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Federal Reserve Bank of St. Louis

Removal Notice

Document type: Journal article


Author(s): Cooke, Thornton


The Collapse of Bank-Deposit Guaranty in Oklahoma and Its Position in Other States


November 1923


The Quarterly Journal of Economics


Vol. 38, No. 1


Federal Reserve Bank of St. Louis
Federal Reserve Bank of St. Louis




From Federal heserve Bulletin, September 1925




Deposits in Mississippi State banks on December 31, 1924, totaled $143,000,000. To
April, 1925, a total of $3,162,748 guaranty
certificates had been issued, of which $1,940,766
were outstanding in June of this year. It is
estimated that six or seven years will be required at the present rate to retire these certificates. Assessments during the ten years
1915 to 1925 totaled $1,395,979, and amounts
paid to depositors in failed banks during this
period totaled $1,766,769. Approximately
$429,384 had been realized from the assets of
failed banks. The amount of the guaranty
fund was $338,825, and the State board held
approximately $2,000,000 of assets of failed
banks, valued at $742,000. Complete liquidation of failed banks has required in individual
cases from three to seven years.



Institutions included.—Every bank organized an fl
existing under the laws of Mississippi.
Character of deposits guaranteed.—All deposits not
otherwise secured and all cashiers' checks, certified
checks or sight exchange issued hy banks operating
under'the guaranty fund act. The guaranty shall not
apply tci a hank's obligations as endorser, upon bills
rediscounted, nor to bills payable nor to money
borrowed from its correspondents or others, nor to
deposits bearing a greater rate of interest than 4 per
x stanruantie.
of (a) regular and (b) special assess--An initial assessment of one-twentieth per
the average daily deposits eligible to guaranty
.pital and surplus is required of banks entering
ranty fund. (a) One-twentieth per cent of the
guaranteed deposits, leee capital and surplus,
v until the fund atnouttts to $500,000, when
-assessments shall be discontinued. Minimum
$20. (h) Should -.such funds become
the superintendent of banks ahaillnake addises
tional assessments from time to tinie tia may be necessary to maintain same, but notore; than five such
earssments of one-twentieth pcent each may be
alWe in any one calendar year. ul.",
'-Method of payment of depositora..--Payments to be
made in manlier determined by superintendent of
Powers of State board or commissioner.—The superintendent of banks is authorized to examine banks
applying for membership in the guaranty fund and if
such banks are found to be solvent and properly managed and after they have made the deposits required
by the act to issue to such banks certificates stating
that slash banks have complied with the act and that
its deposits are guaranteed by the guaranty fund. The
supeitendent is authorized to levy the regular and
special assessment as set out above. Tile payment of
depositors of failed banks out of the guaranty fund is
put under the control of the superintendent.
Disposition of guaranty fund.—The State treasurer
shall hold the guaranty fund subject to the order of the
superintendent of banks, and when the guaranty fund
amounts to $10,000 or multiples of $10,000 he may at
the option and order of the superintendent of banks
invest the fund in certain securities (enumerated in the
act), and whenever the demands upon the fund exceed
the cash on hand the State treasurer shall by order
of the superintendent sell or hypothecate such of the
bontinas he may deem necessary or expedient.
Maximum assessment in any one year.—Five assessments of one-twentieth per cent each.
NOTE.—The State of Mississippi, in addition to the
contributions to the guaranty fund as set out above,
rAuires each bank to deposit and maintain with the
State treasurer as an evidence of good faith certain
securities (enumerated in the, act) to the amount of
$500 for every $100,000 or fraction thereof of its average
deposits eligible to guaranty less capital and surplus.

Federal Reserve Bank of St. Louis


[Hemingway's Code as amended by laws of Mississippi, 1922]

Sec. 40 (Sec. 3604). State banks shall make guarantee
of deposits.
"On and after May 15, 1915, each and every bank
organized and existing under the laws of this State
shall guarantee its deposits under the provisions of
this act relating to the guarantee of bank deposits,
and such banks shall not be required to be examined for
license or certificate to participate in the guaranty
fund, provided they shall have been examined twice
t, and provided that
already and found to be sol
within five days after May I1915, each and every
hich shall not then be
bank in the State of Mississi
one hereof relative to
operating under the pro
the guarantee of deposits shall file with the superintendent of banks a sworn statement of its condition on May
15, 1915, in form to be prescribed by said superintendent, and any such bank failing to comply with the
provi:of of this section providing for the guarantee
sits shall be subjected to the same penalty
of ba
theretoforprovided for failure to pay any and all
assessments for the purpose of creating a depositors'
guaranty fund, and any officer of any bank making
affidavit to the statement hereinbefore required who
shall make therein any false and misleadin
shall be guilty of a felony and, upon convic n th eof,
be punished as for perjury."
Sec. 41 (Sec. 3605). Banks not heretofore guaranteed—
What to do.
"For the purpose of providing for the guarantee of
its deposits, it shall be the duty of every bank organized
and existing under the laws of this State which shall
not theretofore have elected to guarantee its deposits
under the provisions of this act relating to the guarantee
of bank deposits and which shall not have been
examined twice during the 12 preceding months, to
make within 16 days after May 15, 1915, application
en nt of banks for license to participate
to the su
e s and benefits and to be governed
in the
t s of the bank depos
by the
ate of Mississippi. Ea
fund of
to , duly
shall, by a re lution of its board of
certified by its president and secretary in orris to be
provided by the superintendent, and filed with said
superintendent, request admission to participate in
such assessments and benefits, and, upon the filing of
such resolution the superintendent shall, as soon as
possible, authorize himself or one of said examiners to
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 • h
the banking law, such superintendent or
shall, after the bank shall have deposited
treasurer bonds or money, as hereinbefore
be depositeoi,by the bank electing to corn
provisions of the bank depositors' gussets
to such bank, a certificate stating in substance that
said bank has complied with the provisions of this
the bank
act, and that its deposits are guar:
depositors' guaranty fund of 'tkt
as hereinbefore provided. Each bank corning uncle'
the provisions of this act lifter the 15th of May, 1915
shall be subject to the same requirements liabilities,
and conditions and entitled to the same
benefits s hereinbefore provided for b

Federal Reserve Bank of St. Louis

to come under the provisions of this act prior to said
date. Any bank in the State of Mississippi which
shall fail, neglect, or refuse to comply with the provisions
of this act within 15 days after the 15th of May,
1915, providing for the guarantee of bank deposits. or
which shall neglect, fail, or refuse to corn* with the
reasonable demands of the superintendent of barks
shall be subjected to the same penalty heretof ,re
provided for failure to pay any and all assessments f, ,r
the purpose of creating a depositors' guaranty fun, !..'
Sec. 31 (Sec. 3591). How any bank may become a
• :.
This section authorizes but dei not require banke to
become members of the guaranty fund. This section
apparently is superseded after May 15, 1915, by
section 3604 above quoted.
See. 32 (Sec. 3592). Guaranteed banks—Amount and
kind of securities to be deposited—Fees to be paid—
Guaranty fund.
This section is subsi antially the same as section 9—
202 oft the Kihsas net above quoted except that it
omits the provision that new banks. particiti
the guaranty fund shall be assessed their properti ate
guaranty fund at the ime
at whieh they are admitted and the following prosision
is also added:
"'The fund provided for in section 81 and section 32
of this act shall be for the purilose of paying under the
direction and control of the superintendent, the depositors of bonds (banks) that are declared insolVent by
the superintendent or banks that shall Sail, said
payments to be made in the manner dote ined by
the said superintendent.
1 payments m
to the
depositors of banka und
he provisions : this act
shall be repaid out of t
ssets of any
k whose
deposits are paid out of
fund, and sha
a first
lien on said assets: Prae' , That notes
sec u ri ties, or assets of any kind hich any bank
or hypothecate as collateral for funds ho
be used first for the liquidation of the de f which
said collaterals are hypothecated, and a
(or funds therefrom) shall be delivered jo he bank
hypothecating akin'or to the superintendent of banks
for the protection utelte depositors of the said bank and
for the guaranty find."
Sec. 33 (Sec. 3693). Depositors' guaranty fund—
How to be assessed and maintained.
This section is substantially the same as sccaon 9203 of the Kansas act above quoted except"that the
maximum of the guaranty fund is $500,000 instead of
$1,000,000 and with the following addition:
"Whaelever the said uaranty fund amounts to
$1000 or multiples of' 0,000, the State treasurer
shall, al the option of t 'e superintendent stsf banks,
and by his order and selection, invest the proonediof said
fund in United States bonds, Mississippi State bonds,
bonds of any levee or drainage distript, or the bonds of
any county, township, or municipality or road district
bonds within the State of Mississippi, or guaranteed
certificates issued by the bank superintendent; awl
whenever the,demancis upon this guaranty fund shall
I exceed the cash on hand, the State treasurer shall, by


order of the superintendent, sell or hypothecate such
of Use bonds as he may deem necessary or expedient.
The, State treasurer shall credit the guaranty fund
quarterly with its proportionate share of the interest
received from State funds computed at the minimum
rate of interest provided by law, upon the average
daily balance of said fund, as well as interest earned
on the investment of bonds."
Sec. 36 (Sec.3596). What funds guaranteed by this act.
"All deposits not otherwise secured and all cashier,
checks, certified checks, or sight exchange issued by
banks operating under this law shall be guaranteed by
this act. The guaranty as provided,for in this act shall
not apply to a bank's obligations as indorser upon bills
rediscounted, nor to bills payable, nor to money borrowed from its oprsismondent or others, nor to deposits
rate of interest than 4 per cent per
guaranteed bank shall certify under
superintendent of banks at the date of
oath to
each call staterne4 fa,amount of money it has on
deposit not eligible to Irditranty under the provisions of
this act, and in assessing such bank this amount shall
be deducted from the total deposits."





Mr. Van Fossen

April 29, 1926

Operation of State Deoosit Guaranty Laws.


Date lay became effective -- June 1, 1915.

To April, 1925, a total of ii33,162,748 of guaranty certificates had been issued, of which $1,940,766 were outstanding in June. Assessments during the ten years, 1915 to 1925, totaled $1,395,979, and amounts paid to depositors
in failed banks during this period totaled $1,766,769. Approximately $429,384 had
been realized from the assets of failed banks. The amount of the guaranty fund was
$338,825 in 1925 and the state Board held approximately $2,000,000 of assets of
failed banks, valued at $742,000. On December 31, 1925, state banks in Mississippi
held 804,224.94 of "Guaranty certificates" and reported 1651,848.94 as being held
in the "Guaranty fund with State Treasurer." In 1925 the superintendent of banks
estimated it would require 6 or 7 years at the present rate to retire certificates
of guaranty.


Mr. Foster

Dec. 23, 1929

Mississipni considers repeal.
In a recent address before the Mississippi State Bankers' Association,
Superintendent Love urged that timely action be taken to avoid disaster in disposing of accumulated guaranty certificates. Since the adoption of the law - fifteen
years ago - more than sixty banks have failed and the State is about five and a
half years late in paying the depositors of failed banks in full out of the guaranty fund. From the past several years, beginning in 1926, it has been necessary
to issue more guaranty certificates each year than the State has been able to retire. An estimate shows that $500,000 to $600,000 in guaranty certificates have
been retired each year, while during the same period $700,000 to $900,000 in
guaranty certificates have been issued. The net deficit in the guaranty fund
is gradually increasing each year and, unless remedial measures are taken by the
State legislature, the time will not be far away when the interest on these certificates will equal the annual guaranty assessment. Out of the present guaranty
assessment of about $300,000 annually, the estimated interest on the guaranty certificates is $140,000. This leaves only about $160,000 from be guaranty assessment
each year to apply towards liquidating the increasing amount of unpaid certificates.
Two solutions of the problem were presented by Mr. Love: (1) repeal
the guaranty feature of the law; (2) paasa measure which by its enactment would
prohibit the issuance of further guaranty certificates. Adoption of either one
of these methods will mark an accomplishment which will save th
ank in Mississippi.

Federal Reserve Bank of St. Louis




The guaranty law became compulsory and effective on nay 15, 1915,
and continues to operate to the present day. In an address of
the xississippi State Bank Superintendent, J. S. Love, Dec. 1929,
it was announced that during the past 15 years there have been 80 state bank
failures and 2 national bank failures. The net present deficit in the Mississippi guaranty fund is $3,233,254. An exhaustive inquiry into the facts surrounding the liquidation of State banks in 6is3issippi which have been forced to
close their doors since the enactment of the Depositors' Guaranty Act 15 years
ago was ordered by the Mississippi House of Representatives on Jan. 24, 1930.
It is further declared that banking legislation will occupy an active part
in future aessi_ons of the house until some sort of solution is reached. A bill
has already been introduced in the House which proposes to discontinue the
issuance of certificates against deposits in banks failing in the future until
the present deficit is cleared away. Action on this bill will sait a report
by the Committee of inquiry.


Federal Reserve Bank of St. Louis

The next state to adopt a compulsory guaranty plan was Mississippi,
where it was put into effect in 1915. Each state bank was required to deposit cash or securities in the amount of $500 for every $100,000 of deposits,
less capital and surplus, as assurance that regular and special assessments
would be paid when called for. The regular assessment was 1/20 of 1 per
cent annually of average daily deposits, less capital and surplus, until the
fund should reach $5,000,000. In case of emergency, a maximum of four
extra assessments of 1/20 of 1 per cent could be levied in a year.
The history of the operation of this law in Mississippi illustrates the
weakness of the guaranty plan under different attendant circumstances
from those which surrounded the cases of Oklahoma and Nebraska. These
different circumstances, from some points of view, gave the plan a more
favorable and clear-cut opportunity to function on its own merits, free
from the confusing influences of such by-factors as the excessive increases
in state bank charters that resulted from, and in turn reacted against the
success of, the guaranty plan under conditions that prevailed concurrently
with its operation in those other two states. The banking authorities in
Mississippi had full discretion in the matter of granting new charters and
used it liberally in refusing permission for unneeded banks or to unqualified promoters to open new institutions.
A Moderate Increase in State Charters


Federal Reserve Bank of St. Louis

An examination of the banking statistics, therefore, during the period
of the guaranty plan in Mississippi discloses some significant contrasts
with those for Oklahoma and Nebraska. When it went into effect in Mississippi in 1915 there were 280 state chartered banks with $41,600,000 in
deposits and 35 national banks with deposits of $16,900,000, or a total of
315 banking units in the state with deposits of $58,500,000. This meant
that about 89 per cent of the banks and 71 per cent of the deposits were in
the state system.
During the operation of the plan no great changes in respect to the
number of banks occurred, although the trend for a time was a moderate
increase of state banks and a decrease of national banks. At the end of the
first five years, leading to the depression year beginning in 1920, there
were 324 state banks and 30 national banks,a total of 354. This meant that
the number of banks then in the state system had increased to 91 per cent
of all banks in the state.
In respect to deposits the changes were more significant. State bank
deposits rose to $145,000,000 by June 1920, an increase of $103,400,000,
or almost 249 per cent, while national bank deposits rose to $39,900,000,
an increase of $23,000,000, or only 136 per cent. At this stage the state
banks held over 78 per cent of the deposits.
It would appear from these data that guaranty state banking had received a relatively greater stimulation of public patronage than non-guaranty national banking, and perhaps at the expense of the latter type of
banks, although as compared with general financial developments of this
period of expansion for the nation as a whole it does not appear that the
[22 j

guaranty plan in Mississippi was accompanied by the same extreme developments of over-banking and one-sided increases in deposits as were
manifest in Oklahoma and Nebraska.
Restraint Exercised by Banking Department
This lack of a marked increase in over-banking in Mississippi under
the stimulus of the guaranty law is attributable to the restraining policies
of the State Banking Department. This department was created in 1914
under the same general banking law that embodied the guaranty plan.
While the general law, which in most respects was an excellent and much
needed banking code, became effective at once and the banking department began to function immediately in promoting a sounder state banking structure, the guaranty feature itself did not become compulsory until
over a year later.
During this period existing banks were subjected to a rigid scrutiny
before being admitted to the plan. Also,in respect to the chartering of new
banks, the law gave the state authorities adequate discretion. These
powers presented effective barriers to the rush of unqualified persons into
banking, or the organization of an excess number of institutions, such as
the banking authorities in Nebraska frequently complained they were
powerless under the law to prevent since the courts held that it was mandatory upon them to issue charters whenever the technical legal requirements of an application were complied with.
The number of Mississippi state banks increased in the period of the
guaranty to a maximum of 325 units, a rise of only 45 over the number in
operation at the outset of the plan. When the guaranty law went into
effect there were about 6,000 persons per bank in the state. By 1920,largely
due to a loss of state population, which made the increase in banks relatively larger in effect, the number of persons per bank dropped to about
However, while these data reflected at both periods too large a number of small banks, they did not indicate that the condition of over-banking in Mississippi was so great as in Oklahoma and Nebraska, or that it
had followed the inauguration of the guaranty plan or was made materially worse by it. To the contrary they would imply that, in this instance,
a better opportunity for the demonstration of the possible merits of the
guaranty plan was afforded by the restraining influences of the banking
laws and state authorities in preventing a large growth in over-banking
as a confusing factor.
Bank Failures Relatively Moderate
Another relatively favorable set of attendant circumstances is found
in the bank failure records. Between June 1915, the year when the guar{ 23 j

Federal Reserve Bank of St. Louis


anty law became compulsory, and June 1920, there were only three
bank failures with total liabilities of $290,000. In this period no
banks in Mississippi failed. Beginning with the depression that started
1920 the rate of state bank failures rose, there being 4 in the year
June 1921,5 in 1922,4 in 1923 and 1924 each, and 3 in 1925, while in
the number dropped to 1. In 1927 the failures of state banks rose to 7, in
1928 there were 3, 1929,8 and in 1930, when the plan was suspended,there
were 14. During this same period, June 1920, to June 1930, 3 national
banks,or 10 per cent of the number in operation at the outset, were closed.
The total state bank failures in this decade were 53 and their aggregate
liabilities were $13,900,000. The number of closed state banks was equivalent to over 16 per cent of those in operation at the outset of the period.
Similar figures for Oklahoma show a failure ratio of over 32 per cent, and
for Nebraska a ratio also in excess of 32 per cent. Thus,as to numbers of
failures, the guaranty plan in Mississippi did not have to contend with so
great a burden as in those other two states.

Financial History of the Plan

Federal Reserve Bank of St. Louis

Yet,despite these various relatively favorable circumstances,the financial history of the Mississippi fund is not dissimilar to that of the deficits
and bankruptcy that broke down those others.
The first five years of the operation of the plan was without untoward
circumstance and led to its being acclaimed as a success. In no year up
through 1920 was the maximum amount of assessments called for, and all
depositors in failed banks were promptly paid.In 1921 and 1922 the rise in
bank suspensions and liabilities required the collection of the maximum
levies. By 1925 a large deficit had accumulated. The situation as it then
stood was that during the first ten years of the plan $1,396,000 in assessments had been collected and $371,000 realized from the assets of closed
banks, making a total of $1,767,000 paid to depositors in failed banks,
while there remained guaranty certificates outstanding, with no funds to
meet them, amounting to $1,941,000. This deficit, it was hoped, could be
wiped out in seven years by assessing the banks the maximum levies, provided their volume of deposits did not fall and there were no more failures.

