had become members of the system.
This constituted
two-fifths of all of the banks, including trust companies, operating in the
State,
II/
During the next ten years the number of guaranteed banks, and the
proportions of eligible and of all operating banks, steadily increased.
By
1922, nearly two-thirds of the eligible banks, and more than one-half of
all banks operating in the State, had become members of the guaranty system.
Early in 1922 the number of guaranteed banks, and also the number
of banks operating in the State, began to decline.
During the next four
years the decline in the number of guaranteed banks was slightly more,
relatively, than in the total number of banks, so that in 1926, about two-,
fifths of the eligible banks, and somewhat less than one-half of all
operating banks, were guaranteed.
•
During 1926 and 1927 the great majority
1./ The great majority of the ineligible institutions were national
banks. The maximum numbers of trust companies and of private banks during
this period were, respectively, 18 and 6. All of these institutions were
authorized, under the guaranty law, to become eligible by taking out
charters as State banks.
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Federal Reserve Bank of St. Louis
-22-
•
Table 1. NUMBER OF OPERATING BANKS IN KANSAS PARTICIPATING
AND NOT PARTICIPATING IN TEE DEPOSIT GUARANTY SYSTEM
1910-1929, BY YEARS.
Call date
nearest 1/
January 1.-1
All banks
operating
in Kansas
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1038
1077
1107
1113
1141
1153
1196
1220
1250
111024
11
,
1925
1926
1927
1928
1929
A/
years.
Participating
in deposit,
guaranty 2/
..
201
442
462
481
508
526
546
Not participating in
__Aapsi.I.Lyarantv
E1igible.31
Not
eligibl
..
659
213
217
446
432
219
219
439
420
427
437
221
225
243
237
1291
1338
1374
1375
1349
577
013
649
683
714
698
430
426
427
409
377
243
252
262
369
282
1323
1297
1269
1223
681
651
611
357
371
381
547
285
275
277
277
1109
78
794
794
281
269
1102
399
39
282
284
Participati rig banks
per 100
Zrating
0f eligible
banks
banks
O.
18.7
39.9
41.5
42.2
44.1
44.0
44.s
46.2
47.5
4s.5
49.7
51.9
51.7
51.5
5o.2
48.1
32.6
7.0
3.5
23.3
49.8
51.7
52.3
54.7
55.2
55.5
57.3
59.0
60.3
62.5
65.4
65.4
65.6
63.7
61.6
42.2
8.9
4.7
Call dates for national and State banks are not identical in several
J Figures obtained from Bank Commissioner of Kansas, except for 1911,
which relates to preceding September 1 and is derived from statements of individual banks showing guaranty fund with State treasurer.
.3j Number of State banks (excluding trust companies and private banks)
as given in Biennial Reports of the Bank Commtssioner, or tabulated from
information therein, minus number participating in deposit guaranty.
Number of national banks, from annual reports of the Comptroller of
the Currency, plus number of trust companies and private banks, tabulated from
data in biennial reports of the Bank Commissioner of Kansas. Most nf these
institutions were national banks, since the number of trust companies and private
banks did not exceed 24 in any year.
•
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Federal Reserve Bank of St. Louis
•
- 23
of the members of the guaranty system withdrew, leaving only 9 percent of
those eligible, and
7
beginning of 1928.
Only 31 banks continued their participation in the depos
it
percent of all operating banks, guaranteed at the
guaranty law until the law was repealed in March 1929.
,
Deposits of participating and non-participating banks
.
Deposits
of the banks participating in the deposit guara
nty system during the first
eight years of its operation are available
only in two of those years.
During the remaining period of operation
of the law, they are available
biennially for dates on or about September 1.
The numbers and deposits
of participating and non.4participating banks on
the available dates are
given in Table 2.
In 1914, five years after the guaranty system was
inaugurated,
411
more than three-fifths of the deposits eligible
for participation in the
system, and over one-third of the deposits in all
banks in the State, were
in guaranteed banks.
By 1922 more than three-fourths of the depos
its of
all banks eligible for participation in deposit
guaranty, and over twofifths of the deposits 14 all banks in the State
, were in guaranteed basks.
These proportions were, respectively, larger and
smaller than the corresponding proportions for the number of banks, indicating
that the guaranteed
banks were larger banks, on the average, than the non
-guaranteed State banks,
but smaller, on the average, than national banks
operating in the State.
In 192g, When only one bank in twenty of those
eligible remained in the
guaranty system, the deposits of the guaranteed banks
were only 2 percent
of the deposits in all guaranteed banks, indic
ating that the banks re-
•
maining in the system were comparatively small
banks.
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Federal Reserve Bank of St. Louis
•
•
OPERATING Billas IN KANSAS
Table 2. rumER MID DEPOSITS
PARTICIPATING AND NOT PARTICIPATIUG IN THE DEPOSIT GUARANTY SYSTEM
Call date
nearest
September 12/
All banks
operating
in Kansas
Participating
in deposit /
guaranty .F./
Not participating in
deposit guaranty
Not
/
eligible2/
Participating banks
per 100
Operating
Eligible
banks
banks
Number of banks
Deposits (in thousands
of dollars)
1910
1914
1918
1920
1922
1924
1926
1928
1,068
1,147
1,279
1,370
1,361
1,292
1,246
1,112
201
491
604
676
703
651
4/577
- 42
652
434
426
420
374
365
392
798
215
222
249
274
284
276
277
272
18.8
42.8
47.2
49.3
51.7
50.4
46.3
3.8
23.6
53.1
58.6
61.7
65.3
64.1
59.5
5.0
1910
1914
1913
1920
1922
1924
1926
1928
162,581
198,428
445,092
504,069
429,328
449,631
471,150
470,410
26,371
70,329
181,572
217,241
185,989
176,473
153,788
4,791
68,643
41,119
80,334
63,625
56,643
63,827
91,587
221,753
87,567
86,980
184,086
263,203
186,495
209,331
220,774
243,856
14.4
35.4
40.7
43.1
43.3
39.2
33.7
1.0
27.8
63.1
69.3
72.2
76.7
73.4
63.4
2.1
211 Call dates for national and State banks are not identical.
Z.
/ Biennial Reports of the Bank Commissioner. Deposits of participating banks tabulated from statements
for the individual banks, identified in some years by statement of membership and in other years by presence of
the item, "Guaranty fund with State Treasurer" in the assets of the bank. Number and deposits of eligible banks
obtained by deducting data for participating banks and for trust companies and private banks from consolidated
statements for all State banks and trust companies.
Pigures for national banks from Annual Reports of the Comptroller of thb Currency, plus those for trust
companies and private banks, from Biennial Reports of the Bank Commissioner.
4/ Of these, only 225 were in good standing, that is, had paid all assessments due. The others were in the
process of mithdrawing from the guaranty system. Eighteenth Biennial Report of the Bank Commissioner, p. 4.
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Federal Reserve Bank of St. Louis
rx)
0
•
The deposits of participating banks given in Table 2 should not
be considered identical with the deposits specifically covered by
guaranty, since public funds otherwise securêd. are included in the table.
Concentration of bank deposit.
Table 3 shows the amounts of
deptsits held on September 12, 1914, and September 15, 1922, by guaranteed
banks in Kansas grouped according to their deposits.li
These years are
chosen because they are representative, respectively, of the pre.Aar and
tne post-War parts of the period during which deposit guaranty was in
operation.
of
In both years the largest bank held slightly over 3 percent
he deposits of all guaranteed banks, and over 14 percent of the
deposits of all the guaranteed banks were concentrated in the largest 10
•
banks.
-17 Similar figures for guaranteed banks for other years for which
the data are available, are shown in Table 14, p. 70; and for nonguaranteed State banks in Table 15, p. 71.
•
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Federal Reserve Bank of St. Louis
•
-26Table 3. NUMBER AND DEPOSITS OF GUARANTEED STATE BANKS IN
KANSAS, SEPTEMBER 12, 1914, AND SEPTEMBER 15, 1922 L.I.1
Number
of banks
All quaranteed banks, September
-12 1914
Banks withAgosits of $100,000 or less
$100,000 to $250,000
$250,000 to $500,000
$500,000 to $1,000,000
$1,000,000 to $2,000,000
More than $2,000,000
Largest bank
Largest 5 banks
Largest lo banks
Percentage Percentage
Amount of
of number of aggregate
deposits
deposits
of banks
(thousands
of dollars)
L.D.1.
70,329
100.0
100.0
251
187
51.1
313.1
8.2
40.1
4o
16,148
28,184
14,107
9
3
5,771
3,913
0.6
1
2,206
0.2
8.2
5.6
3.1
••
..
••
2,206
6,960
10,217
0.2
.53
DI
1.8
23.0
20.0
1.0
9.9
2.0
14.5
185,915
100.0
100.0
160
348
11,074
57,947
22.8
6.o
49.5
126
42,955
17.9
31.2
23.1
$500,000 to $1,000,000
$1,000,000 to $2,000,000
More than $2,000,000
47
17
32,269
23,296
6.7
2.4
17.3
12.5
5
18,374
0.7
9.9
Largest bank
Largest 5 banks
Largest 10 banks
..
..
..
5,856
18,374
26,752
0.1
0.7
1.4
3.2
All guaranteed banks, September.
15, 1922
Banks with deposits of $100,000 or less
$100,000 to $250,000
$250,000 to $500,000
9.9
14.4
1/ Tabulated from statements for individual banks as given in the
reports of the Bank Commissioner. The figure for total deposits in 1922 differs
slightly from that given in Table 2 because of rounding.
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Federal Reserve Bank of St. Louis
27
S
BANK FAILURES
Fai.lures of guaranteed banks.
During the 20 years of opera-
tion of the Kansas guaranty fund, 154 participating banks closed because
of financial difficulties.1/
Only two of these failures occurred during
the first ten years of operation of the fund.
Three of the banks which
closed were banks which had previously suspended and had been reopened.
The deposits of the guaranteed banks closed because of financial difficulties amounted to $33,086,000.
The largest bank among
the failures was the American State Bank, Wichita, which closed June 18,
1923, and had deposits of nearly $5,000,000.
•
This was the largest bank
In the guaranty system, and also the largest bank operating under State
law.
One other bank with deposits of more than $1,000,000 was among
the failures.
The deposits of these two banks accounted for nearly one-
fifth of the deposits of all of the closed banks.
Two-fifths of all
the failed banks had deposits of less than $100,000, but these banks
lj This fipre includes banks closed during the biennium from
September 1, 1926, to September 1, 1928, which were on the list of
guaranteed banks on the former date. Some of these withdrew from the
guaranty fund prior to date of closing.
gi These figures, except for 4 banks which failed prior to
1921, are from schedules collected by the Federal Reserve Committee on
Branch, Group and Chain Banking, and for the most part refer to the last
examination or call date prior to closing. In the case of 27 of the
banks, for which figures are also available as of date of closing in a
report by a special Commissioner to the State Supreme Court, the deposits at date of closing were 7 percent less than those given on the
schedules prepared for the Federal 4serve Committee.
•
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Federal Reserve Bank of St. Louis
-28-
•
had wily one—tenth of the deposits of all of the closed banks.
The
distribution of the closed banks, and the distribution of their deposits,
according to the amount of deposits held are given in Table
4.
The
number and deposits of the banks closed each year are given in Table 5.
The average annual rate of failure, computed as the number of
banks which failed per 100 members of the guaranty system at the begin—
ning of each year, was 1.5.
However, as has been previously noted,
nearly all of the failures occurred during the latter half of the period
of operation of the fund.
During that 10...year period, the average
annual rate of failure was 2.4 per 100 operating banks.
The deposits
of the closed banks, for this period, averaged $1.8° per year for each
]
$100 of deposits in operating banks)
•
Failures among npnguaranteed banks.
During the first ten
years of operation of the bank depositors' guaranty fund failures among
banks which did not become guaranteed occurred more frequently than
among the guaranteed banks,
However, during the latter ten years of
operation of the system, failures among nonguaranteed banks were rela—
tively less frequent than among guaranteed banks.
During the entire period of operation of the guaranty fund,
66
failures occurred among nonguaranteed State banks.
These banks held
1/ These rates of failure are close approxiwtions, but
may not be precise because the figuree for failures include some
banks which closed subsequent to withdrawal from the guaranty system.
Also, deposits of operating guaranteed banks are available only
biennially.
•
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Federal Reserve Bank of St. Louis
•
—29
Table 4. NUMBER AND DEPOSITS OF GUARANTEED BANKS IN
KANSAS CLOSED BECAUSE OF FINANCIAL DIFFICULTIES,
JUNE 30, 1909, to MARCH 14, 1929
Banks grouped by amount of deposits
Number
of
banks
Deposits
(in
Percentage of total
thousands
,
Number
Deposits
of dollars)
Guaranteed bans,
Total
15_1!
33,086
$100,000 to $250,000
58
64
3,562
10,367
$250,000 to $500,000
21
9
1
1
Hanks with deposits of—
$100,000 or less
III
$500,000 to $1,000,000
$1,000,000 to $2,000,000
$2,000,000 to $5,000,000
•
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Federal Reserve Bank of St. Louis
100.0
100.0
37.7
7,007
41.6
13.7
10,8
31.3
21.2
5,915
1,269
4,966
5.8
.6
.6
17.9
3.8
15.0
-30—
•
Table 5. NUMBER AND DEPOSITS OF STATE BANKS IN KANSAS CLOSED BECAUSE
OF FINANCIAL DIFFICULTIES, JUNE 30, 1909, TO MARCH 14, 1929,
BY YEARS
Year
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
192.0
Guaranteed banks
Deposits
(in
Number 1/
thousands
of dollars)
••
_Nonguaranteed banks
Deposits
(in
Number 1/
thousands
of dollars)
0*
••
••
••
••
••
••
••
• •
••
••
5
••
••
2
349
186
2
72
00
100
••
00
••
Oe
••
••
••
06
455
2
2
2
166
2
2,278
1922
1923
1924
8
17
25
11
3
3
1925
1926
3927
1928
1929
15
35
27
11
1
2,245
5,057
4,342
2,157
82
10
8
11
2
0••••••••
•••••••••••••••••••/.10
1••••••••
1921
Total
154
4,336
9,032
2,889
33.086
2
66
00
72
538
475
711
282
1,087
332
570
792
790
1,434
146
••••••~•••••w•••••
7,836
.2.1 From Biennial Reports of Bank Commissioner. Banks which were
members of the guaranty system on September 1, 1926, and failed during the
following two years, are included with guaranteed banks, though some of
them withdrew from the fund prior to date of failure. Nonguaranteed banks
include 6 ineligible for guaranty (3 trust companies and 3 private banks.)
•
ij 1909-1920 Biennial Reports of Bank Commissioner (figures are
partly as of date of closing and partly for latest available statement
prior to failure); 1921-1929, tabulated from deposits reported on
schedules prepared for the Federal Reserve Committee on Branch, Group
and Chain Banking. Deposits of the 6 banks ineligible for guaranty
amounted to $352,000.
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Federal Reserve Bank of St. Louis
•
deposits amounting to $7,836,000.
The distribution by years is given
in Table 5.
Failures by size of bank.
In Table
6
the size distribution
of banks which failed during then year period, 1919-1928, is compared,
for guaranteed banks and for nonguaranteed State banks, with the
average size distribution of operating banks.
Figures are given for
this decade rather than for the entire period during which the fund
was in operation because nearly all of the failures occurred during
that decade.
No regular relationship between size of bank and frequency
of failure is shown by the figures.
•
The highest frequency rate, with
respect both to number and to deposits, occurred in the group of banks
with deposits under $100,000.
The aiih highest rate, in the case of
deposits, oocurred in the largest size group, with depostts per bank
of more than $2,000,000.
...smni,e•ison
..
.w:LotherStates. In Table
7
failure
rates for both number and deposits are shown for guaranteed and nonguaranteed banks in Kansas, and for banks in contiguous States and in
the entire United States.
The period covered is 1910-1928, which
includes the entire period of operation of the bank depositors: guaranty
fund in Kansas, except for the last six months of 1909 and the first two
and one-half months of 1929.
The total number of bank failures in Kansas during 1910..
1928, relative to the number of operating banks, was lower than in the
•
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Federal Reserve Bank of St. Louis
S
Table 6. SIZE DISTRIBUTION OF FAILED BANKS IN KANSAS COMPARED WITH
AVERAGE SIZE DISTRIBUTION OP OPERATING BANKS, 1919..1928
Number of banks
DODOtOS
Meer-- .1- Failed Average
age
Nun.per
in
In
nunber
100
operafailed
ber
failed operal,
ting
banks
operating.d
banks (thouting
(thou- sands of
sands of dollars)
dollars)
Puarapteoft_bnnks - total
64o
1.5.g.
24
115
303
154
56
64
21
47
16
5
nguaranteed State banks--totalgi
In
falled
banks
per $100
in
opera,ting"
banks =I
3?.957
la
49
21
14
8,167
3,433
51,650 10,367
52,034
7,007
42
20
13
9
1
1
19
6
20
31,787
22,524
16,137
5,915
1,269
4,966
19
6
31
412
5
.11
2.1.
s4 221.
7,156
Banks rith deposits ofr
$100,000 or less
$100,000 to $250,000
$250,000 to $500,000
142
180
63
34
12
6
24
7
lo
8,706
23,955
21,444
1,853
1,546
2,318
$5oo,000 to $100400,000
$1,000,000 to $2,000,000
More than $2,000,000
20
6
1
2
..
..
10
..
..
14,074
7,681
3.367
1,139
Banks with deposits of$100,000 or less
$100,000 to $250,000
$250.000 to $500.000
$500,000 to $1,000,000
$1,000,000 to $2,000,000
More than $2,0100,0310
e
182,299
••
••
1/ These rates are for the 10-year period. Approximate annual rates can be
obtained by dividing the figures by the number of years (10).
gl Includes trust companies and private banks, except 1 trust company for
which deposits are not available.
•
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Federal Reserve Bank of St. Louis
- 33
-
Table
7, BANK FAILURE RATES IN KANSAS, 1910.492S 1 COMPAIIED WITH RATES
IN CONTIGUOUS STATES AND IN TEE UNITED STATES 1./
Deposits in failed
banks per $100 in
operating bank
Failures per 100
operating banks
State
and
national
banks
Kansas - total
Guaranteed banks
Nonguaranteed banks
State
banks
21
22
29
29
14
11
National
banks
State
State
and
national banks
banks
U.