Financial Breakdown
At the date of these foregoing figures, the deposits in the state banks
in Mississippi aggregated $134,900,000. They rose to $153,500,000 in 1927
and 1928, falling back to $147,500,000 in 1929 and $132,200,000 by 1930.
Thus, while the additional favorable factor of an increased volume of deposits as the basis for assessments prevailed in all except the last year, the
burden of suspended banks and of their deposit liabilities increased at a
faster rate. By March 1930 the deficit had risen to $5,000,000, represented



by certificates of indebtedness held by about 125,000 depositors of some
30 state banks. Under these conditions the operation of the guaranty plan
was suspended by a legislative enactment.
This measure halted the further issuance of certificates of indebtedness against deposits in failed banks. However, it continued the annual
assessments of the guaranty plan, amounting to a maximum of 1/4 of 1 per
cent of deposits, less capital and surplus, the proceeds to be applied to
interest and retirement of a state bond issue authorized to liquidate the
claims of holders of certificates of indebtedness. In case this assessment
should not yield sufficient to meet the services on this bonded debt, the
deficit was to be met from state taxation. This law also levied a special
assessment of 3 per cent of their capital and surplus against state banks,
the collections from which, limited to an aggregate of $300,000 annually,
were to protect depositors of banks failing after the suspension of the
guaranty plan. This substitute guaranty plan operated only on an annual
basis and was not accumulative, the proceeds of a year being applicable
only to the failures of the same year, with no carry-over of such deficits or
surpluses as might occur. In view of this special impost certain tax exemptions were granted the state banks.


Summarizing the Mississippi case,—despite the adoption of a sound
new banking code, the establishment of an efficient department of supervision, adequate control over the chartering of new banks, the concurrence of a relatively moderate burden of bank failures and a rise in the
volume of deposits of state banks as a basis of assessment income for the
guaranty fund, it failed to give full protection to depositors, caused a contingent obligation for general state taxation and did not aid in bringing
about a stronger banking structure.
As elsewhere, the guaranty plan in Mississippi dulled public discrimination as between sound and unsound bankers by creating the impression
that all deposits in state banks were guaranteed by the state, and thereby
enabled bankers with easier standards to gain competitive advantages
over those who adhered to sounder but less attractive methods. Through
such channels so large an element of weak banking crept into the state
banking structure and was productive of so great a volume of depositors'
claims against the fund that it broke down and became a public liability.
The contention may be made that the crucial cause of the breakdown
of the plan in Mississippi was of an actuarial character,—that the assessments were placed too low to create a sufficient insurance reserve against
the risks involved. Accepting this contention, consideration of the facts
indicates the impracticability of creating adequate reserves by a flat rate
against an unselected range of risks such as is involved in the guaranty of
[25 3

Federal Reserve Bank of St. Louis


Federal Reserve Bank of St. Louis

deposits idea. They show that a premium, or assessment, rate low enough
to be supportable by a conservative banker with his moderate scale of
profits, would be insufficient to set up adequate reserves against the disproportionate risks created by the speculative banker.
During the period 1915-25, the average assessments collectible from
all the Mississippi state banks amounted to the equivalent of approximately 1.20 per cent of their capital. Yet the deficit at the end of this
period was $1,940,000.In order to have created sufficient reserves to meet
the obligations of the guaranty plan up to this point it would have been
necessary to levy an annual rate of assessments equivalent to about 2.65
per cent of the capital of the state banks. By 1930 the deficit had grown to
$5,000,000. To have created reserves to meet this volume of claims would
have required annual assessments during the fifteen year life of the fund
at an annual rate in excess of 31/2 per cent of capital.
The disturbing effects and unsound influences of such a heavy special
tax against the earnings of a particular class of institutions would inevitably set up reactions tending to weaken the banking structure. Primarily
it would tend to drive capital away from the banks so taxed to seek more
lucrative employment elsewhere. For institutions that continued in the
field it would retard and add difficulties to the building up of proper surplus out of earnings. Among some,the pressure it would exert would doubtless induce less conservative methods and practices in an effort to enlarge
earnings so as to meet the exactions of the guaranty plan and still return
a satisfactory yield on invested capital.
Thus it is evident that the guaranty of deposits scheme contains within
itself forces inherently tending to cause weaker rather than stronger


No; .,5 on Thc Sothorn


e3 41014



until dc.ficit -,acta
Vol.0, JAnuary 1931, p. 20.
• ,

TJ.ssissippi had ruld, that house Bill 131 was constitutio.Tal.
In brd:T, then, ±c tst t
constituti'n,alit- of 't-.ouse Dill
which. tr-sted F.?..rtici.tlarly with
tang Vilc
_Inant- oP Dc-oit Act and empt clo-olus u
to hsv: both 2.2atur.s of this ]a':: tstc ..

uwd suits .eYe


Li 0.

his 1 mba't aas constituti!- nal.
opinion 5.,1 his decision, strAir
violation of a certain s'
constitution of the inited
You set!, therefore, that we have a divded loc,r court opinion on this
question. Both cas::s have n..n aLp 1-1(.1 to 11;ssissippi suprere coii



Airril 1931, p. 22. Edtorial re Et
carnin s as a deposit 'uarL-ct:.7 fund.
"an unbroken .rcord of co-A,•+.states
abandoned and :,ebraska and :ississippi t-


April 1531, p. 95. Refers to Yississippi surrene cou]-t decision upholdin
tionality of the act of Yarch 11, '''
Court A.11 review case on aippDal.


Vol. 57.
Apotober 1931, pp. b7-4L. "Sale f Second Lot of Ti.ssissippi .Deposit Guarant r,
Re s7.:1
- and
rIL bbnd purchasing synuicate, consistft
fro7 without the
1 een used irrniri
,000,000 bond issue, the proceeds of which were to ha7e :
s,- of
j. -.
1.nto the hands of 20,,.)00 desositors an appr
dispose of
in the stqte, other reans are at the dispi.
3,00j1000 for



the deposit°-s by :he state 1-.,ankin
Federal Reserve Bank of St. Louis


+ ;le, "I" 1-,
1 111,

nrcrTr1.(71 r•Ci






. atur

Federal Reserve Bank of St. Louis

:otes on TEE



Volume 1 - July 1914- June 1915
Jul?. issue. Yentions two rulings by Toard of rank Examiners, one
notion cf commercial or business paper, and whether endorser or F
acceptor of bill of exchan:e--though this language not used) must incl.
paper 1,i thin 25,' iiztilitY(maximumrtft to bank; other whether renewal n(,+e
sage trust deed as security is considered past due--no, until its own maturM. (p.1,
Mentions newspaper controversies, in advertisements, between nati:)nal and State
banks. ST .ests that neither class of tank will obtain all the deposits. (pp.10-11
August issue. In legal dept question is raised whether a bank which nationalizes
after a deficit in Lhe guaranty fund, if such she 1d occur, would be liable for
further assessments. Opinion is no.
September issue. Nothing relative to deposit guaranty.
October issue. Has article regarding "Narterly Meeting of Bakk Examiners", o
Which first three paragraphsEre as follows:
"The second quarterly meeting of the Dcard of Bank examiners was held at
Jackson October 5th and 6th. It is unofficially stated that entirely satisfactory
progress has thus far been made 4 n the work of checkinF and inspecting banks
throughout the State. In this respect, the examiners appear to have been running
on schedule tine. It is believed that within a very short While every bank will
have had one examination and that, by May 1915, the task of examining twch hank
twice before theguarartee'law becomes compulsory ill have been completed.
The Banking Department desires that publicity be given to twrulings adopted
at the recent meeting as follows:
The maximum rate of interest permitted to be paid on savings accounts and
time certificates of deposit was fixed at 4;4, this rate to he uniform in each town
and county of the State. Interest on savings accounts is to be credit semi-annual
and time certificates of deposit may be issued for a maximum term of four months.
No interest on time certificates can be allowed after maturity. This latter
feature will necessitate renewal of each certificate every four months in crder
for 'the holders to receive full interest due them." (NOTE. Corrected to minimum-The other ruling related to ronaval of notes secured by deeds of trust, without
new papers or new examination of title - providing a form to be used in cases liXe
those mentioned in ruling referred to in July issue.
(pp. November 1914. Page article on six months of guaranty. See photostat.
December issue. Nothing regarding guaranty, except opinion
(Not summarized here--no court opinion--merely writer of column)
January issne. Refers to Oklahoma decision re collection of assessments from bank
that nationalized. Oklahoma law different from r4 ssissippi. Also refers to
Also opinions at column writer
filing of Bank of Oxford suit. (pp. 8 and 9).
of certain questions re guaranty taw. (Opinion not abstracted here).
February issue. Reprints Thornton Cooke's article re deposit guaranty in
Mississippi in quarterly Journal of Economics. (of Feb. 1915). Reprint differs
in paragraphing, purctuation capitalization, and minor matters of Phrasing from
the original. Differences are partly a matter of QJF style; and in view of time
of reprint, this was Trobably actually printed from a copy sent in by Thornton,
rather than changes by editor of the Mississippi Banker.
March issue. Nothing regarding den - sit guaranty.
April issue.Refers to charge that bank examiner Anderson had abused his authority
and had closed a bank because ofpressure from a competitor. Gives no opinion,
sug:esting that Aterdson should be tried by Bank Commissions, as provided by 'law,
and not "in the court of printer's ink." (pp. 8-9).
5aminer, "A Year of State Bank
May issue. Talk by J.S. Love, State Bank E:


RargO°041, 14e;TwoPEWSBaffclnliegga•ggflpREt
_ - •

Issue. Nothing regarding deposit guaranty.
Federal Reserve Bank of St. Louis

tes on TuE MISSISSIPPT BANKER - continued
Volume 2 - July 1915-Jane 1916
July issue. At meeting of executive com,-1 ttee, speaker urged correction o' -w
giving guaranty fund first lien on assets of failed bank. (NOTE. Amended
made inoperative by court decision). p. 8.
August issue. Nothing regarding deposit guaranty.
October. At meeting of executive committee sevtral recommendations were made for
--FEiri7es in the banking law of 1914. Not summarized here (Note. Mark of
proposed chang-s were made in 1916).
November. Nothing regardin deposit guaranty.
METETY7 'n article on legislation, comments on recommendations of the board of
-bank examiners in its biennial report to the Legislature (pp. 24). See photostai
February. Has article, "Guaranty in Actual Operation" (pp. 8-9), which comments
on the three banks closed, wonderinr why banks which the examiners found it
necessary to close so soon were ever admitted to the fund.
March 1916. Article on "Changes in State Banking Law."
Notes that the minor
--changes and clarifications recommended by board of bank ex miners were passed
substantially as written. Describes these changes.PP. 1-4.
April. Brief editorial regarding the recent failures (referred to in Feb. issue),
saying information available cast no doubt on capability dt.vigilence ofevaminers.
Laz. Nothing regarding deposit guaranty.
June. President's address at Association refers to satisfactory operation of the
new banking law, to the three failures, noting that the guaranty certificates
issued were readilytaken up by the 1-anks over the State. (p. 21). Report of
legislative committee described revisions enacted.

Volume 3 - Ju1y-191tp-mv 194 (no June issue)
July. Nothinr regarding deposit guaranty
November. 11
at Convention, has discussion of operation of
guaranty lawf?Ne phAostat,
Volume 4 - March 1918-JRne 1918 ('issues July 1916 - February 1916 incluive)
March issue. Yothinc regardim - de:osit guaranty
April " . Not in bound volume, with no note whether issued.
May. President's Odress has long paragraph regarding operation (J' guaranty law._,
See photostat. Legislative committee bribe' reference to amendments.
amen:'ments of 1918. ,(pp. 3-5).
June. Has
Volum# 6 - July 1919-May 1922
July, August, September, October 1919 issues.., Nothing regarding deposit guar-F.
November-December 1919 issae. Article "The -ississippi Banking Law" s'•
law, department and personnel. (pp. 5-13)..Genenally favorable to wc
exeminers, prlisin7 their cooperation with banks, and banks with then.
Nay 1920 (next issue). Address by E.F. ARderson, then Chav'Tran of Board of Bank
.a.,raners deals with Leener,
=1 finantial situation, necessity c f credit restriction
by F.7. because of their gold reserve limitations, dangers of a panic situation,
but nothincthe deposit guaranty system of .'issisgippi.(Pp.
'•+, iQissues not4pr re depsit guaranty
no June to Aug Issues)
Federal Reserve Bank of St. Louis

Notes on THE MISSISSIEPI BANKER - volumes borrowed from Department of Archives
History, Jacgson, Miss. (Vols. 1-4 and 6 not available)
Miss. Supreme
Volume 5 - July 1918-June 1919
July issue. Nothing directly relating to deposit guaranty, butgpileeourt decision
mentiored that refers to guarantee act. "The Court also held...that where
stockholders of a bank expressly authorize the directors to accept the depositors
guarantee act and held such inducement to depositors, they are in no position to
complain that the act increases their liability to subsequeht depositors."
August issue. Nothing gelating to depo2it guaranty.
September issue. Nothing r9ating to M ssissippi deposit guaranty. An article on
"Landmarks in American Balitng - The Chemical National Ba k of NewYork" there is
a paragrpph relating to the New York "safety fund", referring to "the recurrent
financial storms duringvhich the safety fund finally blew up in the early forti9s.1
October issue. Nothing relating to deposit guaranty.
November issue. "
by the Gnvernor
mcNair as Commissioner of State
December issue. Refers to appointment of m.
Banks, succeedihg Felix T. Gunter.
- next issue "one of the Bankity Commissioners"
January issue. Nothing relating to deposit guaranty.
February issue. p. 11. reference to srowth of bank dep-sits since Banking Law in
operation. "The increase cab be attributed to a great extent to he improved
business conditions generally throughout the Staten also to the increased confidenc(
of the public in State Banks and to the successfyl operation of bank supervision
and the guaranty of deposits." Article signed by Love, Chairpan Board of Ba24J4am,
March issue. Nothing relating to deposit guaranty.
April issue.
May issue.
June Issue.
Volume 1 - June 1922-May 1923
Nothing relating to deposit guaranty.
June issue.
July issue.
August issue.
September issue It
October issue.
November issue.
December issue
January issue
Febtuary issue. n
Renrints artiile (or2ortion) on bank deposit guaranty by H. 3. Hodap
March issue.
in Chicago Bakker. Argues that deposit 'gsurance violates principles of cemmercia:
insurance--right to select risk, classification and gradation of risk, cost paid
by benffIciaryA Says deposit guarantgi s lije requiring all individuals to pay
debts of each other, and its injustice would be better realized if premiums were
P. 19
deducted from deposits.
April issue. One column article by A. A. Graham on "Ctuaranty of Deposits."
Thinks theory is unsound and practice a failure; mistaken idea prevalent that no
delay in payment in case of failure, ahd supported by State.
May issue. Reporting proceedings of annual convention of Mississippi Bankers
Association, May 8-9, 1923. Several speakers mentioned deposit guaranty.
Herbert Holmes, Delta Bank L Trust Company, in response to address of-velcome:
never a more extravagent idea and unless repealedat next session vill result
in bankruptcy of the banks, is informed guaranty fund behind over 1 milli°. ,
this would take six years to catch up. (p. 11)
J. T. Thomas, President Gredana Bak: increasing burden, asks whether liability
may not become so great that maximum assessments w'll even pay the interest or
outstanding certificates of ggarantyA (i. L3)
J. F. Flournoy, Jr. Whitney-Central National Bank, New Orleans: suggests Mississg,
bankers should try to have guaranty law repealed: as in Oklahoma; is an unjust
tax. (plef

Federal Reserve Bank of St. Louis

—4-Notes on THE T,assissippi PA.aER - pagee'
chants,Bank_e. Trust Co.Jackibr
Vol. 7, continued.
May_1923 issue continued.
O. B. Taylormendments -to MankiI-Efi-O-Turges effort to repeal guaranty law,
or at least to nake it applicable to deposits of limited amounts, not over a
Reviews 1922 changes in the banking laws
thousand or five thousand dollars.
main purpose to secure responsible head of banking department, replacing the
co-equal bank examiners. "Since the entire budden of guaranteeing the eposits
of their customers and of paying the expenses of the Banking Department was
was placed directly upon the banks themselves, it was realized that it was only
fair for the banks to select the Superintendent." (pp. 59 and 61).
A.A. Graham, Bank of Blue Mountain, "The Guaranty Fund." Refers to failure of such
funds in Oklahomaand Washington, and difficultiesin North Dakota and Kansas.
Wrong in theory and failure in practice, has not decreased bank failures, invite
crooks into banking and encourages reckless and lax banking, creates false sense
of security because people incorrectly think deposits are immediately available.
(pp. 66-67).



Volume 8 - June 1923-May 1924
Nothing relating to deposit guaranty.
(P. 27)
June issue.
July issue. Brief note regarding repeal of Oklahoma law, and amount of deficiency.
August issue. Nothing relating to deposit guaranty.
September issue. Nothing relating to deposit guaranty.
October issue.
November issue.
December issue. Report of convention of State bankers to elect Supt. of Banks
(J.S. Love), and fix his salary. After hat done, motion to discuss effort to
repeal giaranty of deposits law, but xmtxdmm voted down.
January issue. Nothing relating to deposit guaranty.
February issue.
varch issue. Entire page 7 entitled, "I formation asiga
r .
o pm.
issues shows
Bill 319". Not described but later issues3.//
Estimates preeeht deficit at ^,2 million. Li sts banks
in pr vious three months. Estimates half of assessment receipts absorbed by
interest on certificates. Would take 16 years to pay out present liability of
fund. If next 10 years' experience same as past 10 years, deficit, not counting
"Twenty-three banks have failed
interest, will then amount to about 5 million.
since Guaranty Law was passed. Nine of these were newbanks, and the failure of
ten of these was caused wholly or partially by dishonest officials. Not a one of
these has beensent to the penitentiary, showing that the Guaranty Law kills the
public conscience, and public demand for conviction of criminals."
April issue. P. 22-24 has text pf House Minority Committee Amendment to Senate
Bill 319 as introduced in and passed by the Senate.(Senate bill not described).
Proposed amendment would permit mithdrawal on or after March 1, 1925, and provides
for continued assessments designed to meet bank's proportionate share of liability
of fund as of tbat date.
P. 35 of same issue is opinion of m±ssissippi Supreme Court that a special
deposit not otherwise secured is covered by the guaranty same as a general deposit
May issue. Broceedines of annual convention of Mississippi Bankers Association,
May 6-7, 192L Several references to deeosit guaranty.
". C. Herring, Pascagoula National Rank, "President's Annual Address;" Referred
to efforts of Association in 1913-14 to prevent enactment of guaranty law.
J. S. Lsvel Supt. of Banks: noted growth in banking reources in ten years since
enactment of banking law. " thesetwn years, we have had 26 bank failures.
I have studieathese failures and the causes of them, and it seems to ine that
we might get some valuable lessons therefrom. Of the 26 failures, 9 are directly attributable to dishonesty or fraudulent transactions; 6 to one man banks,
caused by neglect and incompetency; 4 due to large public deposits; 3 to over
expansion; 2 to excessive r-al estate loans; and 2 to outside affiliations."
(13. 27). Summarized condition of guaranty fund, sbowine nearly t2 million of
Federal Reserve Bank of St. Louis

Notes on T_HE mISSISSIPPT BANKER - Page ffr
Vol. 8 continued. May 19214 issue continued.
Love's talk continued
guaranty certificates outstanding and unprotected except by assessments (p. 39)1
"Our air and desire is to so improve the state banking supervision in Mississipp:
that the wprk will be recognized for efficiency, alongside of and as well as
National Bank supervision. Am convinced that when this is done, there will be
no reason for concern regarding bile Guaranty law." (p. 141).
F. H. Parker, Canton Exchange Bank: reporting a group meeting, quoted from a speak
er who cited the qBults of the Oklahome and Kansas laws and stated that'll' continued tlqx in Mish-ippi, would cause our city corresgondents to lose confidence
in us, requiring about h to 1, in collateral, when we wishtc borrow from them,
and in addition, to mortgage out bank bmildings and fixtures and poss!b1y our
souls." (p. 48)
O.R. Taylor, in report of the Legislative Commitee; referred to effort nade to
repeal the guaranty law, which Senate had passed but the Committee had been
unable to :convince the House of the wisdom of its passage; and to passage of
bill providing some control over organizatien of new banks, which was necessary
on accountcf guaranty law. Bill provided "that before a hew bank is organized
that the Superintendent of Banks, with the Governor and Atterney General, must
first pass upon the character of those promoting the organization, and as to
whether the public convenience and necessity willbe served by eermitting the
proposed bank to operate."
Volume 9 - June 1924-May 1925
June issue. Under heading of "7"me certificates are guaranteed" gives Mississippi
Supreme Court opinion in case of Anderson v. Yates. (pp. 29-34).
July-November issues. Nothing regarding deposit guaranty.
December issue. Gives portions of MississippSupreme Court decision re withdrawal
of bor by bank going into liquidation - Bening Dept. v Adams case -(pp. 22-23)
January mssue. Nothing regardine, deposit guaranty.
February issue. Using full-page spread, copy of telegram of the president of the
Mississippi Benkers Association to the North Caroline Bankers Assocition (when
bill in that State was introductd) denouncing deposit guaranty. (p. 3)
March issue. Column article taken ror American Banker entitled, "The Deposit
Gpranty Laws May Be Discarddd in Texas and Adopted in Wyoming."
April issue. Nothing regarding deposit guaranty.
May issue. In Presidpnt's address(R. P. Clark, president of Bankef Tupelo), long
section urging repal and denouncing dep, sit guaranty - see photostat (kept for
files as description of banker ideas, not for validity of arguments).