-
26
26
.
5
5
11
3
R.
5.
7
- g/
Four contiguous States
Nebraska
Missouri
Oklahoma
Colorado
•
Entire United States
National
banks
22
19
23
21
14
15
22
6
Lo
35
45
5
30
40
19
15
22
10
50
17
22
26
10
5.
8
12
7
.2j Tabulated from data from the following sources: reports of bank commissioners in the various States; Willis, Banking Inquiry of 1925; annual reports of
the Comptroller of the Currency; Federal Reserve Committee on Branch, Grcup and
Chain Banking, "Changes in the Number and Size of Banks in the United States, 1S341931?: and Federal Reserve Bulletin, September 1937.
g
Less than 50 cents.
Note: These rates are for the entire period. Approximate average annual rates
can be obtained by dividing the figures by the number of years (19).
•
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Federal Reserve Bank of St. Louis
.34-
411
United States as a whole, and also lower than in any of the four States
contiguous to Kansas.
If only State banks are considered, the failure
rate in Kansas was also lower than in the entire United States, and
lower than in the four contiguous States combined, but slightly higher
than in one of the contiguous States.
However, the failure rate of the
guaranteed banks in Kansas was higher than the failure rate of all
State banks in two of the contiguous States, Nebraska and Missuri, and
lower than in the other two contiguous States, Oklahoma and Colorado.
The failure rates in terms of deposits are somewhat different
than for number of banks.
For deposits, the failure rate of all banks
in Kansas was higher than for the four contiguous States combined, and
more than twice as high as that for the eltire United States.
•
This
rate for all State banks was higher in Kansas than in two of the con—
tiguous States, Missouri and Colorado, and lower than in the other two
contiguous States, Nebraska and Oklahoma.
When only guaranteed banks
in Kansas are considered, the failure rate, in terms cf deposits, was
higher than for State banks in any of the contiguous States except
Iklahoma, and nearly four times as high as the corresponding rate for
all State banirs in the entire country.
In one of the contiguous States, Nebraska, a deposit guaranty
system was operative during most of the perind embraced by these
figures; and in one other State, Oklahoma, a depcsit guaranty system
was in existence for more than one—half of the period.
contiguous States had ne deposit guaranty.
The other two
The figures for number of
bank failures in these States do not indicate that the existence of
•
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Federal Reserve Bank of St. Louis
-35-
•
deposit guaranty was a significant causal factor in the frequency of
such failures.
However, in the case of deposits, thelailure rates in
the State banks in Nebraska, in Oklahoma, and in the guaranteed banks
in Kansas, were all distinctly higher than the rates for State banks
in Missouri, in Colorado, and in the nonguaranteed banks in Kansas.
These figures suggest that if there is any validity to the argument
that deposit guaranty tends to make bankers more reckless, it applies
to the large banks rather than to the small banks.
Causes of bank failures.
The Biennial Reports of the Bank
Commissioner provide considerable information regarding the causes of
op
bank failures during the period, of operation of the bank depositorst
guaranty fund.
Failures during the first 13 years of operation of the
guaranty fund (1909-1922) are ascribed chiefly to dishonesty or to
excessive loans to favordd interests.
"Every bank that has been in distress under the supervision of the present bank commissioner can trace its trouble
directly to loans to officers and directors." 2./
"During the two years covered by this report--September 1,
1920, to September 1, 1922--there have been failures of twAntytwo State banks and one trust company . . . The insolvency of
sixteen of these twenty-three institutions is the result of dishonesty on the part of some officer. Of the other seven, two or
possibly three may be classed as failures due to the bad judgment
or incompetency of officials. The failures of the others of the
seven were caused by an improper use of the banks' funds to such
an extent that one would almost be justified in classing such
use as criminal. In some cases the misuse of the bank's funds
•
2
.
1 Fifteenth Biennial Report of the Bank Commissioner, 1920,
pp. 4-5.
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Federal Reserve Bank of St. Louis
•
was represented by loans to the active officers of the bank withcut security. In other cases the loans were made to business
concerns in which the officers and directors were interested.
Without exception these loans were in excess of the legal limit."
The Comptroller of the Currency, in his report for 1921, made
the following statement regarding bank failures in Kansas.
"From information furnished by Commissioner Foster it appears
that during the operation of the guaranty law up to June 30, 1921,
five guaranteed banks . . . failed. In three instances failure
was caused by criminal acts of officials; one due to the failure
of a large debtor, and one loss sustained upon worthless paper
placed in the bank by one of the officials. In the same period
there were 11 failures of tunguaranteedt banks . .. In five
cases failure was due to criminal acts on the part of officials,
one to speculations of officers, three to injudicious banking and
inability to realize upon real estate and other paper, one to
failure of a large debor, and one was closed as a result of internal dissensions." El
Dishonesty and loans to officersi interests are also emphasized by T. Bruce
guaranty funds.
Robb, in his study of the operation of State deposit
At the time his book was written, only three guaranteed
banks in Kansas had failed but all of these banks were wrecked by embezzlements of and excessive and illegal loans to officers.
With respect to failures subsequent to 1922, which were
more numerous than those prior to that date, bad loans and frozen
assets associated with a general depreciation in values, an excessive
1/ Sixteenth Biennial Report of the Bank Commissioner,
p.
EP/
p. 189.
•
1922,
4.
11
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Federal Reserve Bank of St. Louis
Annual Report of the Comptroller of the Currency,
1921,
T. Bruce Robb, The Guaranty of Bank Deposit!, pp. 117-32.
- 37 number of banks, and incompetency are emphasized, though dishonesty is
still considered to be important.
"While the majority of the seventy'-eight bank failures in
this State were due to so-called 'frGzen loans', this cognomen
might well be defined as 'depreciation in values', over which,
all analytical thinking people will agree, no Kansas banker or
group of Kansas bankers had control, and which depreciation could
not have been foreseen. There were a few failures which were the
result of mismanagement, and, still worse, plain dishonesty and
misappropriation of funds by bank officials. T11E-se, however, were
in the minority."
"An examination of the records discloses the fact that
these failures were largely due to incomps tency, and in some
few instances dishonesty. Added to this the fact that our State
is overbanked, makinj it difficult for the smaller banks to make
earnings sufficient to absorb losses, accounts for some of the
failures. We cannot ignore the fact that 'depreciation in values'
also had a Dart in the numerous failures during the period covered
by this report." Ei
"The records of this office disclose the fact that the
failures were largely due to the low price level of agricultural
commodities. There were a few instances of dishonesty and incompetency."if
In Table 8 the specific causes stated in the Bank Commissioner's
reports for the failure of banks during the period of operation of the
guaranty fund are classified in four categories:
(a) dishonesty on the
part of officers or employees; (b) excessive loans directly or indirectly to certain business interests, usually the interests of an influential official or stockholder; (c) reversal of prosperous condi-
1/ Seventeenth Biennial Report of the Bank Commissioner, 1924,
p.3. The failure of the American State Bank, Wichita, largest bank in
the guaranty system, was one of those ascribed to dishonesty.
Ej
Eighteenth Biennial Repert of the Bank Commissioner, 1926, p
,]/
Twentieth Biennial Report of the Bank Commissioner, 1930, p. 3.
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Federal Reserve Bank of St. Louis
3.
-38.
111
Table 8. CAUSES OF BANK FAILURES IN KANSAS REPORTED BY THE BANK
COMMISSIONER, PERIOD OF OPERATION OF THE GUARANTY SYSTEM
F
Biennial
period
ended
Sept. 1
Guaranteed banks
1912
1914
1916
1918
1920
1922
1924
1926
1928
1930
Total
?btal
Total
number
of
failures!'
1
None
None
None
1
17
42
Number of failures ascribed in
full or in part to DisExcessive Deprehonesty loans to ciation Incomof
of 2/ petence
favored
officials interests values-/
1
••
••
••
••
••
••
••
••
15
35
55
Ji
5
5
9
•
.
•
•
•
—
•
152
35
63
18
4
Other.3/
Cause
not
given
••
..
••
•.
••
•
.•
•
••
••
••
••
••
••
••
••
••
••
••
•
•5
••
..
••
33
29
45
14.
14
24
1
••
••
1
••
••
10
••
108
47
1
13
39
16
4
3
••
3
1/ Excludes 2 guaranteed banks and 3 nonguaranteed banks which were listed as
suspensions by the Federal Reserve Committee on Branch, Group and Chain Banking,
but not in the Biennial Reports of the Commissioner.
zen assets". Some of these
2/ Includes causes described as "bad loans" or "frozen
should undoubtedly be classified in the preceding column.
.3/ Includes failure of correspondent bank, other bank failures, and insufficient
volume.
1g Banks closed from September 1, 1928, to March 14, 1929.
•
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Federal Reserve Bank of St. Louis
•
-39tions in an important industry and depreciation of property values
associated therewith; and (d) general managerial incompetence.
With
the exception of "bad loans" and "frozen assets" the causes cited for
the failure of each bank are readily classified among these four general
groups of causes of bank failures.
In view of the statement regarding
the relation of frozen assets to depreciation of values, and the substantial declines which occurred in the piices of farm products and in
land values during the 1920?s, "bad loans" and "frozen assets" are here
classified in group (c).
in some of these cases the "bad loans" should
probably be ascribed to group (b) or group (d).
•
Information regarding causes of bank failures in Kansas during the period 1921-1930 is also given on the schedules collected hy
the Federal Reserve Committee on Branch, Group and Chain Banking.
Unfortunately, many of the causes cited on these schedules are descriptions of the situation of the bank at time of failure and do not reveal
the real causes responsible for the failure.
However, it is believed
that a classification of the causes of failure given on these schedules
throws considerable light on the factors responsible for failures in
Kansas during the second decade of operation of the bank depositorst
guaranty fund.
In Table
9
the causes of failure listed on the schedules
collected by the Federal Reserve Committee on Branch, Group and Chain
•
Ai These schedules were prepared in the office of the Bank
Commissioner from information furnished by that office to the Federal
Reserve Committee.
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Federal Reserve Bank of St. Louis
•
Banking are grouped, so far as possible, in a manner similar to the
grouping in the preceding table.
A review of the causes of failure of the banks which resulted
in the largest amounts of loss to the guaranty fund and to depositors
indicates that excessive loans to officers and directors and to their
interests, and dishonesty on the part of officers, were more important
than is indicated by the number of banks in which the loss is ascribed
primarily to these causes.
Seven banks accounted for one-third of the
entire loss to the guaranty fund and to depositurs in guaranteed banks,
and in six of these banks the information available indicates that
•
failure was due to dishonesty and excessive and risky loans to officers
and directors or their interests.
The foregoing information is sufficient to enable certain
important conclusions to be reached regarding the causes of failures of
State banks in Kansas during the period of operation of the bank depositors 1 guaranty fund.
Most of the failures which occurred from 1910 to
1922, and a substantial number of those which occurred from 1922 to 1929,
were due to dishonesty on the part of bank officials.
The great majority
of the failures during the latter period were due to managerial incoapetence, or to the depressed agricultural conditions, or to a combination of these two elements.
However, even during that period, most of
the banks which caused the greatest losses to the fund or to depositors
failed because of dishonesty and excessive and risky loans to bank
officials.
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Federal Reserve Bank of St. Louis
Table 9. CAUSES OF BANK FAILURES IN KANSAS, 1921..1930, REPORTED BY THE
FEDERAL RESERVE COMMITTEE ON BRANCH, GROUP AND CHAIN BANKING
410
Item
no.
1
2
44.
5
6
7
S
Item
Number of cases
Contributing
Primary
cause
cause
Dishonesty of officials — total
Defalcation
Dishonesty, misappropriation, shortages
Excessive loans, speculation, irregular—
ities — total
Failure of large debtor
Heavy or frozen loans to officers or
stockholders
Speculation
Excess loans
Heavily overloaned
Irregularities
13
Reversal of prosperous conditions in an
Induetry or area and decline in values —
total
Decline in real estate values
Unforeseen agricultural or industrial
disasters, such as floods, drought,
boll weevil, etc.
Crop failure, general farm conditions
Bad loans, poor loans, frozen loans,
inability to make collections
Excessive real estate holdings
14
15
Incompetent or poor management — total
Incompetent management
Insufficient diversification
16
17
18
19
20
21
22
23
Other causes — total
Heavy withdrawals
Failure of affiliated institution
Failure of correspondent
Purchased paper, without recourse paper
Insufficient earnings
Volume of business too small
Depleted reserves
Miscellaneous
9
10
1)
12
42
2
12
1
l4
4o
7
7
1
3
3
1
2
23
1
2
6
66
4.6
3
14.
11
3
3
167
166
1
11
21
104
5
7
4
72
2
1
1
1
—
1
2
68
3
4
1.
5
3
1/ Specific items are from schedules collected by the Federal Reserve Committe
on Branch, Group and Chain Banking, the grouping by the author of this report. Tlh
tabulation was made by the author of this report from the schedules, which were
made available through the courtesy of the Board of Governors of the Federal Re—
serve System.
•
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•
FINANCIAL HISTORY OF THE GUARANTY FUND
Sources and adequacy of information.
No complete statement
of the operation of the bank depositoret guaranty fund in Kansas is
available.
However, a fairly complete and accurate summary statement
can be compiled from information obtained from various sources.
The Biennial Reports of the Bank Commissioner, during the
period of operation of the guaranty fund, contain no statements of the
fund, though the balance on hand in certain years is given.
Total
receipts and disbursements each year are given in the reports of the
Treasurer of State.!'
The decision of the State Supreme Court regard-
ing the disposition of the fund provides considerable information
regarding banks which had been completely liquidated by 1928.
The aggre-
gate amount of certificates issued, representing the amount of deposits
in the failed banks, and the portions of this total paid, respectively,
from the proceeds of liquidation of the banks and from the guaranty fund,
have been furnished by the Bank Commissionerts office.?./
Payments by
the guaranty fund in the case of guaranteed banks which failed subsequent to January 1, 1921, are given in the schedules collected. by the
These figures are shown in Table 13, p.
6g.
g/ Correspondence with the Division of Research and Statistics,
Federal Deposit Insurance Corporation.
•
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Federal Reserve Bank of St. Louis
Federal Reserve Committee on Branch, Group and Chain Bankina
Some
further information is available in surveys of deposit guaranty systems
in operation in various States0
Ipoope_and obligations of the guaranty fund.
A summary state-
ment of the income and obligations of the Kansas bank depositors' guaranty
fund, for the entire period of its existence, is given in Table 10.
The losses incurred in the American State Bank, Widhita, which was reorganized through purchase of stock by the guaranteed banks instead of
being placed in liquidation and paid off by the guaranty fund, are
included, since they were part of the cost of the guaranty system to
the guarantped banks.
S
The figures in the table take into account re-
ceipts and disbursements subsequent to repeal of the law.
They excluded.
payments to the depositors in failed banks which were made from the
proceeds of liquidation of thetesets of those banks.
The total receipts of the guaranty fund itself amounted to
$2,g00,000, of which approximately three-fifths was derived from the
annual assessments upon the participating banks, and two-fifths from
bonds and cash deposited as surety for payment of assessments and forfeited by banks which withdrew prior to repeal of the law.
The loss
lj These schedules were prepared from the records in the Bank
Commissioner's office. They have been made available through the
courtesy of the Board of Governors of the Federal Reserve System.
•
2/ These include Robb, The Guaranty of Bank Deposits (Houghton
Mifflin Company, 1921); Thornton Cooke, articles in the Sparterly Journa1.
of Economics, November 1913 and November 1923; article and legislative
summary in the Federal Reserve Bulletin, September 1925; and Blocker,
The Guaranty of Bank Deposits (The School of i'usiness, University of
Kansas, 1929).
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Federal Reserve Bank of St. Louis
/
Table 10.
OBLIGATIONS, INCOME, AND DEFICIT OF THE KANSAS BANK
DEPOSITORS' GUARANTY FUND
Including losses in the American State Bank, Wichita
Cbligations
Guaranty fund certificates issued, deducting repayments
from the liquidation of assets of failpd banks
Loss in reoTganization of the American State Bank,
Wichita .g.1/
Miscellaneous expenses J/
Total obligations
Income
Assessments on guaranteed banks?-/
Forfeiture of bonds and cash deposited by banks 14.1
Interest and transfers ;V
Total income of guaranty fund per se
Contribution by guaranteed banks in the reorgania—
tion of the American State Bank, Wichita Ej
Total combined fund and contributions
Deficit
Defaulted ob]ligations: certificates issued and
not paid EV
Less cash on hand, June 30, 1938 .5./
Final deficit,
$9,422,317
1,500,000
30,961
$10,953,280
$1,678,170
1,124,514
._ 19,108
2,821,792
;,500,000
$4,321,792
6,650,872
19,383
$6,631,489
lj Total certificates (obligations of fund) issued, amounting to
$13,704,392, minus dividends paid from liquidation of assets of the
failed banks, amounting to $4,282,075 (from correspondence with Bank
Commissioner). This figure presumably excludes accrued interest on the
certificates eventually defaulted.
•
Ej
From Correspondence with Bank Commissioner.
jj Warrants redeemed, to June 30, 1938, from reports of Treasurer
of State, in excess of dividends paid from guaranty fund, as reported by
Bank Commissioner.
L4I
Estimated from receipts other than interest and transfers, 1910.
1932, as shown in the reports of the Treasurer of State, minus assessments
on banks.
.t,./
•
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Federal Reserve Bank of St. Louis
From reports of Treasurer of State.
•
incurred by guaranteed banks in the case of the American State Bank
is reported at $1,500,000, so that the participating banks paid a total
sum of approximately $4,300,000 to meet the losses in guaranteed banks
closed because of financial difficulties.
The total obligations incurred by the bank depositors' guaranty
fund, including the losses in the American State Bank, amounted to
$11,000,000.
This represents the deposits in guaranteed banks which
failed during the period of the fund in excess of the amounts recovered
through receiverships and reorganizations, plus the interest on certificates issued by the guaranty fund to depositors in failed banks.1/
The difference between the obligations of the guaranty fund
and the income of the fund is the approximate amount of the final deficit or default.
This figure amounted to $6,600,000.
Annual assessments (or collections) and losses in failed
banks.
For nearly 14 years after the guaranty law went into effect, the
guaranty system was fully operative in all respects, except in the
handling of the failure of the American State Bank, Wichita, in June
1923.