Volume 10 - June 1925-May 1926
June issuev August issue. Nothing about deposit guaranty (one article by Supt. of
Banks deals with responsibilipoel' directors).
September issue. Gives receMs Yre; deposit guaranty law assessments (p. 19)
October-April issues. Nothing about deposit guaranty.
May iss4p. Report of legislative com-rittee to State bankers coraention described
succei'ful efforts to obtain several amendment sto banking code, including raising
limitation ef deposits from ten to fiteen times capital and surplus, and reduction
of interest on guaranty fund certificates from 6:,; to Iv.. (pp. 1,3 and b5). Address
by Supt of Banks (Love) has section on guaranty fund, reporting materiam improvement in the fund, with about P1.6 million guaranty certificates retited and N0.9
issued. Anticipates that all guaranty certificate§ ray be retired by end of 1929.
Notes thatof the .30 banks in liqiidation, about hRifqgqs4@n paid from assets end
Deficit in fund is about equal to obligatienl
about half falls on guaranty fund.
from the 13 banks that failed in 1920. Except for these failures due to deflation
guaranty fund would have a "reas nalle credit ee.lance." Refers to Biennial Report
to Leg'slature, in January 1926, and recommendatiens therein. (Pp. 52-53).
Federal Reserve Bank of St. Louis

Notes on The mississippi .
'Volume 11 - June 1926-May 1927
June 1-_ssre. "State Guarant:. Law" from ecLu,_,_
a aa-ay aa.a.
Supt. of Banks report (see notos on may issue), Ctiticizes assumption that t
will be no failures in LoYe's hope that cert."'
/July-December issues. Nothing al.J)u. deposit ,
January issue. Letter from Love to Miosissippi aaaaera asa;.:caLa:..Lal '
failures, and four Wanks absorbed, in Dec. 1926 or Jan 1927. Only one of tla
failures will be a heavy cost to the guaranty fund. (r. --).
February issue. Nothing al)out depesit guaranty.
March issue. Brief article regarding: r ep%1 of deposit gaaranty in Scatn aakot
Notes that annual assessment of 1/4 of 1 percent was kept to bepaid into Stata:
treasury as credit tomch bank, as a reserve fund in case of failure.'
Longer article re failureof guaranty fund ir mrrrne
(see photostate). (pp. 17-21)
April-May issues. Nothin: about deposit guaranty


Volume 12. June 1927 - May 1928
June issue (convention number). Talk by Supt of Banks Love has discussion of ste+a
of the guaranty fund. with failures in 1926-27 estimates that certificates
paid off in seven years, or by end of 1934.
Reitereates: "that the present
Guaranty of Deposit law seems to be reasonabloi ample to take care of hank failure
in normal times, but it is not adequate to take care of bank failures caused by
abnormal conditions." (p. 30). Continues with summary of recommendations for
changes'n the banking laws. (p. 32), including some method of paying certiqca•
of thetlast or issues in times of al-normal conditions, more strict limitations c'
officers and director's borrowing from ORR
July issueissue - nothing regarding deposit guaran4
August issue. Column article from Southern Banker roprinteo, desrribink? how ',threat
of guaranty laws in Florida and Georgia had been overcome.
Scptember - April issues. Nothing regarding deposit guaranty.
May issue (conventin number). Report of legislative committee describes "'le +1-n+
passed and that failed, the latter including proposed amendmentsfto hhe
guaranty law in part somewhat similartp those that were enacted'

Volume 13. June 1928- May 1929
June - July issues. Nothing regarding deposit guaranty.
August issue. Has article re'arinted from Bulletin of the Wisconsin Bankers Associat
of August 0. Notes effort to enact such a law in Wisconsin. Thep reprints an
editorial from the Chicago Joarnal of romamrce August 7, and an artiKe ip 7 issue by Glenn Griswoldit)oth aboutprobaole
therndin: closing of the Nebraska systk .
September - October. NotOrig regarding deposit guaranty.
Novepber. Report of work of Panking Department by Supt. Love, with emphasis on the
guaranty fund (pp. 7-9). Reported 47 banks had failed wit- deposits of abou
million, for ',Thich euaranty certificatesof more
million were still.
Allowing for interest on these certificates and other contingenet liabilities, for assets held for liquidation, estimated ,deficit at around 3 million. 'titer
on the certifiates would take nearly half of the annual assessments of about
Article "In Regard to Schemes to Guarantee Deposits in Bar' '
(pp. 14-15 and 19) briefly summarizes status La the eight States--of Itich s'
quit, only Mississippi and Nebraska remainin .
December - January issues. Nothing about deposit guaranty, but attached to Janua
issue in file exaained is a pamphlet issued by M4 ss. Bankers Asso reprinting art
from Nov, issue, together with a longer atticle reprinted from Commerce Monthly.
February issue. Brief article about deposit guaranty, In -the eight Statea and in New
York and Vermont, assertine "Every state in the union which has atempted
to enact
laws insuring the safety of deposits by Guaranty Fund insurance has found that such
a plan is economically unsound." (p.
fOopo colu
n 12.easons for Bapeal of
MIsssissi pi deposit guaranty law" (p. 13)

Federal Reserve Bank of St. Louis

Notes on The Yississinpi Panaer _
Volume 13. June 1928-May 1929 - Continlied
March issue. Page article, "Has Dank Gueranty Fully Col
in Nebraska to repeal assessment ero-Asions. (p. 5).
North Dakota (p. 15)
April issue. Nothine about denosit guaranty.
May issue (convention. number),..kReports "Discussion of the Subject Repce.'Guaranty Law," by O. 17. Tor (pp. 59-61). Taylor was chairman f a c
appointed y Pres. of Asso. to asceetain opinion of bankers, which four:
306 banks, 238 favor repeal, 10 absolytely opposed, 24 non-committal, ar m expression of opinion.
Presented resolution for appointment of a cm'
to work plannine and details of a repeal bill. Approved.
. t by Supt of Banks Love on condition of the guaranty fund (pp. 55-.5P).
'deficit estimated at over 3 million. Up until 1926 he thought tbe plan had o
.chance of success in Missippi, but 1926 a had year for the Souith. "I repose
ethe expression often made, that the Guaranty Law on its present set-up can pc:7
itake care of the deposits in banks that fail under normal periods, but it is ,sufficient to take care of the deposits of bank fd lures caused by abrarmal
Fund Lettire
\conditions—conditions over which no many has control." (p.
'deeper in debt eaah year.


Volume 14. June 1929 - May 1930

Juno - September issues. NothinF ebout deposit guaranty.


October issue. Has "Report of Guaranty Law Committee" (full page - p. 11). States
that Supt. Love in conference has indicated intention of askirf for repeal of the
issuance of further guaranty certificates, keepine' assessments topay deficit, bit
this will ' ake about fifteen years.
Committee agreed to support this bill, and '
not submit separate recommendations
November issue. Has "Report of Guaranty Law Committee," by R. P. Clark, e member
from one of the groups of banks in the Asso. Reports recommendation noted above,
and 4404ves eeports on den-sit guaranty -7n the other seven States (pp. 21-24)
Repot oil present condition of fund, giving charges from April (p. 30).
December issue. Nothing about aposit guaranty.
January issue. "House Bill No. 131--Amending Guaranty Law - Ziestions and asmers
Character of queStions and answers. irdicates bil7 was substantially as passdd.
Notes that banks have assessments c, nVnued but a p ortion cf surplus is exempted
fPor taxation. (pp. 3-9)
February issue. Has brief article from Chicago Banker on proposal in Neb-aaka to
be voted on for constitutional amendment giving legislature altharity to provi
funds for relief of depositors ir failee. banks (p. 7).
March - April issues. T1R mention of deposit guaranty.
May issue (conventien numeer). Resolutions comnittee tanks commitee for "V:
of the law (p. 19). Report by Love of the State Banking Department refers to
passage of House Bill 131, March 11, 1930, and discussed some of the nroblems that
would arise. (See photostat)

Federal Reserve Bank of St. Louis




Issued Monthly by the
Vicksburg, Miss.

T. H. DICKSON, Editor

Changes of advertising copy should reach this office
not later than the 5th of the month. Advertising rates
on application.
OFFICERS 1914-1915.
Henry Hart, Winona.................................................. President
First Vice President
S. J. High, Tupelo
T. H. Dickson, Vicksburg ........................................ Secretary
E. P.
General Counsel
Mayes & Mayes, Jackson
J. A. Band', Chairman
Parker Reeves
H. T. Perkins
W. P. Kretschmar
A. L. Jagoe
W. V. Fant
G. J. Hauensteln
W. D. Davis
W. Thos. Rose





No. 1
No. 2
No. 3
No. 4
No. 5
No. 6
No. 7

Forest Prather
R P. Turner
R. C. King
C. A. Torbert
W. D. Cook
Frank G. Wisner
I. N. Ellis
T. B. Lampton

( From




The statement of the oklahoma Bank Guaranty
Fund for the close of the last quarter showed outstanding warrants $ -04,000.00 and cash on hand,
$20,000. Treasurer Barber points out that this is a
slight gain over the previous statement in the net
indebtedness, although the gain is very small.
(From Southwestern Banker.)
The Kansas Bank Guaranty Fund, now five years
old, exceeds half a million dollars, $127,9S7.27 being
cash, and the remainder, $105,071t.76, being in highclass bonds easily converted into cash, if desired.
The bond feature is the distinctive Kansas feature of
bank guaranty. It requires less cash to be taken from
circulation, and at the same time it earns interest.
In five years but $2•4,000.00 have been drawn on the
guaranty fund to meet bank failures, so that guaranty
in this time has not proven the dangerous thing many
conservatives predicted. It has insured every depositor of all banks in the system getting his deposits back,
dollar for dollar, in case of failure, and bank depositors
of failed banks are therefore just $2•,,000.00 better off
because this fund exists than they would have been
without deposit guaranty. Meantime the system
is gradually getting stronger as time passes.
Federal Reserve Bank of St. Louis

The summary of condition of Mississippi state
banks at close of business on June 30th, shows, among
their assets, "Guaranty Fund with State Treasurer,
$0,F,00.00." As of September 12th, with approximately
forty banks then entered in the Guaranty System,
this item of the summary appears as $33,500.00. Since
the latter date, about twenty-five more banks have
elected to insure their deposits and the Fund is still
further increased. Although no statement of the
Fund has thus far been made by the Banking Department, it may be presumed that the amount carried
by the banks as an asset covers only the cash or bonds
deposited with the Treasurer and does not include the
additional assessment of 1-20 of one per cent. Therefore, the total must be perhaps ten per cent larger
than would appear from summarized bank statement.
At the inauguration of the Guaranty System
much argumentative advertising prevailed—and, no
doubt still continues,—between some of the guaranteed gate banks and their competitors operating under
national charters. We are glad to say, however, that
the fight does not appear at any time to have reached
the degree of heat which was anticipated. The extent
to which State banks have been helped, or nationals
hurt, by the new order of things, is a question that
will require further time to determine. Last summer
one prominent State banker who had been a member
of the guaranty system for about a month, told the
writer of a very gratifying increase in deposits during
that term. The figures seemed clearly to demonstrate that the public was disposed to pay considerable
attention to the idea of having its deposits guaranteed. But, within a very few days thereafter, a national banker in the same town volunteered the information that his deposits had also shown a recordbreaking increase for that time of year. As a matter
of fact, both statements were absolutely true.
Several State bankers, and excellent bankers, too,
who pervaded the capitol last January and led an
active fight against the passage of the guaranty law,
have since entered the System and begun to bid for
public patronage on the strength thereof. Whether
change of heart, or merely change of front, this action
calls to mind those well-known lines of Alexander
Pope's, concluding, "We first endure, then pity, then
embrace." The analogy is somewhat strained, and
is used without the slightest intent to reflect upon the
guaranty system or the bankers who have thus far
embraced it.
Arguing from the depositor's standpoint, little,
if anything, can be said against the guaranty idea.
But, for the banker, the story may easily be a very
different one,—as is shown in the contrasting reports
from Oklahoma and Kansas. In both of those states
it is true that no depositor in a guaranteed bank has
ever lost a penny; but our brothers in oklahorna have
thus far paid the piper an enormous sum in cash and,
sooner or later, somebody has got to take care of
$400,000.00 of outstanding warrants. Until quite recently the total of those warrants has steadily climbed

upward. It may be now that the effect of expert
supervision has had a chance to be felt, that warrants
can, be retired faster than it is necessary to issue them.
Otherwise, the evil day of reckoning is postponed
only to the end of making it worse.
In Oklahoma, the bankers have, apparently, paid
a high price for such increased public patronage as they
might have gained through being guaranteed. That
is one side of the picture—from the banker's standpoint. On the other hand, Kansas, Texas, and Nebraska present an aspect by no means so gloomy. Assessments have not fallen so heavily, nor is there any outstanding liability to be liquidated. But even in
Kansas, a half-million-dollar bank failure would wipe
out the fund that it has taken five years to accumulate.
In Mississippi we have laid our nest-egg, which is
less likely to be smashed than the nest-egg of Oklahoma,
where guaranty was slapped on overnight and banks
admitted to the system without preliminary examination. Our law is modeled more like that of Kansas
and, while our Examiners have frankly used their
influence toward having banks come voluntarily into
the guaranty system, we believe that they have, at
the same time, used all possible care and judgment to
prevent the admission of any unworthy bank. Up to
now, no guaranteed bank has fallen by the wayside—
but some of them will fail, and there will be some
drains on the Guaranty Fund as time wears on. It
is simply beyond the range of human probability that
our Examiners will make no nistakes; but it lies within
their power to supervise each bank so closely that, in
the event of failure, the assets and the stockholders
liability will take care of practically all of the loss
incurred. Oklahoma's present deficit is due largely to
maladministration of her Banking Department in
days gone by; and Kansas, with about five hundred
guaranteed State banks, has called upon her guaranty
Fund for only 162F,000.00 in the past five years. The
latter condition, however, does not arise from the
verbiage of the Kansas law, but is due to the backbone, the integrity, and the good judgment of the men
who applied that law. And, hence, in Mississippi,
the success or failure of deposit guaranty—from the
bankers' standpoint—rests not "on the knees of the
gods," but in the hands of the Bank Examiners.
Six months have passed since supervision began
and the guaranty system was established. Another
six months remains in which our bankers may consider and decide whether to embrace the guaranty
system next May, to nationalize, or to liquidate.
Just now, the agiount in the fund is relatively small—
but the strength of the system will lie not so much in
its cash assets as in the character of its members.
For this reason, the progress of bank supervision is
being watched with more than passing interest.
We believe that the Examiners are working
capably as well as conscientiously, and that they feel
in full degree their responsibility toward the banks.
These men say but little of what they are doing in
individual cases—which is entirely proper and commendable—but it seems fairly well understood that
Federal Reserve Bank of St. Louis


Guaranty Service
Accounts of Banks
We invite and welcome the active and
reserve accounts of banks and trust companies throughout the United States.
We believe that such accounts are entitled to a reasonable remuneration and
therefore we allow interest on all balances
that average above a definite minimum
We shall be glad to correspond with
banks or trust companies that contemplate
establishing a New York connection.

Guaranty Trust Company

of New York
Capital and Surplus
Resources, over


$ 30,000,000

not every bank applying for a guaranty certificate
has received one; that some banks who have not aspired to the dignity of being guaranteed, and whose
condition has not been altogether satisfactory to the
Examiners, have been notified to put their houses in
order or else liquidate while there is yet time to do so
with propriety. Still other banks have been closed
forthwith, upon first examination.
With the near approach of May 15th, the Examiners will be called upon to exercise even greater
niceties of decision; for it is then that they must
weigh the question of whether to admit this or that
bank to the guaranty system, to the possible detriment
of the other banks, or—well, it's up to the Examiners,
and we hope they will not flinch.
The Board of Examiners wishes us to inform our
members of an error in ruling published last month
with reference to the length of time for which certificates of deposit may be issued. It was the Board's
intention to fix four months as the minimum instead
of the maximum, term. The entire ruling should,
therefore, be altered to read as follows:
Maximum rate of interest to be paid on savings
accounts and time certificates, 4 per cent, to be uniform
in Mississippi. Time certificates of deposit may be
issued for a minimum term of four months, but on no
certificate, regardless of term, can interest be paid
after maturity.



The Association met at 9:30 a. m. and was
called to order by the President.
PRESIDENT HART: The first thing on the
program this morning, Mr. Love will give us his

address upon "A Year of State Bank Supervision."
Of course that address to all of us is necessarily
going to be very interesting and entertaining.