This bank, as has been previously noted, was the largest bank
operating under State law, and at the time of failure had deposits of
approximately $5 million.
It was apparent that liquidation of this
1/ This figure probably includes only part of the interest
accrued on guaranty fund certificates to date of closing of the affairs of the fund. The interest due on certificates issued to
depositors of the banks completely liquidated at the earliest dates,
which were paid by the guaranty fund, is included but it is probable
that the interest accrued on defaulted certificates is not included.
Neither the amount of interest included, nor the amount of the accrued
interest excluded, is available.
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Federal Reserve Bank of St. Louis
bank by the usual process might wreck the guaranty system, in view of
the liability of the fund for losses in 30 banks with deposits of nearly
$g million inich had previously failed and were in process of liquidation.
A year after its failure, the American State Bank was reorganized
under the name State Reserve Bank, to wiich the guaranteed banks subscribed for stock on which they sustained a substantial loss.
During the 14-year period in which the guaranty fund met all
of its obligations as they became due, a huge potential liability was
accumulated.
This resulted from the combined effect of the provisions
of the law relating to assessments and to the payment of depositors in
closed banks.
e
Since payments were made from the fund only upon com-
pletion of liquidation of a failed bank, the obligations of the fund did
not become due, in most cases, for several years.
In the meantime,
regardless of the accumulation of heavy future liabilities, very few
special assessments were levied, since the cash in the fund reached and
remained above the $500,000 limit.'
During 1924 and 1925 a number of banks which had been closed
during the preceding five years were completely liquidated ana were
paid off by the guaranty fund, bringing the total number of banks paid
off by the fund to lg.
•
On March 1, 1925, the Bank Commissioner ceased
1/ Information regarding assessments levied is incomplete. Up to
the middle of 1923, only one special assessment (1/20 of 1 percent in
December 1922) had been levied (Thornton Cooke, "The Collapse of BankDeposit Guaranty in Oklahoma and Its Position in Other States," atiar,7
terly Journal_ of Economics, November 1923). Definite information regardother special assessments is not available, but the receipts of the
guaranty fund, as reported by the Treasurer of State, indicate that such
assessments were levied during the year ended June 30, 1925.
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Federal Reserve Bank of St. Louis
47
making payments from the guaranty fund because of difficulties encoun—
ation of each
tered in determining the precise date on which the liquid
the obligations
bank was completed and hence in the order of priority of
falling upon the fund.
At that time, about
4o
banks, with deposits at
amounted
time of failure of $9 million and in which the eventual losses
to
$4
e in the
million, were in process of liquidation, while the balanc
guaranty fund had been reduced to a small figure.
at
With a prospect of continued assessments for several years
participating
the maximum rate of one—fourth of 1 percent per year, the
banks began to withdraw from the system.
However, withdrawal was de—
intention
terred by the provision of the law that six months' notice of
•
withdrew
to withdraw was required and the provision that banks which
remained liablg
for assessments to cover losses in any banks which
failed prior to the expiration of the six monthst period.
The bonds
which the banks had deposited as surety for the payment of assessments,
amounting to one—half of 1 percent of the bank's guaranteed deposits,
were much smaller than the prospective future assessments to meet losses
in the banks which had already failed..?/
A test case was therefore
a bank might
brought to the State Supreme Court to determine whether
1,/ The balance stood at $32,571 on June 30, 1925, according to
the report of the Treasurer of State.
Ej The losses actually sustained in the banks in process of
t of the aggregate
liquidation in early 1925 were more than 2 percen
that
at
time.
tanks
eed
deposits of the operating guarant
•
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Federal Reserve Bank of St. Louis
-48-
•
withdraw and be released from the liability of future assessments by
forfeiting the bonds deposited with the State Treasurer.
The Court
decided on April 10, 1926, that this could be done and most of the
participating banks withdrew during the next few months.'
With the withdrawal of most of the banks from participation
in the guaranty system, the insolvency of the fund was apparent, since
the liabilities in closed banks would obviously be much greater than
the proceeds from the sale of the forfeited bonds.
Under these cir-
cumstances depositors in some of the closed banks contended that the
amount realized from the bonds should be distributed pro rata among
holders of all of the unpaid certificates instead of being paid to the
holders of certificates in banks the liquidation of which was completed
•
at the earliest dates.
This view was not accepted by the State bupreme
Court, and the validity of the law as stated was affirmed by the Court,
namely, that payments should be made to depositors in failed banks in
the order of priority of completion of liquidation, and a special
Commissioner was appointed as a fact-finding agent of the court to determine the priority of completion of liquidation of the various banks.
The report of this Commissioner, which was made after holding hearings
open to all interested parties, was accepted by the Court at its
g/
January term, 1928;
and the proceeds from the sale of the bonds were
distributed about August 1 of that year.
•
lj State of Kansas v. Roy L. Bone, Bank'Commiseionsr (1926)
120. Kansas. t20.
State of Kansas V. Roy L. Bone, Bank Commissioner (1928)
128. Kansas. 1518, 266-Pre. 85.
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Federal Reserve Bank of St. Louis
-49-
•
Since most of the banks tarticipating in the guaranty system
filed notice of withdrawal early in 1926, the receipts of the guaranty
fund from assessments from thst time until the repeal of the law on
March 14, 1929, were very sma11.21
In Table 11 the amounts received by the guaranty fund each
year from assessments, or forfeiture of bonds in lieu of assessments,
and also the losses in the banks which failed each year, are given.
Because of the variation in the length of time required to complete
liquidation of the various banks, the order in which the banks were
completely liquidated differs considerably from the order in which they
failed.
Consequently, the guaranty fund paid off the remaining claims
of depositors of some of the banks which failed in each of the years
1921, 1922, 1923, and 1924, and did not pay off the depositors in other
banks which failed in each of those years.
No bsnks WhiCh.failed in
1925 or in later years received anything from the guaranty fund.
All
of the guaranteed banks which failed prior to 1921 were paid off in full
by the guaranty fund.
.11 While definite information is lacking, it is believed that no
special assessments were levied subsequent to 1925.
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Federal Reserve Bank of St. Louis
Table 11. AMOUNTS OF ASSESSMENTS, AND ESTIMATED LOSSES FROM BANK
FAILURES, KANSAS BANK DEPOSITORS' GUARANTY FUND, BY YEARS
Amount of
aasessment
collected .1/
Year
1910
1911
1912
1913
1914
$16,965
30,717
40,567
51,929
71,552
91,863)
1920
1921
1922
1923
1924
107,170)--119,240)
101,587
173,117
101,578
1925
1926
1927
1928
546,786
146,127
91,302
851,822
60,157
192
1930-32
147
1.11
0.1
ame,
•••
0.0
••••
•••
••••
•••
•••
455
1,118,212
1,091,381
432,806
$142,072
712,517
1,495,847
100,344
532,691
0.4
0.0
1,056,227
1,927,503
879,584
505,787
11,848
77,023
Total, excluding
American
State
2,802,686
Bank
American
State
Bahk,
Wichita 1,500,000
Total, including
American
State
Bank
4,302,686
•
$28,702
38,898
23,496
28,194
32,596
1915
1916
1917
1918
1919
•
_2
Losses in failed banks./
Deposits in
Paid by
Borne by4i failed banks
guarany
depositors" (in thousands _
fund JI
of dollars) j
166
2,278
4,336
V 4,066
2,889
2,245
5,057
4,342
2,157
82
••••
2,771,445
7,264,078
1,500,000
4,271,445
28,120
4,966
7,264,078
33,086
21 Years ended June 30.-7)ti;g-ceees from sale of bonds and cash
deposited as security for payment of assessments and forfeited by withdrawing banks. Data from annual reports of the Treasurer of State.
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Federal Reserve Bank of St. Louis
—51-
2j
Classified by date of failure, calendar years.
S Total from Bank Commissioner (correspondence). Data by years
from schedules collected by Federal heserve Committee on Branch, Group
and Chain Banking, or from Bank Commissionerls report, with amount for
banks unavailable individually estimated from total for all banks.
ILY For banks paying final dividend subsequent to April 1, 1929,
estimated from amount and percentage of tutal dividends, from Biennial
Reports of the Bank Commissioner, 1932, pp. 12-20; 1934, p. 14; and
1936, p. 14. For other banks, estimated from total claims and total
Payments on claims, as reported in schedules collected by the Federal
Reserve Committee on Branch, Group and Chain Banking.
.5j Includes deposits in 25 failed banks which were reorganized
or reppened without loss to depositors. The figures in this column,
and also those in the preceding two columns, include a few banks which
failed subsequent to withdrawal from the guaranty fund.
•
.61/ Excluding the American State Bank, Wichita, which is given
separately.
V Figures for losses and deposits include banks failed to
March 14, the date of repeal of the law.
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Federal Reserve Bank of St. Louis
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•
Adecoacy of the guaranIy fund.
The extent to which the
bank depositorsi guaranty fund met the claims of denositors in failed
guaranteed banks is shown in Table 12.
For the entire period during
which the law was on the statute books, about 65 percent of the deposits
of failed banks were eventually paid from the liquidation of assets
of those banks.
Guaranty fund assessments provided g percent of the
dencsits, and the guaranteed banks provided an additional 5 percent
through assumption of losses in the American State Bank.
The remaining
22 percent was lost to the depositors.