State Bank Examiner
The Scotch have this proverb, "War brings
poverty, poverty brings peace, peace brings prosperity, prosperity brings pride, and pride brings
war again."

stronger today, and their affairs more carefully
handled and their management is more intelligently
efficient than ever before in the history of

I wonder if this proverb is not applicable to the
history of banking in Mississippi? Following the
long period of poverty-n-ode peace and longer period
of peace-poverty that was experienced by the South
generally, and Mississippi particularly, after the
great Civil War, an era of prosperity and plenty did
come and did continue, with but an occasional ebb—
and bankers in Mississippi know better, perhaps,
than any other business men just how much of
unwise and unsafe and speculative business was
indulged in by banks in Mississippi on account of
that fatal feeling of proud power and serene security
which an era of uninterrupted prosperity brought to

Not so very long ago—certainly within the
recollection of the majority of the bankers present—Mississippi had few banks. Most of the banking business was done in cities in adjoining States.
There were no laws governing the banking business
of the State at that time, and the few banks that
were in existence were doing business under special
charters granted them by the Legislature, giving
them special privileges, and a banker was a rare
and respected creature; he was a lord. But as the
resources of the State were more and more developed, new banks were organized, and finally in 1906
the Mississpipi Legislature passed laws governing
In a limited way the banking business.

The mushroomy growth of new banks, and
the rather loose management of old banks, resulting
in numbers of failures and losses to depositors and
stockholders, made the necessity of adequate banking laws so imperatively evident that the last Mississippi Legislature passed the law under which we
are now operating.

These laws were sufficient for a time, but as
the resources of Mississippi continued to develop
and the country became more thickly populated, and
business increased in volume, there were rranY
banks. They began to spring up in almost every
town of any size, and frequently a small town possessed the distinction of having more than one
bank. For a time it seems that all of these banks
were prosperous. The investment of money in bank
stocks was an inviting field. Everyone was proud
of stock owned in a bank, and as a rule it was a
dividend-paying stock, and not being subject to
taxation, was attractive, and many invested in bank
stock really not knowing the true nature of their
Investment, who were satisfied and contented, and
In fact, proud of their holdings.

Here the application of the Scotch proverb
ceases, for aside from some opposition to certain
provisions of the new law. Mississippi bankers have
rot and are not making war on the banking laws
made by all the people of the State through their
representatives, but are supporting the executors
of this law and 'aiding them in properly interpreting
and wisely applying, and in intelligently carrying
out the principles of the Mississippi Banking Law,
with the gratifying and highly pleasing result to
all concerned, that Mississippi State Banks are
Federal Reserve Bank of St. Louis

In those days of banking prosperity there were
many calls for bank men or bank cashiers. Good



material was scarce, and many of the
banks in
organizing did not exercise good judgmient
in selecting men to manage these institutions,
and unfortunately, in a great many cases young men lacking
In experience and ability were selected
and put ,11
the head of financial institutions involving hundreds
of thousands of dollars. For a while the country was
so prosperous that even these men lacking in experience apparently conducted successful banks. But
with a change of conditions adversity came. There
was keen competition in the banking field, as well
as in every other industry; tests on the ability of
these managers and bank cashiers were made, and
it was a test they could not stand. The final result
was bank failures, resulting in loss of the depositors' money, to say nothing of stockholders'
It has been said that there is a crisis or an
opportunity in every man's life. There is a marked
difference between Crisis and Opportunity. A crisis
is when our carefully-reritured and well-laid plans
fail to respond to our best efforts or to gibe in with
natural conditions, requiring extraordinary effort
and sacrifice, maybe, and the calling forth of all
reserve powers and resources to meet the emergency
sticessfully. Opportunity Is when one's careful
preparation of planning and the changing conditions
meet, and co-ordinate exactly according to calculations, making possible the accomplishment of the
desired end without extraordinary effort.
The passing of this law by the Mississippi Leg:alature and the putting of same into effect by the
Board of Bank Examiners brought about a crisis
or an opportunity, as the case might be, in the history or the lives of our Mississippi banks or bankers.
Some of these men have met a crisis and by extraor(Hilary effort have been able to tide over their institutions and put them in sound condition. Others of
our banks or hankers were more fortunate, and the
law merely afforded them an opportunity to show
to the world their true worth and ability, and without any special effort they were able to show or
prove the stability of their banks.
I have been asked to give you some of my
experiences with the banks and bankers of Mississippi in meeting these crises or opportunities, as
the case might be; or in other words, putting into
effect this most excellent law passed by the Mississippi Legislature of 1914.
On the floor of this convention last May in
Vicksburg one of our most prominent bankers said
in talking about the Mississippi Banking Law that
they asked the Legislature for bread and were
given a stone; another said that this law was a
great piece of constructive legislation. After twelve
months of study of the law and experience in putting
it in effect, it is my opinion that the first banker
is wrong and the other right; that the Legislature
Federal Reserve Bank of St. Louis


YOU KNOW—That we have the only
deep water port of the state.
YOU KNOW—That by giving prestige
and importance to this port you materially advance the business interests
of the whole state.
With capital and surplus of over
Three Hundred Thousand Dollars. and
up-to-date facilities for handling all
branches of legitimate banking, we are
in a position to solicit and expect SOIlle
of your South-Mississippi business.
Let Us Get Together.

The First National Bank
of Gulfport
The Oldest National Bank on the Coast.

gave us on the whole a splendid piece of constructive
To my mind one of the best features of this law
is having the directors fully realize their duties, and
imposing upon thern the necessary obligations and
due supervision of their institutions. It is very
gratifying to the Board of Bank Examiners to find
that in every instance the directors have accepted
this duty and this obligation and have faithfully
and conscientiously executed this trust.
In some instances we have found where the
directors did not direct, but left the bank largely
to one man; but when the matter was properly put
to these directors, in every case we found them
willing to assume these duties and become faithful
to their trust.
The directors oi the banks of Mississippi are
how giving strict attention to the banks' affairs.
They meet regularly, pass on all loans, and are
directing the banks as they should be directed.
Another good feature of this law is prohibiting
banks from making loans on the capital stock. On
our first rounds we found this in places to be a
common practice, but on our second round this class
of loans had been entirely eliminated.
One of the most satisfactory features of the law
is the new method of liquidating a bank, and the
people are pleased with the successful manner in
which this feature of the law has been put into exe-

cotton. I know of a bank that has liquidated in
South Mississippi without a dollar's expense, except
when $50.00 was paid as salary to a clerk to do some
detail work. In other words, a bank waa taken
charge of, the depositors paid in full, all creditors
taken care of, and the bank's affairs entirely
liquidated satisfactorily to all, without the payment
of one dollar for liquidation fees, either to agent for
the examiner or to an attorney. This offers a pleasing contrast to the method of liquidation under the
old law, when a considerable percentage of the
bank's assets were required to effect liquidation.
The examiners' experiences in their first round
of examinations were varied. The examiners themselves were not over-confident, and the bankers
naturally were a little uneasy, until they learned
the requirements of these examinations.
remen-her in the examination of a bank I
found pretty well the entire capital of the bank absorbed by losses. After calling the Board of Directors together and putting matters squarely and
frankly before them, showing them that the capital
stock had all gone and that they were doing business without any protection to the depo3itors whatever, and after these men fully realized the situation and "came to," so to speak, the president of
the bank, who was a forceful man, rose to the occasicn. stating in the most positive way to his board
that this man was right. The bank could not afford
to liquidate its affairs and must be gotten in shape,
and the only way would be by personal sacrifice
of the Board of Directors, and wound up his remarks
before the board in a most forcible manner by saying with emphasis, "Boys, it's got to be (lone:'
Within ten days this board had trot the requirements and the bank was in a safe condition, and
the people and depositors were none the wiser, but
their deposits certainly much safer.
In making our rounds we have learned to appreappreciate the
ciate more and more our fellow-man;
directory .
class of men who as a rule compose the
very few
of our State banking
in any
of these men of affairs; but on the other hand, we
have found them not only willing but coming up
like men, facing squarely the issue, and making
large personal sacrifices in order that no innocent
person should lose on account of their unfaithful
stewardship. As I said, seeing these men 'root
conscientiously their duty has been a great uplift to
the examiners, and has made us respect and appreciate our fellow-man mole than we have ever done
In our work we have found, as a rule, good
banks in Mississippi—banks well officered and well
managed, and handled in a businesslike way with
the public and depositors fully safeguarded. For
a while we would meet continually with banks of
Federal Reserve Bank of St. Louis



, Nze'

Used and approved
by more Mississippi
Bankers than any
other typewriter



First in


"The Machine You Will Eventually Buy"
this nature, and then again it seems that we would
run into a nest ot badly-managed banks—banks in
an unsatisfactory or unhealthy condition, not necessarily insolvent, but banks badly needing supervision. And then it was that it called for the very
best there was in the examiner to meet this condition and remedy it without wrecking the institution
and blotting the lives of the officers and directors,
and bankrupting the community,
rettomber going into one community in which
there were two banks, neither of which on examination proved to be in satisfactory condition; one
being weak in one respect, and the other strong in
that particular respect, and vice versa. Neither
bank was able to meet the requirements of the
examiner alone; the failure of one meant the failure
of the other. Problem: to save the situation, make
one good, healthy Institution out of the two without exciting the community, or hurting anyone connected. By the hearty co-operation of the officers
and directors of both institutions, and by the personal sacrifice of some of the directors, after they
fully realized their duty, the examiner was able to
combine the two institutions, and to liquidate one
bank through the other, making one strong, healthy
bank, doing it in such a way that it would work no
great hardship on anyone. The people awaited with
Patience and confidence the result of the work of the




examiner, and are now enjoying the benefits of one
throughout the State generally, that as few changes
of the best managed banks in the State. We have
as possible be made, as long as the present
had numerous experie::ces of this kind. In every
board are making a success and doing their duty
instance we have found some good man connected
with the bank who was willing to spend and be
The guaranty feature of the law, which met
spent, not on;y for the good of the institution but
with such strenuous objection by nearly all of the
for the good of the town and community in which the
bankers of the State, has been accepted with good
bank was located.
grace with one or two exceptions, and I am delighted
When the
their commissions
to report that now two hundred and fourteen hanks
there were three hundred and twenty-one banks
have accepted gracefully the provisions of this act,
doing business in the State of Mississippi. Since
received certificates showing that their dethen there have b9en several consolidations. There
are guaranteed and generally admit that
have been thirty-six liquidations. Of this number
there is merit in same. Personally, I believe that
eighteen were voluntary and the balance by suggesthe depositors are entitled to some protection. The
tion of the Board of Bank Examiners. Of this numdepositors should be guaranteed in some way, but
ber of banks in the process of liquidation twentythe method of protection there may be some
five have already paid their depositors. Several of
however, this law appears to be sufficiently
these paid their depositors in full within ten days
good until a better one can be devised.
after the banks suspended business. Of the balance
more than 50 per cent has been paid, and there is
It is very gratifying to the Board of Bank
every prospect of paying the depositors.
Examiners, and I feel sure to all of you bankers,
to know that there have been no failures among the
In a few instances the failures were bad. The
directors were not personally able to raise sufficient
hanks that have been guaranteed. In other words.
funds to pay these depositors. However, threethe banks that enjoy the distinction of having a
fourths of the banks that are in the hands of the
certificate showing that their deposits are guaranexaminers now in the process of liquidation will
teed under the provisions of this act have been put
pay the depositors in full. In scon'c instances there
In such shape that they could be operated profitably.
will be a residue to be divided among the stockand are in a safe and sound condition.
holders. Four National Banks have surrendered
After one year of optional guarantee, or one
their charters and have become State Banks. Four
year of grace before the banks are compelled by
State Banks have nationalized. Ten new banks have
law to accept the provisions of this act, there have
been organized.
not only been no failures of guaranteed banks, but
In order to meet the requirements of the examthere is now deposited with the State Treasurer
iners and comply with the law the directors have
bonds amounting to $177,000.00 and fees collected
trade sacrifices and put up large sums of money in
and credited to the Depositors Guarantee Fund
order that the banks might continue in existence and
amounting to $9 500.00. which fund is to be used by
their depositors be fully protected. It is interesting
the examiners, if necessary, to pay the depokitors of
to know that these directors have already advanc,d
any guaranteed bank which may fail.
Personally to the different examiners more than a
million dollars. These sums have varied from
The Banking Law has done a great deal towards
$5,000.00 in the smaller banks to nearly 'a halfmillipii
restoring confidence in banks and bankers of the
In the larger institutions. These sacrifices ha
State. One prominent banker said to me not long
been made willingly, end this money has been put
ago that he shuddered to think in the face of preIii) without any apparent regret or hesitation.
vailing conditions what !night have been the status
The two features of the law that were objected
of the banks in MinnieniPPI had not this law been
to mainly by the bankers of the State were the elecpassed and had not the provisions of the same been
tion of the examiners and the guaranty of deposits.
enforced by the examiners, who knew their duty
As yet the election (entitle has not been tested.
and were fearless in executing same. As I see it
Only one of the examiners has any opposition at all
now. the people of the State have confidence in the
for re-election, the other two having an open field.
banks and are willing to entrust their (ands to them
This is very pleasing to the board. It shows that
without any uneasiness. This is rave:daily true of
the bankers and people of the State generally apprethe banks that have already taken advantage of
ciate the work that the examiners have been able
the guaranty feature and have received certificates
to do. and are of the opinion that inastrrich as they
showing that their deposits are guaranteed under
are just commencing this work and getting their
the provisions of the law. The credit of Mississippi
stride. so to speak, they are entitled to at least one
banks with their correspondeets in the money cenfull term in office. The people realize that the Feleeters has improved, and they now enjoy more conlnon of examiners is a serious responsibility, and
dence and are able to secure more accommodations
it is best, not Only tor the banks but for the people
from this source.
Federal Reserve Bank of St. Louis



With few exceptions the banks have now complied with the requirements made of therm by the
examiners. Most of the banks that have not already
entered the guaranty are eligible and will be issued
certificate upon application within fifteen days
after May 15th, 1915. A few of the banks have
some readjustment to make; however, most of them
will be able to make these readjustments and satisfy
the Board of Bank Examiners as to their fitness to
receive this certificate.
All banks except possibly eight or ten have been
examined at least twice, some oftener. By June 1st
the examiners will be ready to commence their third
Unfortunately it appears that it may bile. necessary to liquidate a few banks which, possibly on
account of prevailing conditions, are unable to adjust
their affairs so as to comply with the law and meet
the requirements of the Board of Bank Examiners.
This is unfortunate and the examiners would like to
have the privilege of using their discretion in extending the time to some of these banks, rather than
force them into liquidation. However, the law does
not leave this to the examiners, and bankers who
have already qualified, often going the limit in
order to strengthen your own institutions, need have
no fear that any undue leniency will be exercised in
these latter banks.
The strongest and the most important feature
of the Mississippi Banking Law is—Supervision. The
success or failure of the law depends upon wise
supervision. All other points revolve around or
depend upon this.
Even the guaranty of deposits can be robbed of
its terrors and objections by wise supervision. With
leasonable, yet prudent, fair-minded and experienced
bankers and business men as examiners, and with
the full co-operation of the bankers of the State, I
feel that there is nothing to fear in the law ever
from the guaranty feature.
The Board of Bank Examiners in accepting this
trust and taking on the responsibilities of this office,
:ealize that they are given very broad powers—
powers that could be an agency for great good or
great evil. The examiners have done conscientiously
a large work, which we feel has been of great value
to the banks and banking interests of the State of
Just a year ago the Board of Bank Examiners
said to you bankers that as they saw it the law was
written with the view of helping the banking interests—not to tear down but to build up, and we promised you to work to that end. We leave it to you
as to whether we have kept the faith and trade good
our promise. A year ago State bank examiners were
an unknown quantity. After a year spent in
mingling among yop, you know us. We are no longer
to be feared. In meat instances we are welcomed
because we have been able to help and not hinder.
Federal Reserve Bank of St. Louis

Guaranty Service
Our Home
The Guaranty Trust Company's building at
140 Broadway was designed for the exclusive
purpose of adequately providing for the efficient
operation of the company so as to serve its
customers satisfactorily and with precision and

To that end there has been installed every
known convenience of proven worth which will
facilitate the work of such an organization.
Bankers visiting New York City are cordially invited to call and inspect this modern
business home.

Guaranty Trust

Company of
140 Broadway

Capital and Surplus
Resources, over



New York

$ 30,000,000

I take this opportunity of pledging to you bankers of Mississippi the continued faithful performance
of duty by the entire Board of Bank Examiners and
their assistants, and assure you of our appreciation
of the splendid co-operation and treatment we have
received at your hands. If we have been able to
put this law into successful operation it has been
largely duo to your assistance, and after all, it is
to you that the major part of the credit is due.
(Prolonged applause).

Upon motion duly seconded Mr. Love was given
a rising vote of thanks for his address.
PRESIDENT HART: I wish to read to the
Convention a telegram received from two very
active members of the Association of Mississippi;
these gentlemen are at Old Point Comfort, Virginia,
attending the American Bankers' Association. The
telegram is as follows:




bill would materially broaden the open market operations of Federal reserve banks in competition with
member banks—a question which is already beint4
seriously discussed.
Representative Clark of Florida: A bill requir
ing that each and every bank in the United State.
shall compute interest on the basis of 365 days to
the year. Penalties for infraction, however, have
evidently been overlooked as the bill is silent in
t hat respect.