These estimates indicate that aggregate assessments of
$12,000,000 would have been sufficient to have met all of the losses
to depositors in failed guaranteed banks up to the time the law was
411
repealed.
The assessments actually collected, including the proceeds
from forfeiture of bonds and cash held as surety for payment of assessmerits, were less than one-fourth of this amount.
An average annual
assessment of one-half of 1 percent would have provided the needed
amount.
The average actually collected, including proceeds of forfeiture
of bonds and cash deposited as surety for the payment of assessments,
amounted to one-eighth cf 1 percent.
However, total contributions of
the guaranteed banks, including their loss in the case of the American
State Bank, was equivalent to an average annual assessment of nearly
one-fifth cf 1 percent.
The maximum annual rate of assessment, according to the
interpretation of the law by the Bank Commissioner, was one-fourth of
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Federal Reserve Bank of St. Louis
Table 12. DEPOSITS IN FAILED GUARANTEEDBLNKS IN KANSAS PAID AND
UNPAID, WITH SOURCES OF FUNDS USED IN PAYMENT 21
Total deposits
Deposits paid from:
Liquidati9n of assets of the failed
banks
Bank depositorsi guaranty fund
assessments, including proceeds of
bonds and cash forfeited by with—
drawing banks
Contributions of guaranteed banks
(loss on stock purchased) in
reorganization of the American State
Bank
•
Loss to depositors
Amount
(in thousands
of dollars)
Percentage
of total
deppsits
33,086
100.0
21,551
65.1
2,771
s.4
1,500
4.5
7,264
22.0
lj Includes a few banks which failed subsequent to withdrawal from
the deposit guaranty system. Also includes banks reorganized and reopened
or succeeded without loss to depositors.
g Estimated as the difference between total deposits on the one
hand, and payments from other sources and loss to depositors on the other.
This estimate differs somewhat from a total derived from liquidation data
regarding payments made to claimants.
•
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Federal Reserve Bank of St. Louis
•
1 percent per year.
Under the provisions of the law, it was not possible
to levy assessments sufficient to meet the claims falling upon the
fund.
Further, the maximum permissible rate could not be levied at the
time when the banks failed and it became obvious that the future liabilities of the fund were mounting rapidly,
This was because the fund did
not actually become liable for any payments until a closed bank was
fully liquidated, and in the meantime, the fund remained at the level
prescribed by the law.
Thf burden of assessments.
Assessments during the first few
years of the Kansas bank depositors' fund, at the regular rate of onetwentieth of 1 percent per year, were comparatively light; and bankers
do not appear to have protested that the assessments were a financial
•
burden upon the banks.
However, as soon as it became apparent, in the
early 19201 8, that future assessments at the maximum rate would be
necessary for several years, the banks felt that the assessments would
be a heavy drain on their earnings and sought means of escaping the
burden.
Since participation in the system was voluntary, and under the
State Supreme Court decision withdrawal could be accomplished by forfeiture of bonds amounting only to two years' assessment at the maximum
rate, most of the banks chose this method of avoiding the inevitable
burden of assessments.
Had withdrawal not been possible on these con-
ditions, it is probable that, as in certain other States with deposit
guaranty, a large number of State banks would have taken out national
bank charters.
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Federal Reserve Bank of St. Louis
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•
Earnings data are not available for the guaranteed banks in
Kansas, but they are available for all State banks, and are sufficient
to make Possible a rough comparison of the actual and prospective
amounts of the assessments with the net profits and dividends paid by
the banks)
/
Had deposit guaranty covered all of the State banks dur-
ing the entire 20-year period of operation of the guaranty system,
aggregate assessments of approximately $14 million (or $10 million in
addition to the assessments and contributions paid by the guaranteed
banks) would have been necessary to meet the losses in closed banks.
The net profits of the State banks amounted to $61 million.
Therefore,
about one-sixth of the net profits of all State banks would have been
•
necessary to have made the deposit guaranty system a success.
The net
profits of the banks, after deducting the assessments and contributions
which the guaranteed banks made to the guaranty system, amounted to an
average of 8 percent per year on the total capital accounts of the
banks.
Absorption out of profits of the remaining loss to depositors
in failed banks would have reduced this average rate of profit to 6.7
percent per year on total capital accounts.
Whether an item of expense, such as an assessment for meeting
losses in failed banks, comes out of profits can never be determined
exactly.
If the expense item is one Which is borne by all or a large
2.
1 Selected items from the consolidated earnings and dividends
reports of Kansas banks, by years, during the period 1909-1928, are
given in Table 16, p. 72.
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Federal Reserve Bank of St. Louis
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•
majority of the operating banks in the Area, it is probable that certain
other items of income or expense may be affected more than the profits
of the banks. The banks in Kansas, during the period of operation of
the guaranty system, paid interest on deposits aqzregating slightly
more than the net profits of the banks.
A reduction of one-fifth in
the interest paid on deposits would have thrown the cost of deposit
The presence of nonguaranteed
guaranty entirely upon the depositors.
banks, both those operating under State law and those operating under
national charters, made it difficult for the guaranteed banks to make
this kind of adjustment as a means of preserving their Profits in the
face of the additional expense.
•
Another interesting comparison is the total cost of deposit
guaranty, in a form to have met all of the losses to depositors, with
the amounts actually charged off by the operating banks as losses on
loans, investments and other assets.
20-year period, amounted to
$28
The latter figure, for the entire
million for all State banks, which is
twice the total loss to depositors (including the loss met by the
guaranty fund) in all failed banks.
The losses charged off amounted to
an average of 0.8 percent per year of loans and investments. . An increase in this allowance for losses by one-half, or to 1.2 percent per
year of loans and investments, placed in the guaranty fund, would have
met all of the losses in failed banks.
Had deposit guaranty embraced all banks operating in the State,
including national banks, the total losses which the fund would have
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Federal Reserve Bank of St. Louis
-57-
•
been called upon to meet would have been $15 million.
The necessary
assessment rate for the entire 20-year period to
have met this loss
would have averaged lees than one-fourth of 1 percen
t per year.
Losses in mismanaged banks
.
.
which failed,
33
Of the 154 guaranteed banks
were reorganized or reopened, or were liquidated,
without loss to either the guaranty fund or to depositors.
Of the 121
banks in which losses to the guaranty fund or to depositors
occurred,
there were 42 banks, or
35
percent, in which the failure was attributed
by the Bank Commissioner in full or in part to dishonesty,
mismanagement, excessive loans to officers, or irregular practices./
The loss
in these banks amounted to
64
percent of the total loss to the guaranty
fund and to deoositors in all guaranteed banks.
The lerge percentage
of the loss which occurred in banks which were dishonestly run,
mismanaged, or operated improperly is due to the fact that nearly
all of
the larger banks which failed did so because of the way they were
managed.
The bulk of the failures which were due primarily to incom-
petence, inability to make collections, or to causes reflecting
adverse
economic circumstances, were small banks.
Of the seven banks which
caused the largest losses to the guaranty fund or to depositors,
and
which together were responsible for one-third of all of the
losses to
the fund or to depositors, four feiled because of dishonesty or
excessive
•
21 This figure includes 1 bank for which no cause of failure is
mentioned in the Commissioners reports, which is ascribed by Robb
to
mismanagement and dishonesty.
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Federal Reserve Bank of St. Louis
•
—
5g—
loans to officers or directors, and two more because of dishonesty
combined with incompetency.
The failures ascribed solely to dishonesty
by the Bank Commissioner include the American State Bank, Wichita,
which for several years prior to its failure was the largest bemk
operating under State law.
•
•
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Federal Reserve Bank of St. Louis
-59-
sllaTIVFNESS OF BANK SUPERVISION
The office of Bank Commissioner in Kansas was well established at the time of adoption of deposit guaranty, and financial
sup—
port of the banking department by the State was more adequate than in
some of the neighboring States.
These conditions were more favorable
to effective bank supervision than in some of the States contiguous
to Kansas and subject to similar general economic circumstances, and
it is probable that better supervision is one of the reasons why the
failure rate for all banks operating under State law was lower in
Kansas, during the period of operation of the deposit guaranty system,
than in most of the contiguous States.
•
Nevertheless, the fact that so
large a proportion of the losses to the guaranty fund and to depositors
was incurred in banks which were mismanaged, dishonestly operated, or
engaged in improper practices raises the question whether supervision
was as effective as could reasonably have been expected.
While no attempt has been made in this study of the operation
of the deposit guaranty fund to make a thorough survey of the operations
of the office of the Bank Commissioner, information found in the State
reports and other sources does indicate that bank supervision in Kansas
--while perhaps better than in some of the neighboring States--was
nevertheless seriously defective during the period of operation of the
guaranty fund.
The deficiencies of bank supervision in Kansas which are
apparent from the available information have their roots in the legis-
•
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Federal Reserve Bank of St. Louis
6o
•
lation on the statute books rather than in incompetency in the office of
the Bank Commissioner.
The most serious defect was the absence, up to
1927, of any special limitations on loans by a bank to its own officials
or directors.
This omission was recognized by the Bank Commissioner,
and restrictive legislation was recommended in his biennial reports in
1920 and in 1922.21
Another serious omission was the lack of any
penalty for violation of the section of the law limiting loans to a
single borrower.
Another provision of the law in force at the time
deposit guarEnty was inaugurated, but Which was repealed in 1917, held
great potentialities for minimizing the risks of failure.