Stephens, of Mississippi, who
was born and reared at New Albany and is now
serving his third term at Washington, proposes to
"amend the national banking laws" to such a radical
extent that it is thought hardly probable that his
bill will be seriously considered by the Committee
on Banking and Currency, to which it has been referred.
Especially interesting features of the
Stephens bill are its elaborate restrictions upon the
membership of national banks in clearing house associations; prohibition of any attempt by Clearints
house associations to regulate rates of interest or
exchange, or to employ clearing-house examiners
otherwise than by appointment of the Comptroller.
The bill, also, would practically prevent a national
bank from lending money to a firm or corporation in
which one of the bank's directors was interested.
As a "trust-busting" measure designed to throw
competition wide open and unscramble the slightest
vestige of interlocking business relations, the
Stephens bill deserves honorable mention.
So much for the first month's work at Washington. Being closer at home and involving a larger
number of member banks, the activities of the Mississippi legislature will prove more widely interesting.
Fraudulent Checks.
The first bill to pass either house was the one
introduced by Mr. Bailey, of Lauderdale County,
providing penalties for the issuance of checks or
drafts without funds. The maximum penalty is
$500 fine or six months imprisonment, or both. A
provision that the maker of a dishonored check or
draft may refund the proceeds within ten days after
written notice is mailed to his post-office address
tends, in some respects, to weaken this excellent
law by providing an easy loophole of escape for the
professional check-swindler, if caught. However, it
is the commercial public who are chiefly concerned
with the strength of this law, as banks are not
often victimized. The bill passed the House without dissent, and now goes to the Senate.
Interest Rates.
Two or three separate bills have been introduced which seek to repeal the law exempting
money from taxation when loaned at 6 per cent or
under. As the benefit, or otherwise, or this law,
either to the banks or the public, is a matter upon
which the opinion of Association members is sharp.
Federal Reserve Bank of St. Louis

Continental and Commercial
National Bank
of Chicago
Capital, Surplus and Profits

George Af. I;,, Tl. old-

I 'I .., 41••nt

.‘rthur Reynolds ..
\-ii .•
Ralph Van Vechten
Vie, President
Alex Robertson
Viee President
nnan Waldeck ..
Vie. Pt eselent
n C. Craft
Limes it. Chapman
i, .• 1,1-.•.
william T. Itrut•knor
VI, . I'l,
.1,ilin R. Wamhburn
Nathaniel it. Lossch
.• —liter
\ -1t ii 4 .:.-111,
Harvey C. Vernon
\ ---,I-1,W c.ishier
(leorge B. Smith
A s, i*.ishier
Wilber Flattery
\ --1.-1.,nr c.istli.•r
II. Erskine Smith
\ —1-.t.,nt
Wilson W. Lampert
A ,..,1...t.,n1 C:ishier
I Pan Norman .. ....
,:eorge A. Jackson
Assist,int c.istiiet
34.,,,,., ci.,lit I oep.imiiiert
John Y. Craddock
Joseph McCurrach
Mang,- r 1;,.1,-Ign I wparttn.-nt
R. C, Danielson
Manager Transit Department
The capital stock of Ike Continental 5sr Commercial Truss and
Sayings Souk (S4liis0.0uoi and the Hibernian Banking Association (52.000.0(1)). are armed by the stockholders of the Contineutial and Commercial National Bank of Chicago.

ly divided, no comment is ventured by the present
Depository Laws.
The Board of Bank Examiners in its biennial
report has recommended to the Legislature that the
maximum rate of interest allowed to be paid by
banks on public deposits be fixed at 3 per cent and
further, that deposits of public funds of every
character be let to state and national banks prorata in proportion to the capital and surplus or
banks bidding this rate.
Senate Bill No. 73, by Mr. Greaves. provides
that banks qualified under the guaranty system may
become state, county or municipal depositories to
the extent of their capital stock, without giving additional bond.
Senate Bill No. 77, by Mr. Casteel, is evidently
a similar measure, but without limitation as to the
extent to which protection of the guaranty fund may
be accepted.
In connection with these two Senate bills,
House Bills Nos. 150 and 151. by Mr. Sutherland.
open up interesting possibilities. Mr. Sutherland's
bills would repeal, respectively, Section 2 of the
county and municipal depository law (Chapter 137.
laws of 1910), and the same section of the State
depository law (Section 96, laws of 1908). In each
of these Chapters Section 2 is the section which





provides that "any bank" may qualify as a depository by offering certain designated securities.
Repeal of these sections. coupled with a .provision
accepting protection of the guaranty fund alone,
would probably have the effect of removing any
method whatsoever by which national banks coul I
qualify as public depositories.
Report of the Banking Department.
Most of the recommendations for changes an'.
additions in the Banking Law as embodied in this
report were carefully considered in joint conferera
of the Board of Examiners and the Executive Coinmittee of the Association. The report embodies a
number of suggestions adoption of which by th
Legislature would redound to the joint benefit of
banks and their customers. It is gratifying to note
that the Uniform Negotiable instruments Act haq
been cordially endorsed not only by the Board of
Examiners, but also by Governor Mho, who took
occasion in his inaugural address to dwell at length
upon the importance of placing this law upon the
statute books.
One feature of the Banking Department's report
which was not discussed by the Examiners with our
Executive Committee, and which will naturally
prove quite interesting to state banks, is the recommended four-fold im-rease in assessments to the
guaranty fund.
While only five or six former state banks have
converted to the national system since the guaranty
law was enacted, the fact remains that, with a number of banks still holding state charters, participation in the guaranty system is a matter of acceptance rather than endorsement of the law. Some of
them would probably have nationalized at the outset. but for the low rate of assessment originally
fixed and, to such as these, the proposed increase
will appear only as an additional drain upon their
earnings which they had feared all along. One
finds it hard to censure the typical bank of $100,000
capital and a million of deposits should it fail to
welcome the prospect of having its guaranty assessment raised from $450, to $1,800, per annum. The
extent to which smaller banks will be affected
varies only in degree. What the banks think about
It, however, will probably matter but little.
There is merit in the Banking Department's
argument that the guaranty fund, as it now stands,
would prove inadequate in event of "a failure o.
failures of any aggregate proportions." On the other
hand, it might be pointed out that Kansas, with an
assessment rate of 1-20 of one per cent, has never
yet called an emergency assessment, has suffered
but one trifling loss to the guaranty fund, and is
building up the fund by annual accumulations which,
though gradual, are apparently satisfactory to the
public. The state of Nebraska has never yet called
upon its guaranty fund for a penny. Similar results
are surely possible in Mississippi—their attainment
Federal Reserve Bank of St. Louis

At the Capitol and Financial
Center of Mississippi
We are advantageously located
to handle your items on Mississippi, and we have very best
facilities and connections for
handling your business.
Let us clear your business
and make us a large clearing
bank for the Banks of Mississippi. Being one of the largest
banks in Mississippi, the first
bank to qualify under the new
Banking Law, together with our
large and ample resources,
enables us to give you the very
best service.
We Invite Your Business.

The Merchants Bank & Trust Co.
Capital - - - $250,000.00
Surplus and Profits 80,000.00



depending largely upon efficiency of
bank supervision. in which respect we think the
Mississippi examiners have just cause for pride in
past achieve
ments and confidence in the future. A
good many
bankers will probably feel that the
examiners have
recommended that they cross a
highly expensive
bridge which need not and may not
be reached.
Under the proposed new scale of
assessment, at
least eight years would be requir
ed to build up a
fund of $500,000. Based on last
year's average deposits, the increased annual
cash outlay of MissPsippi banks would amount to
about $42,000. Figure
this in arithmetical progression
from one to eight
years, calculate interest upon it
at 6 per cent per
annum, and it will be found
that, exclusive of the
direct drain, the loss of earnin
gs on $42,000 per
annum, cumulatively for eight
years, will amount
to $90,720.
Another feature for consideratio
n is the proposed limit of $500,000 at which
assessments shall
cease. This figure was taken arbitra
rily from lb ,
Kansas statute, and without full
consideration :it
the time, either by the bankers or the
If half a million dollars is deemed a
sufficient maximum fund in Kansas, with more than
nine hundred
state banks carrying deposits in
proportion, why
should an identical sum be necessary in
with fewer than three hundred state banks
and less
than $30.000,000 of deposits eligible to
Kansas has contemplated a fund approx
one-half of one per cent of total deposits.
It is
observed that Senator Owen's proposed bill
for insuring deposits in national banks contem
plates a
fund equivalent to one per cent of total deposit
If in the wisdom of the Banking Depart
and the Legislature it is deemed necess
ary so soon
to recast the whole underwriting plan of the
guaranty system, perhaps what now seems like a
needlessly heavy drain on bank earnings might be
lessened. Some plan could surely be found
the banks may pledge their credit instead of
cash—until such time as cash is actually
The foregoing comments are not intended a.;
an authorized expression of Association though
They merely suggest a few points that would
bly be brought out in a general discussion, u,r,
such discussion possible.
'I'. \V. McCoy. vice president of the Merchants
National Bank of Vicksburg, has recently been appointed vice president, for Mississippi. of the Nation
al Bank Section of the American Bankers Associa
In selecting Mr. McCoy for this important pest
the Fxecutive Committee of the National Bank
Section has Aosen wisely. Mr. McCoy is not only
thoroughly trained banker of broad and
ideas. but has always taken an active interesssive
association affairs and may be relied upon to in
his full share of hard work in any movement,
state-wide or national, that may be launcheither
ed in
behalf of banking in its larger aspects.
Federal Reserve Bank of St. Louis




Surplus and Profits (earned)

$ 1,000,000.00



S. G. BAYNE, President
Vice President.
B. L. GILL, Vice President

Vice President.

W. K. CLEVERLEY, Cashier
Assistant Cashier.

Assistant Cashier.
0. M. JEFFERDS, Assistant Cashier.


This Bank Serves 15 States II

Asst. Cashier
Asst. Cashier
Vice President
Asst. Cashier
Vice President
W. C. TOMPKINS. Auditor



President First National Bank, Gulfport
NI embers of the Mississippi Bankers Association,
Ladies and Gentlemen:
Now that we have been so thoroughly and
graciously welcomed to this beautiful city,
we will
take up the more formal part of opening
the 29th
Annual Convention of our Association.
Before doing so, however, let me tell you
how very deeply I appreciate the honor you conferred upon me one year ago in selecting me
your President, and I wish now to extend
hearty thanks for the splendid spirit of
you as members have manifested at all times.
success as we have had during the past
year (and
I believe we can all agree that our Association
work has met with some measure of success) has
resulted from the ready and willing response you
have made to every call for support from the Association office. If the axiom is true that "In cooperation there is strength," then truly we are
strong, for certainly no State Bankers Association
has a more live and willing-to-work membership
than Mississippi.
The greatest satisfaction any leader can have
—let it be in corporation or Association endeavor
of any sort, is team-work among the rank and file
of members. I shall look back upon the past year
as one of the most pleasant of my life, and whether
It may have been in matters of business or those
of a social nature. I have found you in either relation most kind, generous and considerate—much
more so I am sure than I deserve. By reason of
all this from you—I am prompted right here to renew my pledge of loyalty and support of your
interests both now and when I have surrendered this
gavel to my successor—the same in the future as in
the past.
I shall not transgress your time this morning
by reciting the details of our work for the year,
since by mutual agreement, between the chairme
of different committees, the Secretary and myself—
their reports will cover those items fully, and any
reference I might make to them would be of a more
or less general nature and not so clear to you besides depriving those officials of the satisfaction
of telling you in their own way of what has been
Therefore, in rendering an account of our
stewardship. I will rely upon those gentlemen
give you the details and confine myself principa
to the policy of our Association, for the past year,
and make such observations for the future as may
be prompted by our experience.
Federal Reserve Bank of St. Louis

In the first place let me tell you that we
started out with every officer and member
of the
Executive Committee being fully imbued with the
spirit of economy, and a full determination to
your Association on a sound financial basis.
Secretary's report will show the progress we
made. A comprehensive system of bookkee
and accounting has been adopted, and put
practice. Each member of the Executive
Committee is furnished regularly with a copy of our
financial statement, with a clear idea of funds
on hand
and probable expenditures. This enables
them to
plan their work intelligently and so regulat
e our
expenses as to keep within our means.
The Secretary's report will show that
practically every bank of any importance in
the State
is a member of the Association, and
those of any
consequence still remaining out, do so tempora
for some local reason, with the expecta
tion of Joining during the coming year.
Since May 15th. 1915. all State Banks have been
operating under the Guaranty System. A total
14 banks have been liquidated by the State
Deaprtment. all of whose deposits were guarant
by the Bank Depositors Guaranty Fund. Of
number 10 bands paid all depositors in full upon
liquidating. The following named banks did not
pay their depositors upon suspension of busines
Covington County Bank, Collins, Miss.
The Peoples Bank, Wiggins. Miss.
Bank of Newton, Newton. Miss.
Bank of Commerce. Gulfport. Miss.
With reference to the last named bank. I understand that virtually all of the current depositors
have received their amounts in full through the
purchase of certificates of Guaranty by other banks.
The accounts which have not been liquidated in
bank up to the present time consist principa
lly of
city deposits which are supposed to have been otherwise secured and the liability of the Guaranty
as to these deposits has not been fully determined
or established. With the other three banks named.
the liquidation of whose affairs have not been fully
completed. we learn that certificates of Guarant
were issued by the Examiner in charge. These
to be held .until the final liquidation. In the
meantime dividends are paid from time to time, and
the assets of the several banks are not ample
to retire all certificates issued, the balance is to be
derived from the Bank Depositors Guaranty Fund.

Approximately $610.000.00 of certificates have
been issued to the depositors of the four banks
named. I understand, in round figures, $160,000.00
has thus far been collected from their assets by
the liquidators. The Bank Examiners estimate
they will be able to realize about $360,000.00 on
assets and claims yet to be collected. This does not
include any assessments under the double liability
of stockholders. Should the Supreme Court uphold
this section of the law, the stockholders will be
assessed, and the remaining assets will be strengthened in the amount realized from those assessment.. The Bank of Newton has paid a dividend
of 50 per cent to depositors or $125,000.00. This
would appear to leave a balance of $485,000.00 due
on the Guaranty Certificates still outstanding.
The total amount of assessments collected from
Guaranteed Banks up to April 20th, 1917, for the
account of Bank Depositors Guaranty Fund including interest on daily balances, amounted to $58,153.67. This has no reference to bonds deposited
with the State Treasurer to insure the payment of
assessments when called. None of this fund has
been disbursed in payment of Guaranted Certificates as yet.
Since the above figures were compiled there
has been another small failure, the bank in question
having deposits of about $40,000.00. According to
the statement of Examiner it is not anticipated that

this failure will be any tax on the Guaranty Fund.
Great credit is due to the several Examiners for
the heroic efforts they have put forth in having the
certificates issued to depositors, taken up and
cashed in full by other banks. This has operated
greatly to the benefit of depositors and relieved in
several communities what might have otherwise
been heavy distress and embarrassment with many
people of small means. Every one admits the law
is incomplete, but it is most certain that no other
legislation passed in Mississippi for many years
has cleared away quite as much fog as the new
banking law. In some respects this measure is more
drastic and far reaching than that govering the
National Banks, and we frequently find a hesitancy
on the part of business men to serve as directors
on account of its rigid requirements. Not a bad
feature to be sure. The one part of it that still remains more or less on probation is the method of
final settlement with depositors. We realize fully
that the satisfactory results so far obtained are
largely due to the active efforts of the Examiners,
and without doubt from the experience these gentlemen have had they will be able to recommend
the necessary corrections when the Legislature
meets again.
I can hardly find words to express the satisfaction your executive officers have derived from the

Union & Planters Bank
& Trust Company





FRANK F. HILL,President

ROUT.S. POLK,Cashier
FRANK S. BRAGG,Asst. Cashier
SAM HOLLOWAY,Atty. & Trust Officer


Federal Reserve Bank of St. Louis







tion have passed the experimental stage, and are now
on a very substantial basis. In fact, they are, in som,
S A STATE institution,
respects, the most attractive part of the year's work.
belonging to the Federal
Following the plan adopted last year, special Pullman
service was obtained, and those who desired to make
Reserve System, The
the rounds were enabled to do so in the most convenient
Mississippi Valley Trust
and pleasant manner. The car, by the way, was
loaded to capacity from the beginning to the end of
Company offers banks and bankthe trip. The programmes, dealing almost exclusively
with war problems and the duties, obligations and
ers facilities not obtainable from
responsibilities growing out of same, were strong in
a strictly commercial bank.
every instance, and it is safe to say that none present
failed to receive inspiration, while those who were forWrite for a copy of our latest
tunate enough to make the entire trip reached the end
booklet, "Service Complete."
bigger men in every sense of the word, with broader
visions of duty, quickened pulses, and stronger
giving an outline of the wide
seope of our servire.
One of the most interesting subjects to the members of our Association, particularly state hankers, is
the Depositors' Guaranty Fund, and such a report as
Mississippi Valley Trust
this would be lacking indeed without some reference
to same. Fortunately, there has been no addition since
last we met to the list of defunct institutions. The
Banking Department is now liquidating five bar'
Capital, Surplus and
and has outstanding certificates, the net amount
over $8,000,000
which approximates Six Hundred Thousand Dollar:,
Against this are assets in excess of Eight Hundred
Thousand, to which should be added One Hundred
St. Louis
and Forty Thousand Dollars due from stockholder:under the double liability provision. It is estimated
that enough will be realized from the above resources in the effort of the liquidating agent to enforce collecto reduce the net loss to something like Two Hundred tion of paper, There seems to be instead a disposition
Thousand Dollars, and, as there is now One Hundred and preference to secure reimbursement from the
and Thirteen Thousand Dollars in the Guaranty Fund, Depositors Guaranty Fund furnished by bankers here
an additional amount in the neighborhood of One and there at other points over the state, rather than
Hundred Thousand will have to be provided. The to assist in the vigorous prosecution of claims among
assessments of one-twentieth of one per cent against neighbors. This sentiment has, in several instances,
deposits subject to guarantee are now yielding excess proved a serious handicap to the examiners.
of Thirty Thousand Dollars, so three of these assessIt is with some relief that we note the adjournment
ments will probably be required to make good the
last week of the Mississippi Legislature. From the
present deficit. Under such circumstances it is more
standpoint of banking legislation, however, it has, perthan likely that the Banking Department will continue
• haps, been the most satisfactory session in some years.
the policy which was inaugurated last year; that is,
Continuous, unselfish, painstaking work on the part
of making an additional call. The law provides that
of our Legislative Committee, and the Bank Examiners,
five such calls may be made each year, should the occahas resulted in several most excellent amendments to
sion demand. Since the issuance of Certificates to
the Bank Act, details of which will be covered in the
depositors it has become apparent that the six per cent
Committee's report. Grateful acknowledgment is hereinterest provided will add materially to the expense
with made of this valuable service.
of liquidation, especially in those cases where considWhile, as stated above, on account of the activities
erable time is required in which to realize upon assets.
This suggests advisability of rapid liquidation at an of our officers and members in connection with war
apparent concession, rather than a long drawn out duties, the ordinary work of the Association has, to
administration, during which the resources are materi- some extent, been set aside, it is with pleasure that we
ally reduced by heavy interest charge. An amendment report a most satisfactory condition both in regard
to the law, which would terminate the interest pro- to membership and finance. This will be covered in
vision of deferred payments, could hardly be construed detail by the report of the Secretary.
as a hardship on depositors, and would certainly simAnd now, gentlemen, at the conclusion of the year's
plify, to a considerable extent, the problem of the
work, I wish it were possible for me to express to you
examiners. A rather .unexpected by-product of the
my sincere appreciation of your many courtesies and
Guaranty Law is apparent lack of interest and conse- the honors which you have so kindly conferred upon
s_Auent lack of co-operation on the Ran of local parties me, and to say how deeply I cherish the friendships
Federal Reserve Bank of St. Louis

It might be decided to build just a "home" or
club, locating it with regard to hotel and other public
facilities, with some one in charge and to be available the entire year, or certain seasons, for the use
and occupation of bank officials and employees and
their families, charging just enough to cover cost of
maintenance. In this event, convention meetings
would probably be held in such public auditorium
as would be used ordinarily on such occasions—the
"home" to be used during the Convention for any
appropriate purpose. Or it might be decided to include in the building a Convention hall, as well as
dormitory accommodations. The total banking
capital of the state (capital, surplus and undivided
profits) December 31st, 1924 was $28,477,115.00
(National banks $8,884,319 and State banks $19,592,796.00). A subscription of one-fifth of one percent
would raise $56,954.00. On this basis a $25,000.00
bank would subscribe $50.00; a $100,000.00 bank
$200.00, etc. Possibly one-half of that amount would
be sufficient, depending, of course, upon cost of site
and character of building.
Whatever may be done, as above stated, I feel
that the Association can and should have a permanent meeting place to be used when it is not desired
to meet elsewhere, and that we should defray the
principal convention expenses. At least a special
committee might be appointed to see what, if anything, may be worked out.
number of things affecting the business of banking in
Mississippi that might be appropriately discussed
here, including several justly protective statutes that
should be obtained, but most of them will doubtless
be brought before you in the report of the LegislativE.
Committee or by spontaneous resolutions. In this
connection I want to devote my time to discussion, of
the "Guaranty of Deposits law." I feel that other
things are of more or less minor importance untit
we, the people—"all the people"—of Mississippi have
freed ourselves and the business of Mississippi from
this overshadowing hallucination.
It seems to me that nothing can be said in its
favor. It is, to my mind, grossly immoral because it
fixes upon the innocent and helpless the penalties
incurred by the guilty; the guilty going free; the
Innocent remaining to bear indefinite and unending
penalties. It compels a prudent, honest bank to
underwrite the character, judgment and honesty of
every act of every official and employee of every
other bank, without affording the slightest personal
means of self-protection. I do not believe there is
one in Mississippi who would dare even suggest that
such a scheme be applied to any other class of individuals or line of business. I am quite sure there is
no other class of individuals or line of business that
would have submitted to it eleven long years.
Federal Reserve Bank of St. Louis


Such a law is inequitable, unrighteous. It Is
void of principle and, regardless of what Courts may
have said, or may hereafter say, as to the technical
constitutionality of its letter, I know, to the satisfaction of my own mind, that it does extreme violence
to the sublime, God-guided spirit breathed into our
sacred National Documents—the writings and expressions born of the travail of the very hearts and souls
of our great forefathers.
I am satisfied that, in principle, it imposes confiscatory diversion of property without "due process
of law" and constitutes a legalized crime that would
have graced the days when conversions to the "true
faith" were accomplished by "benign" resort to
rapine and murder; when "witches" were burned;
when debtors were jailed; when it was required
that we submit to "taxation without representation."
The worst and most objectionable declarations of
extreme Socialism never advocated an enforcement
more fundamentally wrong and dangerous. Such a
policy has no place outside of Communistic Russia,
where, it is alleged, even women and children are
Communized chattels. Applied to all people and all
lines of business in any State—Oh well, follow the
line of reasoning to its inescapable conclusion—
appalling, unthinkable, isn't it?
The law, in Mississippi, is in a dishonest attitude
before the people. At least in the rural districts and
small communities, they do not understand it—never
have understood it. I do not believe a bank can, in
strict honesty, accept a deposit made in the belief
that the "guaranty" protects. At first, it was supposed that the net worth of all the State chartered
banks, individually and collectively, was bound by the
law for the security of the deposits in each bank, and
I think it is probable that those responsible for the
law intended to accomplish just that. Let's consider
what that meant and where it led.
Theoretically, the law was enacted to protect depositors generally against failure of banks, and,
naturally, would be needed most in times of greatest
economic distress. December 21st, 1924, according
to report compiled by the State Banking Department,
the total "guaranteed" deposits was $110,222,179.00
In 321 State banks. The combined Capital worth of
the 321 banks was $19,592,797.00 (Capital, Surplus
and Undivided profits). The failure of ten or twelve
particular banks within a year or so could have consumed the entire Capital worth of the entire 321
banks. In other words, the depositors and stockholders in over 300 otherwise probably safe and solvent
banks might have been destroyed in the foolish and
futile effort to make safe those of ten or twelve
banks, who obviously, would not have been made safe
after all. 'The safety of all depositors was jeopardized for theoretical safety of the few." Can it be said
that this is an exaggeration, when we recall the
casualties, near casualties and anxieties of just a


few short years ago, remembering that we have, even
yet, scarcely made a beginning on covering the loss.
Does history repeat? The law, as it stood, was utterly false in its proposal of individual security when
in truth, it provided only universal insecurity. Do
you think the people, generally, understood this?
But, recently, the Supreme Court held that an
individual bank is liable, under the law, only for
the current annual assessments named in the law.
Undoubtedly this removed, to a very large extent if
not 'entirely, the danger of the widespread and universal disaster pictured above, and, as long as the
law remains as fixed by the Court's decision, about
the only material hurt to the individual bank is an
unjust and substantial burden. But what about the
"Guaranty." How is it now going to return the
money to the "protected" depositor in'a failed bank?
Lets see. About January, 1924—considering the then
apparent, net deficit in the guaranty fund; consider.
ing that the annual revenue coming into the fund
would not decrease; and that there would be no more
liability from additional failures, it would take about
FIFTEEN years to pay the then deficit and interest.
In other words, a guaranty certificate issued at that
time, to be paid out of the guaranty fund, taken in
order of issue, would be reached for payment in
FIFTEEN or more years. Do you think the people.
generally understand this?
During the 1923 campaign, I heard a Legislative
candidate exclaim, in a zealous outpouring of native
eloquence, that he did not want to see a certain
office abolished; he wanted to "strengthen" its hands.
There are some bankers in Mississippi, I think, who
are unwilling to discuss this question openly and
frankly, fearing that the next session of the Legia
lature will endeavor to "strengthen" the law. I
think they are correct about what they think the
Legislature will try to do, and unless certain steps
are taken beforehand, we are sure to have to face it
then, even if we do not discuss it now. Let's do
not make the mistake of trying to fool ourselves into
believing that this measure of supposedly effective
political ammunition will not be resorted to. Considering the members individually I believe that the
Legislature is in the most reasonably frame of mind
toward this iniquitous legislation it has ever been,
as a result of the heroic work of many bankers and
other citizens during the late session. If this is
true, to my mind, it is but evidence that the most
certain if not the only way to secure outright, complete and permanent repeal is to begin NOW to bring
the people to a knowledge of the truth—to see the
wrong and the danger—to see that any attempt to
add force will only increase danger and weakness—
to see that the Legislature is powerless to enforce
such a thing, and ought to be; that it cannot compel
the existing banks to pay the deficit because it cannot compel them to stay in business or remain in the
Federal Reserve Bank of St. Louis


State banking system; that, by the same token, it
cannot compel them to accept a "strengthened" law.
The existing deficit is not an obligation of the going
banks, either morally or legally and it is wrong to
talk of trying to make them pay it. The State arbitrarily imposed the rule that brought about the situa
tion—imposed it in the same manner that a bandit
attempts to enforce his demands; threat of corporate
death in the one case, threat of physical death in
the other. If the present and future deficit is ever
entirely paid, the State should pay it. The certificates outstanding and to be issued is the moral obligation of the State, if it is an obligation. But in
no event should the certificates be paid to any onc
other than the original payee, until it is clearly
shown the price paid. It has been commonly reported that the certificates have been heavily discounted
in many instances; certainly the speculator should
not be paid a profit. I am not advocating that the
State liquidate the deficit, although I am 'willing to
it, under proper safeguards, terms and conditions.
There has gradually grown up among those who
deal with banks an exaggerated, one-sided conception
of the true relationship between themselves and the
banks they deal with. There are a number of probable causes for this attitude, and the banks themselves, are not entirely free from blame in this
respect. All men engaged in banking, and anyone
else who thinks at all about it, know that the existence of an individual bank depends upon a volume
of deposits proportionate to the necessai y expense of
conducting the business. Competition for "favor"
has grown apace with the increase in the number
and proximity of banks. This has led to abandonment of reasonable dignity and modesty. Much, it
not most, of our advertising is ludicrously immodest
and Pharisaical, therefore, offensive to ethics and
good taste. This shares largely in the responsibility
for the mental attitude of the public and the verbal
attitude of thunder-seeking candidates for somethingor-other. Many bankers are almost servile in their
attitude toward actual and potential depositors. We
are afraid to let our thoughts and ideas on public,
matters be known, and we are fast becoming useless
as individual factors in civic upbuilding and stability,
whereas our duty and responsibility is to be in the
forefront among the leaders. The people who deal
with banks, unthinking, and encouraged by the man
with "an ax to grind," have actually come to consider themselves "patrons" dispensing largess. In
our intensive race for the favor of these "patrons,"
we are saying things in print about ourselves that
would close the doors of our friends in our faces if
we said those same things by word of mouth. We
prate of our integrity, righteousness, good judgment,
financial and personal high standing in the community. We boast in bold type of our "profits"—and it is
a word that unconsciously offends—why don't we



call it "earnings." "Profits" is gain without work—
his financial loss and at imminent risk of not only
"earnings," the rightful reward of work. I think
the money but of other property and his very life ae.
we have come to this deplorable state because we are
well. So, whether he is conscious of it or not, his
afraid to talk to the public about current matters of own better protection and benefit is the consideration
public interest, but we just must talk, so we talk
that brings him to the bank—it is the primary cause
about the only thing left—ourselves—the thing we of the existence of banks. He does not come to the
like most to talk about anyway. In the personal
bank because he wants or expects to eliminate risk,
presence of our "patrons" we are Humility. His
but because it is the place of least risk and most useopinions are professedly ours. What he wrongly
ful and convenient in many other ways. He is
does in private life and business, we condone. In
actuated solely by benefits he expects to come to himpublic life we support him (or pretend to); we vote self from the relationship. I do not believe that once
for him (or pretend to), regardless of his fitness or in a thousand times he gives principal thought, if
qualification; and when he is in office we approach
any at all, to the probable benefit that will come to
him as does a servant seeking the favor of his master. the bank. Do you?
Is it then a cause for wonder that, as a class, those
We need no "Guaranty" to keep the otherwise
who deal with banks have come to believe that banks
unemployed money of the state in the banks. The
and bankers are barnacles; that we are the sole
people are going to keep it there because they know
beneficiaries of the relationship and therefore, just- that it is the safest and most convenient disposition
ly subject to impositions and exactions not dreamed
that can be made. Of course, they will use discretion
of in connection with any other of the affairs and
in selecting a bank or banks—that is right and
businesses of life?
proper, but the bank that needs no guaranty—that is
It is needed for those who deal with banks to justified in its existence, will not lose its business.
realize that banks are in existence sclely because of Face this. National banks are not guaranteed, althe imperative public and individual need of such
though they fail sometimes. December 31st, 1924 in
facilities; that the business of banking is one of the
Mississippi, 35 National banks held deposits aggrevery primary foundation stones of present day civili- gating about $65,000,000.00. 321 State banks held
zation, and that, as such, it is of fundamental im- deposits aggregating about $145,000,000.00. An averportance to the welfare of the public, collectively age of $1,850,000.00 in the one case—an average of
and individually, that prudent banking be encouraged, $450,000.00 in the other. Do you know where, in
Mississippi, a National bank is materially suffering
freed from unjust burdens and fairly protected. It
is needed for them to realize that the bank means as for business in competition with "Guaranteed" banks?
much to the depositor as the depositor means to the
What does it mean? I think it means that if the
bank; that an individual bank can get along without Legislature "strengthens" the Guaranty—probably it
an individual depositor, but, of course, cannot con- It does not repeal what we now have, we will arrange
tinue without depositors; that, on the other hand, to transfer to the National system if we would hold
and continue to build our business. If it is tried to
the depositor can get along without a particular
bank, but the business, individual or otherwise, of explain the described situation away by saying that
today cannot be conducted without banks; that, It is because the National banks are confined to the
therefore, the interest is inseparably and inescapably larger towns and cities, just rememberthat there also
mutual. Who is going to tell them if those who dwells the best informed and most discriminating investors and depositors, and that knowledge of the
work in banks do not? How are we going to do it
truth will have the same effect everywhere. It may
by keeping quiet?
Because banks are necessarily conducted by
be that in the beginning of this misguided policy,
human beings (although it is argued that some of
National banks. regretted the law, fearing that it
them are not), and because all humanity is fallible, might adversely affect their business. But, in this
there always has been and always will be failures the eleventh year of its reign, it is my firm convicamong banks just as there are and always will be tion that in their selfish thoughts (if they have such)
failures in all other of life's activities. And it can- they would like for it to stay with us and for us to
not possibly be morally right for any one to have or
stay with it.
want "absolute" protection against the fallibility of
The "guaranty" has another immoral and dangerothers with whom he deals for his own convenience ous aspect which is indirect and, I think, not often
and benefit, when this life offers him nothing but his considered. The cost of it as affecting what a bank
own mind for protection against his own fallibility. can pay its officers and employees, and the relation
When one personally leands his money, he does so at of that to the defalcations—shortages—"inside jobs."
the risk of his. judgment. When he uses his means Those who work in banks, especially in a largely
to purchase property, he does likewise. When he rural community like Mississippi, literally give their
conceals his money in the ground, in his home, lives to the business that employs them, and the emon his person or elsewhere, he does so to
ployees of no other commercial organization give as
Federal Reserve Bank of St. Louis




much out of their lives to the welfare of the general peated—just as it is today being repeated in NI11331Sand individual public. Considering this and the con- sippi and the few other states wherein such a law
stant demands of the position they occupy before the exists. Oklahoma was forced to abandon it about two
public, those who work in banks are, generally speakyears ago with about a $12,000,000.00 deficit. Within
ing, inadequately compensated. This situation does the past few months the same thing has happened in
not exist because the owners of the banks are un- South Dakota with a net deficit of about $17,000,000.willing to be more liberal, but because of restricted 00. Texas is rapidly on her way. I have before me a
earnings. Of course, there are individual banks that voluntary letter from a banker at Tyler. Texas. In
earn well, but there is some individual or local rea- part he says:
"The guaranty fund is under fire in Texas. and
son for it. It was Mr. Frank W. Foote, of Hattiesburg, I think, who showed a fe;A, years ago that the out of 965 Guaranty Fund Banks formerly in Texas,
more than 229 have converted and Nationalized,
average earnings of Mississippi banks was about
nine percent. Allowing for adverse things unknown, leaving only the smaller banks in the guaranty fund
am confident, the real earnings on investment would
that are afraid to change, or else unable to get out—
figure considerably less. It seems to me that it is under the Guaranty Fund we paid out $18,000.00 dun
unsafe, if nothing more, for banks generally to be ing first three months of this year."
operated on such a meager margin, considering the
His bank has converted.
ordinary uncertainties of business life and consider- BANKER dated April 20th, 1925, carries a long article
ing the vast importance to the public of the safety of headed "Texas may soon lead in number of National
the banking business as a whole.
Banks; present rush to Nationalize by State banks
I know a young man who was virtually reared
has brought total National banks to 700." Always
in a bank, which was finally entrusted to him as its the same story in the end.
chief Executive Officer. He appropriated it to his
About January 1924 there was an apparent deown uses. After the situation had become known. I ficit of about $2,000,000.00 in the Guaranty Fund of
asked him why he did it. His answer was, that he
Mississippi. Since the economic crash of several
was not able to live and support his family even
years ago we have had a period of reconstruction and
reasonably in accord with the requirements of his comparative quite and the fund should, at this time
position on the salary paid him—and I think that
be in better apparent condition. I am not informed
was true. He said that he had, more than once, dis- just how it stands, but, if we have learned anything,
we know that periods of financial disaster and econcussed the situation with the President and Directors
of the bank, and each time, had been told that the omic distress come with fair and almost certain regubank could not afford to pay more—and I think that larity. and that the natural laws of economics and
was true. He said further, that he was told that he average will prevail in the end. So, with us. it is
would just have to supplement his income with an
merely a question of whether or not the people or
insurance agency or some other side-line activity. Mississippi will rid themselves of this unrighteous
He acted on their suggestion, interested himself in and dangerous act under comparatively favorable
first one side-line and then another. Some of them
conditions, or wait until it overwhelms the entire
became involved. He finally resorted to unauthoriz- state in disaster as it has invariably done elsewhere
ed "borrowing" under cover with the expectation of and will inevitably do in Mississippi.
repaying, he said. And thus the process was started
The State of Mississippi, at the State's expense,
and continued until the bank was an empty shell be- should make ample provision for the quick and
fore it became known. And this illustrates, I think
certain punishment of those who have betrayed the
the immorality and danger of putting inequitable ex- trusts reposed in them. I think it is true that in
penses upon banks, thereby aiding to bring about a thirty years or more not one has been brought to
situation of this kind. It may be that, if the truth
justice in Mississippi, or any serious effort made by
were known, the majority of the defalcations ana
the State to avenge society. What does the Fei:etal
banks ruined on account of dishonestly have come Government do? Does it deter? Does it protect?
about in something like the same way. Of course,
The State should require a minimum bank
there is no excuse in it for the crime or the criminal, Capital of $25,000.00, giving reasonable time for
and punishment should be sure and swift, but it is those now having less to increase to the requirement
a matter of genuine concern to organized society.
or to liquidate their affairs in an orderly and conA "Guaranty law" is no new thing. It has been servative way. And the Capital requirement should b.
tried at intervals in the United States for more carefully graduated upward according to the condithan a hundred years, and, without exception, has
tions prevailing in the community being served or
come to disastrous grief and an inglorious end. proposed to be served.
Every now and then it is rediscovered by some all
Great care should be exercised in granting new
wise and self satisfied inventor of panaceas, it is charters. If a community has sufficient and satisadopted and inevitably and invariably history is re- factory banking facilities, for the sake of general
Federal Reserve Bank of St. Louis





safety, another bank should not be permitted. And,
under those circumstances, our Banking Department
would doubtless have the support and co-operation of
Federal authorities. To have a bank in a locality is
unquestionably desirable from the standpoint or
that particular locality, and if it is able to safely
support a bank of minimum capital requirement, or
more, it is entitled to it. But if it is not able to
have a bank on its own account, it certainly should
not have or wan.t one at the expense and risk of other
communities. From the information I have been
able to get, I am impressed that failures in Mississippi have principally resulted from under capitalization and dishonesty.
Banks should be put on an equitable basis of
taxatiop as compared with other property.
present banks are assessed at 100% of true value—
other property at probably not an average of 50%.
This is enervating as well as unfair.
Banks should be relieved of the cost of operating
the Banking Department. About $50,000.00 per annum. This also is debilitating and unfair. It is
necessary and a proper safeguard that the best possible Supervisory Department be maintained, but it
should be at public expense because it is for public
service, and the "public" includes those who chance
to own the banks.
Banks should not be permitted to pay more than
2% on public funds deposits, and on some classes
should not be permitted to pay interest at all. Generally the service rendered the public in connection
with such deposits costs the bank all that it can
afford to pay. Public funds are a temptation and
Finally, the Guaranty law should be repealed
absolutely, and immediately relieve the banks of the
approximately $300,000.00 annual cost. This is not
only enervating, debilitating, a menace, but additionally, it is certain ultimate destruction to the ,State
Banking System. If we will thoroughly do all, or
most of the things enumerated above, we will need
no guaranty. We can't have it anyway. There is
no such thing. Let the State issue twenty or twenty
five year bonds and pay the deficit—I am willing.
Certainly it ought not to be any great burden on
the great State over a twenty-five year period, if
It has been expected that the banks alone could meet
it in fifteen years or less and still stay prosperous
and solvent?
I am entirely aware that I have observed at
length on this subject and that what I have said will
probably be objected to and critized from many
angles, but sense of duty impelled me and it was not
possible for me to discuss it except in the full light
of what I honestly believe.
I express: with all the serious earnestness I am
capable of, the hope that the Executive Committee
of this Association will prepare and submit to you
Federal Reserve Bank of St. Louis