This was
the requirement that a bank should not receive deposits in excess of
ten times its unimpaired capital and surplus.
S
Retention and enforcement
of this provision, accompanied by thorough bank examinations and care—
ful appraisals of each bank's net worth, could have been used as a
powerful weapon in the prevention of unwise expansion and in forcing
banks to correct improper financial policies long before the stock—
holders' cushion had been wiped out by losses.
Lack of funds, though not so serious as in some of the neigh—
boring States, was also a handicap to effective supervision, at least
during a part of the period of operations of the deposit guaranty fund.
Total expenditures of the Bank Commissioner's office rose from $40,000
during the first year of deposit guaranty to $96,000 for the year ended
2/ Fifteenth Biennial Report of the Bank Commissioner, p.
Sixteenth Biennial Report of the Bank Commissioner, p.
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6
Federal
Reserve Bank of St. Louis
5, and
-61June 30, 1928, with an average of $84,000 for the period 1921-1929.
The examining force, in addition to the Commissioner, assistant color
, and chief examiner, consisted of 12 deputy examiners in 1921
missioner,
and 1922,
14 from 1923 to 1925, and 20 from 1926 to 1929.
Since the
number of operating State banks was about 1100 in 1922, and about 900
in 1926 and 1927, and two examinations of each bank per year were required, each examiner was apparently required to make about 180 examinations per year in 1922 and about 90 per year in 1928.2/
During the
early years of the guaranty system the Bank Commissioner asked for
higher salaries on the ground that competent examiners could not be
obtained at $1,800, the salary then paid.
In the early 19201 s the aver-
age salary of bank examiners was raised to $2,400, but appears to have
•
be reduced to the former level when the number on the examining force
was increased in 1926...?1
On the other hand, it is doubtful whether the powers possessed
by the Bank Commissioner were used to the utmost extent.
Even though
no penalty was prescribed for loans in excess of the legal limit to a
1/ The Federal Deposit Insurance Corporation in 1942 had 4
examiners and 4 assistant examiners in Kansas to make one examination
per year of approximately 245 banks, or an average of about 30 examinations per year per member of the examining force. In comparing the
size of the examining force with the examining task allowance should
also be made for the fact that the banks examined by the Corporation
are of larger size, on the average, than those examined by the State
About one-fifth of the banks examined by the
1
examiners in the 1920s.
of $500,000 or more, while only onedeposits
Corporation in 1940 held
banking department of the State in
the
by
tenth of the banks examined
or more.
$500,000
the 19201 s held deposits of
Computed from number of deputies and total cost of salaries
of deputies, as given in the annual reports of the Bank Commissioner.
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Federal Reserve Bank of St. Louis
gi
0.11
•
62
single borrower, the Commissioner had power to require the reduction of
such loans to the legal limit, and to close a bank if it was found to
have willfully violated any requirement of the law; and any bank Which
failed within ninety days to comply with any lawful requirement of the
Commissioner in writing, accorlIng to the law-, forfeited its charter.
During at least a part of the period of deposit guaranty, banks found
to be insolvent or in financial difficulties were nursed along by the
department instead of being closed, and supervision was the poorest in
.11
the history of the banking department.
However, irrespective of the effectiveness of bank supervision
in Kansas, one conclusion of vital importance to the success of other
systems of deposit guaranty or insurance can be drawn with certainty.
That is, that dishonesty, favoritism to special interests, and excessive loans to enterprises in which responsible officials of the bank
are connected, will lead to disaster, and that the supervisory authorities must be alert and vigorous in watching the policies of the
larger banks in which the risk is concentrated.
2.
1 This statement is based on interviews with Kansas bankers
familiar with the situation.
Ej This is the same conclusion as was reached in the study of the
operation of deposit guaranty in Oklahoma.
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Federal Reserve Bank of St. Louis
- 63 CLOSING OF THE GUARANTY FUND
Withdrawal from the guaranty fund of the great majority of
the participating banks, and the litigation over the use of the proceeds
from the bonds and cash forfeited by the withdrawing banks, have been
described in a preceding section of this repo:t.
Mention has also been
made of the Attempts to alter the distribution of ighatever
amounts
remained in the guaranty fund after it became apparent that the fund
would be unable to meet its future obligations:
first, through elimina-
tion of interest on the certificates issued to depositors; and second,
by treating the remaining assets of the guaranty fund as a trust fund
to be distributed pro rata among all persons having a claim on the fund.
The decisions of the State Supreme Court on these questions--that the
elimination of interest on outstanding certificates was void, and that
the fund should be used strictly in accordance with the guaranty law and
distributed to certificate holders in the order of priority of completi
on
of liquidation--have also been described.
The latter decision resulted
in the distribution of the proceeds of the forfeiture of the deposite
d
bonds and cash, in the latter part of 192g, to the certificate holders
of 13 failed banks, out of approximately 200 banks which were then
completely liquidated or in process of liquidation.
The former decision
also affected the number of banks which participated in the distribution
1/ In the case of two of the 13 banks, certificate holders
received 93 percent of their claims. The liquidation of these two banks
was completed on the same day, and since the funds were inadequate to
pay all claims against these banks, the Court ordered the payments to
be prorated among the certificate holders of the two banks.
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Federal Reserve Bank of St. Louis
of the fund, since certificates for some of the banks had been outstand—
ing for several years, (from 1921, 1922, Or 1923, to 1928) and the
accrued interest at
6
percent per year was a substantial addition to the
face amount of the certificates.
Another problem which arose was the payment of the cost of
litigation regarding disposal of the assets of the fand.
The State
Supreme Court, in its 1928 decision, stated that these costs should
be
borne by the persons participating in the benefit of the decision, that
is, by the holders of the certificates that were finally paid.
Definite
infcrmation regarding payment of the litigation costs is not available,
but it is presumed that they were met by the guaranty fund and deducted
•
from the amounts paid to the certificate holders in 1928.
Under the decision of the State Supreme Court in 1926, and a
supplementary decision in 1928, banks withdrawing from the fund, and
those ceasing operations through liquidation or conversion to a
national bank were entitled to have returned to them the bonds or cash
deposited as surety for future assessments, provided that these bonds
or cash were not needed to pay claims against the guaranty fund arising
from banks which had closed prior to the date of withdrawal or cessation
of operations.
In view of the large claims upon the fund in nenneation,
with banks which failed prior to 1926, no such refunds were made.
On March 14, 1929, the deposit guaranty law was repealed.
The
act of repeal authorized the return of the surety bonds or cash to banks
which had paid all assessments to the date of repeal.
•
However, the State
Supreme Court held that the authorization of the return of the bonds was
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Federal Reserve Bank of St. Louis
1
.65.
invalid since the certificate holders of failed banks which had been
members of the fund had a vested right in the proceeds of the bonds./
The statement of receipts and disbursements of the bank
depositors' guaranty fund published in the biennial reports of the
Treasurer of State shows small amounts of receipts, in part labelled
"transfers", each year as late as the fiscal year ended June 30, 1936,
and also shows disbursements on warrants as late as the fiscal year
ended June 30, 1940, with- a small. balanee on hand on that date.
Total
disbursements from June 30, 1929, to June 30, 1940--that is, subsequent
to the distribution in 1928 of the proceeds of forfeiture of the surety
bonds--amounted to $118,000, most of which was paid out in 1932.
•
Whether
these disbursements represent payments authorized in 1928 to certificate
holders who failed to present their certificates promptly, or small
additional payments to the certificate holders in the case of the two
banks partially paid at that time, has not been ascertained.
lj William A. Smith, Attornej General v. H. W. Koeneke, Bank
Commissioner (1929) 128 Kansas 805, 280 Pac. 767.
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Federal Reserve Bank of St. Louis
-66 APPRAISAL OF THE KANSAS BANK DEPOSIT GUARANTY SYSTEK
The failure of the Kansas system of guaranty of bank deposits
was due to the character of that particular system and the circumstances
surrounding its operation, not to the impracticability of applying
the insurance principle to losses from bank failures.
The Kansas system
suffered from several serious defects.
The regular rate of assessment, one-twentieth of 1
First.
Percent per year, was far too low and decidedly inadequate; and special
assessments could not be levied at the time when they were obviously
needed, because of the delay in making payments to depositors in closed
banks until completion of liquidation of the bank.
The maximum reserve fund which could be accumulated,
Second.
$1,000,000, and the amount to which it could be depleted before assessments were resumed, $500,000, were two small.
The maximum accumulation,
which amounted to approximately one-half of 1 percent of the largest
volume of deposits in guaranteed banks, was only two-thirds of the loss
assumed by the guaranteed banks in one failure.
Third.
Prompt payments could not be made to depositors in
the failed banks.
Deposit guaranty or insurance does not fulfill its
proper function if depositors are unable to obtain their guaranteed
funds promptly.
To achieve its purposes, deposit insurance or guaranty
must provide for no significant interruption in the flow of payments in
the community in which a failed bank is located-.
Fourth.
Losses to the guaranty fund were not recognized, in
the fund's accounts, at the time banks failed.
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Federal Reserve Bank of St. Louis
As a consequence, the fund
•
-67accumulated large liabilities which were not reflected on its books or
in the assessments levied.
Reserves for losses should have been
established at the time each bank failed, on the basis of an appraisal
of the liquidating value of the bankts assets, so that the accounts
of the fund would reflect its true condition.