Committee whose
a resolution calling for a special
be to see that
particular duty
ly won before
suggest that this
the Legislature next convenes. I
of a speCommittee include in its plans the naming
cific date—set at a time that will, in its judgment
best serve the
a special
to get every bank in Mississippi to hold
for the
meeting of its
purpose of securing their understanding and sympathetic support and co-operation. And that the banks
in every County co-operate to secure the attendanc
of their Representatives
of the meetings held in that County. It seems
like this
me that if it is gone about in something
way and actively persisted in, it cannot fail.
ComAccording to the record compiled by your
mittee during the late
they were in favor of outright repeal. These letters
are on file in the Secretary's office. If it is true
that 85% of the banks in Mississippi agree, and if
vigorous effort is organized and sustained, I have no
doubt about the outcome. Our people are really fairminded and want right to exist, when they know the
truth. What will we do?
I have no quarrel with our form of Government
but I do think our method of procedure can be
vastly improved. Our Judicial system constitutes
our greatest public institution and, generally speaking, is above criticism. Probably its greatest, if not
its only real weakness, consists of the method of
selecting Judges. The Legislative branch, it seems to
me, is our greatest weakness, the Executive running
it a close second. The chief trouble is the putting into
public office of too many men with little or no
knowledge of the matters to be dealth with—men
with insufficient education and/or training to enable them to acquire the necessary knowledge even
if they had the opportunity to do so and without opportunity to do so, before assuming office, even if
possessed of sufficient education and or training.
This applies generally from the highest office to the
most humble.
After much contact and observation, I am impressed that the Legislature, especially the House,
is entirely too large numerically to do orderly, sane,
well considered work. Under present circumstances
of operation, wise consideration and action is no
more possible than it would be in a chaotic schoolroom. My layman's mind can see no real reason
why the House should be composed of more than
one member from each county. Even then it would
be composed of eighty-two members. If this change
could be brought about and then if the competent,
responsible people of the state would awaken to their
political responsibility and make certain in every



Report of The State Banking Department
By J. S LOVE,Superintendent of Banks
I realize that we are fast coming
the program and to the end of what
cp.' the best conventions Mississippi
had in several years. Therefore, I
statement brief and to the point.

to the end of
I consider one
bankers have
will make my

First. I want ti express my deep appreciation and
sincere thanks for the vote of confidence and endorsement this Association has just given the
Superintendent of Banks and the Banking Department. I do not deserve all of these commendations,
Yet I have the good feeling of knowing that I have
given to the bankers of Mississippi, to tho depositers of State banks in Mississippi. twelve of the
Lest years of my life and I believe that my efforts
have been prompted by honesty, sincerity and fairness to all. I have tried conscientiously to do my
duty, as I saw it, and while I realize that at times
I have made mistakes yet at all times my efforts
have been for tlie best interest of the banks and the
depositors of these banks, whether going or in liquidation.
To receive this vote of commendation
touches me deeply and I appreciate it greatly. I
promise to continue as long as I hold this responsible position to give the same holiest conscientious service as I have in the past and to try to
improve by past experience.
Judge Taylor. in his report en the action of the
Legislative (7mumittee. especially touching on the
repeal of the Guaranty of Deposit law, is full and
comprehensive, anti needs no explanation or comments by me; yet I feel it is fitting at this time, and
I am sure you are interested in knowing since the
Guaranty Law has been practically repealed, .the
present status of the Guaranty Fund.
The total amount of guaranty certificates now
outstanding is $6,096,294.16. The value of realizable
assets of the banks now in liquidation, including
cash on hand belonging to these various banks M
liquidation, is $1,400,000, which leaves a deficit in
the Guaranty Fund of $4,696,296.16.
Under House Bill 131, no more guaranty certificates will be issued. The assessment against the
banks will continue and these certificates will be
retired at the rate of from $300,000 to $500,000,
each year, amount depending upon the collections
or realization from assets of failed banks. Since
March 11, 1930, the date House Bill 131 went into
effect, we have had four bank failures. These banks
had total deposits of $1,049,000.00. The majority
of these failed banks were not insolvent. The truth
is, the condition of most of these banks has improved during the past year, but on account of
Federal Reserve Bank of St. Louis

gc iieial conditions existing and scarcity of
bability of these banks to borrow sufficient money
to carry on comfortably and to meet the depositors'
demands, they were forced to close their doors. The
cause of this is largely due to the fact that the
management of the banks did not analyse their own
condition properly and prepare for the hard times
that were in evidence. Surely we are going through
one of the hardest years we have experienced in the
banking business in many years; probably in the
last thirty years. To my way of thinking, it is the
hardest year in my own banking experience and
most of these closings are due largely to the fact
that the bankers (lid not look far enough ahead.
They took too much for granted and did not make
the proper arrangements ill time with their correspondent banks for the necessary credits. They did
not realize that the correspondent banks were more
rigid in rendering assistance and leaning money than
they have ever been. and merely assumed that
usual credit that had been furnished them by their
correspondents would be available and this credit
was not forthcoming when needed.
During the past twelve months, or since we last
met, we have had fourteen bank failures in Mississippi. Tile statement I made regarding the last
tom- bank failures will apply to a great extent to
the fourteen. The failure of these banks was largely
due to general conditions; largely due to the fact
that a banker failed to read the prevailing signs
and prepare for this day. The Superintendent saw these hard times were coming and predicted
Hie present condition to many of these banks during tile past year and warned the banks to get their
houses in order, but all of them did not heed the
v.arning and were not prepared; therefore the
The condition of the Guaranty Fund has not been
so materially set back by reason of these last fourteen failures. In several of these banks we have
been able to pay the depositors in full. In several
of them we paid as much as 75%; in others 35 to
and it is our opinion that the call on the
Guaranty Fund front these failures will not be
With reference to House Bill 131. which became a
law on March 11, 1930; it would be in order to comment briefly on this law. It is not so difficult to
write a law, but it is entirely a different matter to
put this law into practkal operation. This House
Lill is very comprehensive; it does not cover many


pages but after studYing the law with a
view of putting it into practical operation, we find
some complications.
For instance. we all understand that
when a bank goes into liquidation now we
do not
issue guaranty certificates to depositors, as
we did
in the past, but we issue what we would term "participating certificates." These certificates do not
bear interest and are protected, first, by the assets
of the bank; second, by double liability of the stockholders; and, third, by a fund raised by 3% tax on
the surplus. Just what protection the fund raised
by the 3% tax is, is problematical. This fund is to
be distributed pro rata among all depositors after
we have realized all possible out of the assets
the bank and because of the large number of bank
failures since March 11. 1930, it now appears that it
will be only a small percentage to be realized by
the depositors out of this fund.
The Bill seemed to overlook taking care of Cashier's checks, as well as drafts drawn on correspondent banks that were in float or unpaid at the time
the bank failed. This brings up quite a problem for
the department to work out, yet it is our thought
now that the holders of such drafts should be entitled to participate with the depositors in the assets of the bank, but would not be entitled to participate in the fund raised by the 3% tax on surplus. At least until this feature of the law has been
decided by the Supreme Court, it will be the intention of the Banking Department to allow the holders
of these drafts to participate in the assets of the
bank pro rata with the depositors.
Briefly, House Bill 131 has three outstanding features:
First, it exempts from taxation surplus of a bank
up to 100% of its capital.
Second, it taxes this surplus 3% to build up a
depositors' protective fund.
Third, it requires banks to place one-half of their
earnings each year to the surplus account before
they can be permitted to pay a dividend.
The third feature of the law is most constructive.
By building a surplus to 100% of its capital, banks
become stronger and offer a greater protection to
the depositors. It could not work a great hardship
on any bank, but probably for a while the dividend
of some of the banks will not be as large as in
the past.
Many banks in Mississippi would have already
built up a larger surplus, which has not been done
because of the exceedingly high tax. In some counties, for instance, the tax rate is as high as 11% or
12%, but with relief on this tax on surphis, banks
can now afford and are very glad to build their
surplus up to an amount where it equals or exceeds
its capital. Therefore the banks will be stronger
,institutions and will afford a greater protection to
Federal Reserve Bank of St. Louis


the depositors and will be able to present better
statements to their correspondent banks, which
et.title them to a greater line of credit.
Mr. Downs said yesterday in his address that the
present is the golden age of criticism; we see it
everywhere. He could have added that in Mississippi the present is the age of investigation, for
appears that there has not been any department of
slate in Mississippi that has not been investigated
by the State Legislature within the past twelvemonths. A great many embarrassments have been
developed front these investigations. Some resignations by State Officials have taken place. It is
most gratifying to the speaker, and I feel sure to
the bankers of the State, that the Investigating
Committee of the Banking Department, after having
taken the testimony of more than a hundred witLessem. this testimony consuming 682 pages, was'
able to report that they found no wrong-doing, no
fraud or corruption on the part of the Superintendent of Banks or the Ranking Department. Since
the Superintendent of Banks is selected by the
bankers themselves, I take it that this is a vindication not only of him, but of the bankers, because
the bankers have come in for their part of the
criticism aimed at the Department. and I feel sure
that they are very happy, together with the Superintendent, at the outcome of this investigation and
the favorableness of this report.
The testimony befOre the Committee contains
great deal of information not submitted in the report, yet it is filed as exhibits to the report.
instance, the constructive work done by the Superintendent and the Department was not made a part
of the report. yet it had the Committee's due consideration. The Committee was authorized to investigate particularly the amount the Superintendent has been able to realize out of the assets of
failed banks and the cause of the liquidation of
such banks. While the record of the Banking Department has not been what I would like for it to
be on these points: yet it is only by comparison
that we know whether we have done reasonably
well or not. Therefore, information was procured
and submitted to the Committee as to the amount
realized from assets of failed banks in other states
and the cost of this realization. This information
would be interesting to you.
For instance, in Texas the Commissioner has realized 38% on assets of failed banks at a cost of 7%.
In Florida, 33% at a cost of 9%.
In Oklahoma, 40% at a cost of 8%.
In Arkansas, 54% at a cost of 15%.
In Tennessee, 44%, at a cost of about 10%.
In Louisiana, 44.5% at a cost of 9%.
In Nebraska, 51%; no record of expense.
In North Dakota, 35%; no record of expense.
In South Dakota, 29%; no record of expense.


NIISSIsS1 1 1.1

The Comptroller of Currency has realized from
assets of failed National banks, according
to his
statement, 54%, at a cost of 6.5%.
In Mississippi, we have been able to realize 55%
from assets of failed banks at a cost of 5.5%.
Additional evidence was submitted to the Comittee as to the number of failed banks in these
States during the fifteen year period being invest
igated. It was shown that in Florida there were
In.nk failures during the 15 year period
. In Arkansas, 73; in Missouri, 292; in Tennessee,
66; in Geor
gia, 254; in Alabama, 229; in Nebraska,
380; in
North Dakota, 322; in South Dakota, 213;
in Missis
sippi, 58. So in point of failures,
Mississippi had
considerably less than any of the
Southern states,
as well as several states operating
under the Guar
anty-of-Deposits law.
Mississippi has realized more from
the assets of
failed banks than any other
state mentioned, lie
eluding the Comptroller of Curre
ncy; Mississippi's
cost for this work has been
less than any of these
states, including the Comptroller.
Therefore it was
vcry evident that the Banking Depar
tment was entitled to the clearance, from
a point of investigation,
providing, of course, they found
no fraud or corruption; and inasmuch as no fraud
or corruption was
found, a favorable report was submi
In conclusion, it would be intere
sting to you to
'know that during the twelve years
I have been connected with the Banking Department
I have been
instrumental in doing a great deal of constr
work. I have collected from Directors,
and friends of banks more
than $1,610,000, which
money was used in taking care of losses
in these
banks, and building up impaired capita
l and surplus
of these banks. Therefore, have
saved many banks
from failure and have by this work
caused protection of more than twelve million dollar
s of deposits
in banks and no doubt have saved
additional burden of, at least five million dollars fallin
g upon the
Guaranty Fund. No doubt this is
one reason why
the Guaranty of Deposits law in Missis
sippi has
fared better and lasted longer than
in any of the
other seven states that have attempted
to operate
under the law.
It is a pleasure indeed to touch upon
this featurc
of the banks' operations and
tell you something in
detail of the work the Banking Department
has done
and to submit this report to you for your
consideration. I am happy in doing so, and
I hope with your
co-operation and assistance to be able
to continue
to do this kind of work in the
banks of this State.
During my connection with
the Banking Department
I have had the hearty co-ope
ration of all the
ft has been only by this and
through this that
this constructive work has been
accomplished and
I want to thank you for it.
At the same time, I
thank you again for the vote
of confidence just
given me.
Federal Reserve Bank of St. Louis



New Orleans Securities
with Capital, Surplus and Undivided
Profits of more than $330,000.00.
owned by Stockholders and managed
by the Officers of the New Orleans
Bank and Trust Company, welcome
opportunities to be of mutual benefit
to Mississippi Banks. Bankers and
their friepds.

NOTES OP THE MISSISSIPPI BANKER, Vols. 15-20, June 1930 - May 1936


These volu'ms were borrowed from the office of , he publisher particularly to
see what information might be riven re ardin the process of closin: the
depotit guaranty fund with the 'roceads of c,he State Pond issue. Items rcarding
deposit guaranty found are . ndicated bolow.
Vol. 15. July 1930, p. 7. Reprinted comment re Nebraska (trped copy placed in
Nebraska binder.)
October 1930, P. 18. Bureau of Internal Revenue decision re deducticn of deposit
guaranty assessmonts fro- miss income - Texas. (Typed copy placed in T,Iftmer)
November 1930, pp. 3 and 5. Gives opinion of circuit judge uph lding
constitutionality of House Bill No. 131, a :roved March 11, 1930 (bill that
removed protection of guaranty fund from future failures, continuT assessments,
and set up depositors guaranty fund).
Vol. 15, March 1931, pp. 3 and 5. "The Present Status of the Guaranty Law." This
article memiammmttm7. summarizes the Act of March 11, 1930, and also'HoUse 7Bi11
949, or chapter 269 of laws of 1930 (providing for issue of State Ponds to pay
certificates outstanding on March 11), approved May 31, 1930. Article notes that
State Bond Commission has not announced date for meeting to issue the bonds.
Vol. 16, June 1931, pp. 5 and 7. "Sale of Five Million Dollars of Ponds to Take
Up Outstanding guaranty Certificates." Describes offer for sale on July 15,
1931 of bonds authorized by act of May 31. Gives denominatiors and series (one
for each failed b?rik) of bonds, with date to be July 1, 1931.
July 1931, p. U. "List of Banks to have Depositors Reimbursed is Given Here
in Full" - from Jackson Clarion Ledger. Gives principal at interest of each.
(since list is riven in reports of Banking Department, no copy of this pAdm1 28
July 1931, p. 21 "That Five Million Dollar Bond Issue." Describes a meetings
bankers and others called by Supt. of banks to discuss the bid by a syndicate
for the bonds. Does not describe the character of the offer. Motion was carried
unanimously to approve the offer and to recommend to 411 certificate holders the
accepttnce of the offer. States that some tankers not holdinr certificates also
subscribed for a margin of the bonds at par and accrued interest. Last par:
"Approximately two million dollars of guaranty certifica'es are now held by
the anks in the State, including banks in liquidation, and a-proximately three
million dollars of certificates are held by individuals within and without the
State of Mississippi, and it is going to be necessary for all of these holders
of certificates to lend their full cooperation in carrying out the arrangements,
and Yr. Love gave the definite assurance that it would not avail anyone anything
to hold tack."
NOTE. There is nothirp - in later issues regarding the fact that these londs were
not sold, nor about the new lay approved Oct. 20, 1931, nor the sale of bonds
dated Dec. 1, 1931„under theterms of the new law, nor about the process by which
certificate holders were paid fro-, the proceeds of that issue.
Vol. 17, December 1932, p. 7. "Guaranty of Deposits Plans All Failures". Excerpts
of an article by Philip A. Benson, inthe American 3nkers Association Journal.
4004r1933, pp. 5-6. "Government Guaranty Fr All Banks As Cure For Postal Savings
Evil," by M. •.•:. Swartz, President, Peoples Bank of Indianola. Argues that government guaranty of some deposits in postal savins) unfairand unjust. "We pay
insurance on our homes; pm our autos; on everything except our m ney. Why should
we not ;- -ay on oar money also?" Ben:fits
the banks. Banks wi 11 have the debits necessary to extend abundant credits.
Deposits willbe secure. Confidence will replace fear. Trade will revive and
prosperity will again be the portion of a disturbed and a depressed people. (p. 6).
Federal Reserve Bank of St. Louis





on The Ilississippi Banker 5 vols. 15-20, continued

Vol. 18 regarding deposit guarantyVol. 19, p. 22. In article on "Changes in .7c.Ti ssissi .pi Banking Laws" (pp. 18-26)
he general revision of the law in 19311 is described, with the nrov:' sion for
repeil of the State guaranty law mentioned on p. 22.
Tay 1935, pp. 40-115. "Address of Honeral•le Jeff Busby," Associate Co •nsel,
Fc.d.eral Deposit Insurance Corporation. At State bankers convention. Contains
follow-in ; paragraphs re bank deposits as money.
"The issuance of money is primarily tie business of the Fcderal Government,
but it ilas intrusted to commercial bankin the privilege of issuing credit money-bank check money--which does nine-tenths of the business of the country, and on
which business must depend in order to perfect its sales and make its exchanges.
Unfortun tely, available bank credit heretofore has seemed to operate in reverse.
When prices were rising and bus:'., ness was active, and when there was little need
for additional credit expansion to maintain a stable price level, deposits poured
into the •anks and the volume grew. When adverse times set in, and financial
conditions lecarre unstable, and the banks needed additional power, the depositors
withdrew their funds and diminished the power of the bank. These withdrawals came
about for various reasons--need of funds, hoarding, runs on 7sanks because of fear,
and because depositors, before the passage of the Federal Deposit Insurance law,
knew they must get their money out of the bank before it closed, or stand the risk
of havin: it tied up for a long; period of time, or of losing, it entirely.
The enactment of a law by the National Government to guarantee or insure funds
of the depositors ,;as absolutely essen ial if cerne cial tanking was to continue.
It is the duty of the Nati.. nal Government, which has never provided any better
arrangement than the privately operated bank, and which has repeatedly recommended
these banks to the public as a safe place in which to deposit their funds, to
maintain a system for 77 nsurim: those deposits." (p. 43).
San e issue has a talk by Mr. Brett, the new State Controller, on the provisions
of the new banking law adopted early in 1934. One of the major elements of revision
was in the provisions for handling insolvent banks, and Mr. Brett gives a good
description of the inadecpacies of the former procedure. NOT.E. This should have
been copied or photostated for use in the text of our rississippi study (perhaps as
an addition to the secti...n o liquidat" on of closed banks. Perhaps borrow again
to insert on final revision).

Federal Reserve Bank of St. Louis









Vice-President & Chairman
Executive Committee
R. P. Parish, Jr.
_ Greenwood



W. P. McMullan_______________




NUMBER 5 W. W. Hollowell Treasurer

-- __Greenville

Leigh Watkins, Jr





Terms Expiring 1953
A. N. French
. _____ _______..._.----Byhalia
C. P. Fortner
Buford Yerger


Terms Expiring 1954
R. C. Liddon
C. 0. Dean
J. K. Sessions __ _

Cover Page—Association Headquarters, "Clock" Building, at the Capitol
Street's Center, West and Capitol Streets—By Louis Williams



Terms Expiring 1955
J. H. Sasser
F. M. Patty
Yazoo City
W. F. McLeod
Moss Point
Ex-Officio Members

Personals, About Banks and Bankers

New Officers of the American Bankers Association
Origin of the Dual Banking System—By J. T. Brown, Jackson


8 W. P. McMullan .



Rate War, A Discussion of Savings Account Interest Rates


History of Mississippi Banking Continued—By J. S. Love, Sr


Through the courtesy of J. F. Hyer, Publisher and Dr. W. D.
McCain, Author of "The Story of Jackson," the History has
been carried in the Banker. It was prepared by Mr. Love
for "The Story of Jackson."