Fifth.
Provisions of law relating to loans to officers and
directors and their interests, and in regard to excessive loans to single
borrowers, were inadequate; and supervision over banking practines,
particularly the practices of the large banks, was inadequate.
Sixth.
S
Banks were able to withdraw from the system without
cull responsibility for obligations which accrued while they were
participants in the system.
•
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Federal Reserve Bank of St. Louis
•
-68-
110
T Table 13.
Year
ended
June 30
Receipts _
Assessments
Interest
and forfeituv)
and
of bends .?../
transfer
Disbursements
Balance
on
June 30
-
$16,965
$983
1,341
_
_
56,846
81,683
28,194
32,596
1,283
1,639
$23,702
111,160
116,693
1915
1916
1917
1918
1919
30,717
40,567
51,929
71,552
91,863
2,522
-
1920
1921
1922
1923
107,170
119,240
101,587
173,117
-
1c1,578
-
489,930
546,786
_
971,463
146,127
91,302
.
22,844
218,593
1.910
$16,965
1911
1912
1913
38,898
23,496
1914
•
1924
1925
1926
1927
1928
1929
Total
1/
•-•
•-•
16
.
149,931
190,499
242,411
313,963
405,826
546
-
512,450
631,690
733,277
60,795
845,600
457,248
32,571
155,854
220,045
672,191
28,563
660,339
53,576
1,278
1,586
1,489
705
364
8,219
931
95,577
3,994
2,760
63,164
85,491
30,224
26,934
24,539
491
156
-
_
_
_
2,153
1,313
22,876
21,719
-
-
637
1,699
388
21,082
19,383
$2,803,331
$18,460
383
$2,803,179
16,530
21,671
38,821
.
.
1935
1936
1937
1938
1939
1940
-
5,270
851,822
60,157
1930
1931
1932
1933
1934
ilk
RECEIPTS AND DISBURSEMENTS OF THE KANSAS BANK DEPOSITORSt
GUARANTY FUND, BY YEARS 1/
18,995
18,612
From Biennial Reports of the Tteasurer of State.
2,/ Marked simply as "receipts" or as received from the Bank Commissioner.
Figures undoubtedly refer primarily to assessments collected, except in the later
years (particularly 1928) when they represent the proceeds of the sale of bonds
and the taking over of the cash which had been depositsd by withdrawing banks
as surety for the payment of assessments.
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Federal Reserve Bank of St. Louis
.31 Marked "interest" during the period 1911-1915, and "transfers" during
the period 1929-1934. These figures exclude $3,247.01 reported separately
by the Treasurer of Stata as "guaranty fund bond interest collected" during
the years 1917-1926. It is probablg that this amount is included in the
figure for "transfers" in 1929.
ly
Warrants redeemed.
•
•
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Federal Reserve Bank of St. Louis
1•••11111.
•
•
Table 14.
•
NUMBER AND DEPOSITS OF GUARANTEED BANKS IN KANSAS, 1910-19281/
Banks grouped by amount of deposits
Aug. 15, Sept. 12, Aug. 31, Aug. 28,
1910
1914
1918
1920
Number of banks - total
Aug. 31,
1922
Aug. 21,
1924
Sept. 1, Sept. 15,
1926
1923
201
491
604
678
703
660
555
46
116
63
17
251
187
40
82
261
173
94
295
198
160
348
126
136
324
139
104
265
132
23
18
4
4
1
-
9
3
1
-
48
16
3
1
58
25
6
2
47
17
3
2
40
14
6
1
41
11
2
r.
1
-
Deposits - total (thousands
of dollars)
26,371
70,329
181,572
219,352
185,915
179,114
145,543
6,004
Banks with deposits of3100,000 or less
$100,000 to 3250,000
3250,000 to 3500,000
7,372
9,281
5,835
16,148
28,184
14,107
5,976
49,389
59,057
7,006
50,809
66,268
11,074
57,947
42,955
9,324
54,756
47,256
7,457
45,347
44,633
1,612
2,603
1,213
2,651
1,232
-
5,771
3,913
2,206
-
31,548
21,929
8,008
5,665
37,970
33,219
13,132
10,948
32,269
23,296
6,921
11,453
28,727
19,486
13,348
6,217
28,421
14492
4,993
-
576
-
Banks with deposits of3100,000 or less
C100,0010to 3250,300
0250,000 to 3500,000
$500,000 to 31,000,000
$1,000,000 to 32,000,000
$2,000,000 to $5,000,000
35,000,000 and over
$500,000 to 31,000,000
$1,000,000 to 32,000,000
32,000,000 to $5,000,000
05,000,000 and over
V Tabulated from statements relating to indivilt-aal banks, as given in the Biennial Reports of the Bank
Commissioner, with guaranteed banks identified by the presence of the asset item, "Guaranty fund with State
Treasurer". Totals for these banks plus those for nonguaranteed banks, in Table 15, differ slightly from the
figures given in summary tables for the same dates in the Commissioner's reports. Statements for individual
banks were not published in the Biennial Reports of the Bank Commissioner, 1912 and '1916.
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Federal Reserve Bank of St. Louis
•
•
•
Table 15. .NUMBER AND DEPOSITS OF NONGUARAUTEED STATE BAHKS AND TRUST COLfEC
IES IN KANSAS, 1910-1928 1/
Banks grouped by amount of deposits
Aug. 15
1910
Nunber of banks - total
Sept. 12, Aug. 31,
1914
1918
Aug. 28,
1920
Aug. 31,
1922
Aug. 21,
1924
Sept. 1, Sept. 15,
1926
1928
661
445
440
434
391
377
418
818
deposits ofless
0250,000
3500,000
429
185
40
308
109
25
147
190
78
135
191
77
175
158
41
131
177
49
122
183
69
166
363
196
3500,000 to 31,000,000
31,000,000 to 32,000,000
02,000,000 to 35,000,000
5
2
1
1
2
-
20
5
-
27
4
-
13
4
-
14
5
1
28
10
6
60
28
5
70,406
43,343
84,941
87,926
64,012
72,041
112,217
229,687
22,919
27,211
12,563
16,204
16,297
7,856
8,829
30,999
26,127
7,956
30,677
25,496
10,494
24,923
14,030
8,254
28,170
16,916
8,000
30,002
24,651
11,563
59,222
67,117
3,275
2,390
2,048
529
2,457
12,293
6,693
-
18,776
5,021
-
8,997
5,563
-
10,175
6,380
2,146
20,129
14,746
14,689
41,362
39,209
11,214
Banks with
000,000 or
3100,000 to
3250,000 to
Deposits - total (thousands of
dollars)
In banks with deposits '31'0100,000 or less
3100,000 to 3250,000
3250,000 to 3500,000
$500,000 to 0,000,000
31,000,000 to 02,000,000
32,000,000 to 35,000,000
2/1 Tabulated from statements relating to individual banks,
as given in the Biennial Reports of the Bank
Conmissioner, with nonguaranteed banks identified by the
absence of the asset item, "Guaranty fund with State
Treasurer". Private banks and trust companies are
included. Totals for these banks plus those for guaran
teed
banks, in Table 14, differ slightly from the figures
given in summary tables for the same dates in
Commis
the
sioner's reports. Statements for individual banks
were not published in the Biennial Reports of the Bank
Conmissioner, 1912 and 1916.
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Federal Reserve Bank of St. Louis
•
- 72 Table 16. SELECTED DATA FROM CONSOLIDATED STATEKENTS OF EARNINGS AND
DIVIDENDS, AND TOTAL CAPITAL ACCOUNTS, ALL STATE BANKS
IN KANSAS, 1909-1928
(In thousands of dollars)
Interest
on
deposits-1J
Gross
losses:1f
Net
el/
profit
62,293
28,11.3
60,798
44 426
1514,792
1909
1910
1911
1912
1913
1914
797
910
1,007
1,239
1,456
1,623
361
417
322
398
642
480
2,945
3,131
2,879
3,126
3,143
2,892
1,692
1,818
1,872
2,141
2,108
1,985
21,375
23,441
25,153
27,055
28,381
30,411
1915
1916
1917
1918
1919
1,847
2,223
3,178
;5,772
4,291
493
635
849
830
978
3,444
4,204
4,371
4,643
5,422
2,376
2,607
2,933
3,083
3,369
32,269
34,723
37,028
39,814
43,769
1920
1921
1922
1923
1924
4,937
4,820
4,702
4,437
4,508
1,437
2,093
2.575
2,514
2,262
5,054
2,984
2,190
1,963
1,637
3,366
2,669
2,209
1,902
1,748
48,197
49,757
48,929
47,253
45,443
1925
1926
1927
1928
4,625
4,293
3,909
3.725
2,519
2,955
2,923
2,430
1,675
1,513
1,395
2,187
1,780
1,611
1,481
1,676
44,657
44,073
42,135
40,929
Calendar
year
Total - 20
years
III
Dividends'
Total
capital 7/
account
Federal Reserve Bulletin, February 1938, p. 122. Tabulated
from data in the Biennial Reports of the Bank Commissioner. •
Ej
From Biennial Reports of the Bank Commissioner.
.3.
/ Capital, surplus and reserves--computed average at all call
dates in year, tabulated from consolidated statements of assets and
liabilities in Biennial Reports of the Bank Commissioner.
•
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