Community Responsibilities of a Banker— By N. S. Rogers, Jackson


Retiring President
Preceding President


_ 12

Livestock Production Loans--By John M. Upchurch, Paris, Tenn...


R. P. Parish, Jr.
W. W. Hollowell
L. G. Simmons
W. B. Herring

Member Executive Council—
Conwell Sykes
State Chairman, U. S. Savings Bond Committee
Frank R. McGeoy, Jr._____ ________Greenwood
Member State Legislative Council—
J. W. Latham
Vice-President for Mississippi—
Yazoo City
P. C. Williams
Sub-Committee on Social Security—
V. S. Whitesides
Member Committee on State Legislation—
M. D Brett
Member Credit Policy Commission—
W. S. Johnson ___
Members Federal Legislative Council and
Finance Committee—
Conwell Sykes
Member on Forestry—
M. E. Cooper
Member Committee on Relationship between
FDIC and State Bank Supervision, and Member State Bank Division—
Bay St. Louis
Leo W. Seal
Trust Division MBA_
Geo. F. Openshaw, President,
(Through 1952 Group Meetingsi

Published Monthly at Jackson, Mississippi
Fifth Floor, First National Bank Building, West Street Office
P. 0. Box 37
LEIGH WATKINS, JR., Editor and Business Manager
Subscription Rate —$5.00 per annum — 50¢ per copy


M. Paul Haynes .
J. Q. West
N. L. Cassibry
J. T. Steele
R. L. Thompson
E. W. Haining
J. 0. Lenoir
0. B. Bowen, Jr.

__. Forest

Entered as Second Class Matter, June 30, 1922, at the Post Office at Jackson,
S. E. Babington
Magnolia Bank
Mississippi, under the Act of March 3, 1879.
Bank Management
A Khayat
... Pascagoula
Asst. V. P., Pascagoula-Moss Point Bank
Federal Legislation
Conwell Sykes
President, Commercial National Bank
Public Relations
W. B. Brannan
Vice-President, First National Bank
State Legislation
J. W Latham
Vice-Pres., Deposit Guaranty Bk. & Tr. Co.


The Mississippi Bankers Association is not responsible for opinions expressed and
statements made by contributors of articles published in the Mississippi Banker,
excepting official announcements.
Federal Reserve Bank of St. Louis





in every part of the
have made our bank
their bank

Federal Reserve Bank of St. Louis



*your inquiries are invited...

Since 1869
Memphis, Tennessee
Capital, Surplus and Undivided Profits Over
Seventeen Million Dollars





NEWTON: I. M. Nichols, Newton
Vice-Pres., Newton County Bank
NOXUBEE: Paul SiIvey, Macon
Pres., Merchants Bank & Tr. Co.
OKTIBBEHA: J. C. Nash, Starkville
V. P. & C., Security State Bank
PANOLA: Dave Pointer, Como
Pres. & Cash., State Bank of Como
PEARL RIVER: P. C. Byrd, Picayune
V. P. & C., Bank of Picayune
PERRY: O. B. Bowen, Jr., Richton
Cash., Richton Bank & Trust Co.
PIKE: W. S. Johnson, McComb
Vice-Pres., First National Bank
PONTOTOC: J. H. Salmon, Pontotoc
Pres., First National Bank
PRENTISS: J. S. Bishop, Booneville
Pres., Prentiss County Home Bank
QUITMAN: J. T. Mack, Marks
Vice-Pres., Citizens Bank & Trust Co.
RANKIN: J. C. Murray, Brandon
Pres., Rankin County Bank
SCOTT: W. D. McCravey, Forest
Pres., Bank of Forest
SHARKEY: H. C. Greer, Jr., Rolling Fork
Cash., Bank of Anguilla
SIMPSON: W. V. Kees, Magee
Pres., State Guaranty Bank
SMITH: F. S. Huff, Raleigh
V. P., Bank of Raleigh
STONE: M. E. Cooper, Wiggins
Pres., Bank of Wiggins
Federal Reserve Bank of St. Louis

SUNFLOWER: F. H. Hamilton, Jr.,
Indianola, Cash., Peoples Bank
E. TALLAHATCHIE: Ned R. Rice, Jr.,
Charleston, V. P. & C., Tallahatchie
Co. Bank
W. TALLAHATCHIE: B. C. Henderson,
A. C., Bank of Sumner, Sumner
TATE: J. H. Wilborn, Senatobia
Cash., Senatobia Bank
TIPPAH: E. W. McMillin, Falkner
Pres., Bank of Falkner
TISHOMINGO: R. A. McRee, Jr., luka
Exec. V. P., luka Guaranty Bank
TUNICA: M. D. Buckels, Jr., Tunica
Vice-Pres., Planters Bank
UNION: A. L. Rogers, New Albany
Pres., Bank of Commerce
WALTHALL: P. L. Mangum, Tylertown
V. P. & Cash., Tylertown Bank
WARREN: W. H. Campbell, Vicksburg
Exec. V. P., Merchts. Nat'l Bk. & Tr.
WASHINGTON: Duncan Cope, Hollandale
Exec. V. P., Bank of Hollandale
WAYNE: V. B. McWhorter, Waynesboro
Pres., First State Bank
WEBSTER: C. P. Fortner, Eupora
Vice-Pres., Bank of Eupora
WILKINSON: P. H. Brasfield, Woodville
V. P. & Cash., Commercial Bank
WINSTON: R. B. Fulcher, Louisville
Vice-Pres., Bank of Louisville

YALOBUSHA: F. A. Kendrick, W. Vall,ey
Cash., Bank of Water Valley
YAZOO: Miller P. Holmes, Yazoo City
V. P., Delta National Bank

Two new textbooks published by the
American Institute of Banking are a two
volume work on "Effective Bank Letters"
and "Bank Administration". They are to
be used in connection with AIB work
but are obtainable from the American
Bankers Association, 12 East 36th Street,
New York.

4: Meridian for Group 5
5: Vicksburg for group 6
6: Percy Quin Park near McComb
for Group 7
7: Gulf Hills, Ocean Springs for
Group 8
10: Cleveland for Group 3
12: Sardis for Group 2
13: Lakeside Country Club, Starkville, Group 4
14: TupeJo Country Club for Group





J. S. Love, Sr., Jackson
Member J. S. Love & Co., and
Former State Supt. of Banks
whose paper could be used for currency
The year 1952 is a good time to look
at the colorful story of 143 years of bank- and whose vaults would contain specie
for conversion of negotiable items.
ing in Mississippi,—for total assets of our
And so in 1809 the first bank in
banks are today approaching that fabulous
Mississippi, appropriately named The
figure of one billion dollars.
Bank of Mississippi, came into being. Its
Deposits, capital accounts as well as
charter was dated two days before Christassets are at a new all-time high, as
mas, December 23, 1809, granted by
banks keep abreast of the state's vastly
the territorial legislature. It was a good
expanded economic needs. A foundation
beginning, with level-headed businessof thorough soundness underlies the
men whose names have long been imstate's financial structure.
portant to Mississippi history as backers
But such was not always the case in
of the bank.
Mississippi banking,
Among these were the directors:
Just as no commonwealth in the Union
Francis X. Martin, Ferdinand L. Claiborne,
can unfold a past more colorful than does
John Steele, Abner Green, Abijah Hunt,
the Magnolia State, certainly no branch
Samuel Pastlethwait, Ebenezer Reese,
of Mississippi history records more downCowles Mead, Joseph Sessions, William
right exciting episodes than that of the
B. Shields, Winthrop Sargent, Alexander
banking system.
Montgomery, Layman Harding.
From 1809 to 1952, from one bank to
Banking in Mississippi has always been
143, from $100,000 in assets to almost
so closely with agriculture that a
$1 billion,—that
history of one almost parallels the history
units, and dollars.
of the other, and this fact was recognized
Our story opens with a strong, wellwith the establishment of the first bank.
planned bank. It closes with a host of
The opening sentence of its charter reads:
institutions that just as equally merit that
"Whereas, the establishment of a Bank
in this Territory would tend to promote
But the intervening chapters are checkits agricultural and commercial inered. Spotted with rascality, poor judgterests. . . .
ment and failure in a few places, the
record also is splashed with tragedy.
With a paid capital of $100,000 and
But it is more importantly decorated
with $400,000 additional authorized, the
with courage, ability, integrity and high
bank opened at Natchez as a private
It all makes up a story
corporation. Stock was sold widely under
worth writing and worth reading.
the direction of the outstanding leaders
Mississippi became a territory of the
of that day. From the stockholders, the
United States in 1798 and it was not
board of 13 directors was chosen to
long before the need was felt keenly for
operate the institution under its 25-year
some sort of banking system that would
offer a uniform territorial currency and
A Writer of the early 1900's praised
means of exchange.
the basis of operations for this bank of
Cotton gin certificates were used as
Mississippi saying, The pattern on which
legal tender in section around Natchez, its financial bias was cut was modern in
in the community that built itself there
its conservatism, issues being restricted
on the river, and was gradually spreading
to three times the amount of the capital
to embrace much of the state as we know
stock, and the directors made individually
it today. This section was full of the
liable for any excess over this amount."
coins and species of the various countries
The bank was allowed to charge more
whose flags had flown over its territory
than six percent interest on short terms
at various times.
loans, nor above seven percent on long
Spanish coins dominated the confused
term loans. Domiciled in Natchez, then
mass of doubloons, dollars, pistareens and
a "city" of 1,500 inhabitants, and only
picayunes in circulation. It was from the
six miles from the territorial capitol of
latter that a South Mississippi city and a
the state at Washington, and situated on
New Orleans newspaper took their names, the Natchez Trace, practically the only
and stand today as reminders of those
highway, or "high road", in the sparsely
early, hectic days.
settled territory, the Bank of Mississippi
did a good business from the start and
Eight years before Mississippi became
had a successful career for twenty-two
was climaxed for an authorized bank
Federal Reserve Bank of St. Louis


It maintained specie payment at all
times except during the war with Great
Britain in 1814. The bank suspended
specie payments at this time to prevent
the money being drained out by agents of
the enemy which was operating on the
gulf coast. The Bank of Mississippi was
the last Bank in the United States south
and west of New England to suspend its
specie payments, and when peace was
restored it was one of the first to resume
Statehood came in 1817 and with it
followed agitation for a state bank. In
1818, the clamor became very loud in the
legislature, but a compromise was effaced. As a result the state became a
partner in the Bank of Mississippi, and
the name was changed to The Bank of
The State of Mississippi by an amendment to the charter. This act also increased the capital stock to $3,000,000
and reserved the right for the state to
hold one fourth of the capital stock, to
name five of 16 directors, to make
regular inspection, to make its notes
legal tender for all public dues, and to
extend the charter six years to December
31, 1840. The state solemnly promised
that no other bank was to be established
during this period.
Things went along smoothly for 12
years as the bank continued to do a
good business, pay regular dividends, and
conduct a sound venture.
Then the state violated its pledge to
the bank's original institution, and the illfamed Planters' Bank came into being in
1830. Private enterprise got its first
slap in the face as the idea of a statedominated bank caught the fancy of the
legislators even at that early day.




The Planters' Bank was also located in
Natchez, and the stee promised $2,000,000 of the chartered capital of $3,000,000, named seven of 13 directors, exempted the stock from taxation, pulled
the state owned stock out of the Bank of
Mississippi, invested the same money in
the Planters' Bank, and pledged the full
faith of the state to the new bank.
J. P. Walworth was the first president.
He was later succeeded by James T.
Wilkins, and the Capital stock was increased to $4,200,000 and the state's
first installment of $500,000 was turned
over to the bank. Expansion fever hit
the bank and the state alike, and the
Planters' Bank in Natchez became a
parent bank with branches at Columbus,
Jackson, Monticello, Port Gibson, Vicksburg, and Manchester, which is now
Yazoo City.
Realizing what was happening in the
very immature banking business of the
state, the sound and sensible Bank of






Mississippi, averse to participating in or
competing with the wild schemes that
seemed in the offing, asked permission
of the state legislature in 1831 to wind
up its affairs and close its doors. Although
the legislature in 1933 indicated it would
like for the Bank of Mississippi to continue and to take back its charter with
enlarged privileges, the incorporators
declined the offer. It took the bank
several years to close out, but it proceeded
in an orderly, business-like fashion, paid
ten percent dividends all the time in
operation, repaid the entire capital stock
subscribed, and distributed an extra six
and one half per cent surplus.
The Bank of Mississippi was the only
bank of this early generation that lived
out its natural life, and came to an
honorable end.
Had the incorporators of the Planters'
Bank taken a lesson from the Bank of
Mississippi or had they heeded the first
warning, their history might not have
been so notorious. When the state bonds
that were to provide the state's part of
the investment in the Planters' Bank were
sent to New York, they sold at a oneeighth of one percent premium, whereas
similar bonds for the State Indiana sold
at the same time in the same market for
15 percent premium.
The handwriting on the wall was seen
but not heeded, for Governor Brandon in
his message to the legislature of 1831
explained the low sale premium by saying: "The state being young, not known
in the stock market, and without established credit, and the promulgation of
opinion that the legislature had violated
the faith of the state in chartering the
Planters' Bank, were drawbacks to the
The word—even in those days of slow
travel—had simply gotten around that
Mississippi had not kept faith with the
Bank of Mississippi, and for that reason
the commissioners who sold the bonds
could not get a good price for them.
The Constitution of Mississippi was
amended about this time to prohibit the
state from borrowing money or pledging
its credit unless submitted and approved
by two legislatures, but contained a
clause specifying that nothing was to
prevent the governor from paying off the
remaining $1,500,000 pledged for the
Planters' Bank.


Eventually, the state secured the rest
of the money through sale of bonds at
2 premium, and this $1,500,000
plus the original $500,000, together with
another $5,000,000 issued a few years
later, went down in history as the repudiation bonds. And it marked the end
of conservative banking for era.
Federal Reserve Bank of St. Louis



Comes now the third bank for MissisEstablished in 1833 again at
Natchez, The Agricultural Bank was
admitted an effort to right the wrong
done to the earlier banking system. Governor Lynch told the legislators of 1933
concerning the $2,000,000 grant from
the state for the Agricultural Bank that:
"This grant was urged and carried as a
compromise upon the plea of injustice
done the old bank in chartering the
Planters' Bank, and the great necessity
to provide for the deficit to ensue in the
circulating medium from the withdrawal
from the branch of the United States
Bank at Natchez." Alvarez Fish, first
president, was shortly succeeded by W.
J. Minor.
Both the Planters and the Agricultural
banks were made depositories for United
States money, and the Planters' Bank was
the depository for all the state's funds.
Both banks flourished for a time. In
1837 prepared statements showed the
Planters Bank had total resources of over
$9,000,000, with liabilities running about
a million less. The Agricultural Bank's
total resources were over $6,000,000,
but its liability proportion was higher
than the Planters, and its surplus less.
Circulation of the two banks was $2,559,470, and specie reported to be
Both banks profited from the Federal
funds. Especially was this true of the
Agricultural Bank whose stock was owned
mainly by prominent businessmen in and
around Natchez. This bank had established a branch bank at Pontotoc in time
to share in the large land sales in that
section of the state by the United States
Land Office at Pontotoc. In 1836 when
the lands sales amounted to $1,563,180.22, all deposited in the Pontotoc
branch, the bank books showed a profit
that year of $400,000, and twelve and
one-half percent dividend was paid to
the stockholders.
With such an abundance of money on
hand, the bank freely made loans with
deposits to take advantage of the good
fortune. The loans were long term ones,
to commission merchants in Mobile and
New Orleans to help handle cotton production. They were regarded as prime
Then came the crash of May 1837 and
all the banks of the United States
suspended specie payments. The Mobile
and New Orleans commission merchants
went bankrupt; their paper was sent back
protested to the banks, and the banks had
to face the planters whose crops were still
in the fields.
The panic of 1837 was the result of
the action of President Jackson who was
violently opposed to operation of the


United States Bank at Philadelphia. This
was a huge banking institution of its day
with some $35,000,000 in capital and
25 branches in all the states including
Mississippi. Jackson decided that the
United States Bank was dangerous and
was an encroachment on States Rights,
and without waiting for the 20-year
charter given it to expire, he ordered the
removal of all United States money from
the bank and its branches, and placed it
in different state banks over the nation.
Thus the United States Bank which had
proved useful, and which was something
of a balance to keep the nation's money
system stable, was suddenly almost out
of business. And so were the many banks
which had found the federal funds a
great cushion on which to operate.
To offset this situation the Mississippi
bankers conceived the idea of operating
their banks on borrowed capital. The
governor admitted that "Mississippi being
the central cotton growing region where
lands are productive and of permanent
value, it cannot be questioned by
capitalist at home or abroad that the
landed security is the best that can be
given. . ." But the state approved and
the banks launched into a fast and furious
era of building railroads—largely on
paper—to supply the great vacuum in
the currency, and to put the money back
in the state. The spree was of short
Actually railroad banking came into
being December 30, 1831 when banking
privileges were conferred on the West
Feliciana and Woodville Railroad, and
until the crash of 1837 the state was '
criss-crossed with imaginary railroads and
beset with railroad banks.
"In these enterprises there was more
watered stock sold than were cross-ties
laid; post-note clippers commanded a
premium over good road beds; reckless
speculation brooded nothing asprosaic as
the actual construction of railroads, on
the successful operation of which it was
supposed fabulous dividends would be
declared," says a historian of the early
part of this century.
The railroad banks which thrived during the 1830's were Commercial Railroad Bank of Vicksburg, with branches at
Clinton and Vernon; Grand Gulf Railroad
and Banking Company with a branch at
Gallatin, the West Feliciana, the Mississippi and Alabama and Tombigbee Railroad and Banking Company. During this
period there were other banks established
for no purpose other than to make money
for the stockholders, and did not, as even
the railroad banks had, profess to be for
the internal improvement of the country.
Included in this group were Commerical
Turn to Page 22


when properly supervised;' say these 5 bank managers
Every year more bankers are issuing production
loans on broilers, turkeys, poultry and livestock—
and they're making money. The statements of
these five managers show you that such loans can
be safe and profitable when well supervised.
Purina has good feeding programs plus welltrained salesmen and dealers who can help you

select good credit risks. They can also supervise
the growers' operations to help keep them on a
sound basis.
If you are interested in studying finance plans
that have been profitable for Purina and for bankers, please send the coupon asking to see our
new portfolio. No obligation, of course.


of Amtrira
Vank momss

Zook wommi
of Amtrint





Sanger, California
June 7, 1952
Ralston Purina Company
Visalia, California
We have been making fryer chicken
loans to various growers in this area
during the past three years. Total loans
to our customers have approximated over
$200,000.00 per year and our experience
has always been satisfactory. No losses
have been sustained.
We feel that if this type of loan
is properly supervised by the lender with
the cooperation of the feed store that
they will prove to be profitable loans,
which has been our experience to date.
Very t uly yours,

N. G.M.ogo1uso
Federal Reserve Bank of St. Louis



Kingsburg, California
March 11, 1952
Ralston Purina Company
Checkerboard Square
St. Louis, Missouri
Our loaning experience with
selected fryer producers in this area
operating under your Plan has been
very satisfactory.
We have also found your repre—
sentatives to be most helpful in
arranging credit matters for our
Yours very truly,

B. '''. Bergstrom,


tonit mums%
of Amtrira

tank of Antrrint



Fresno 17, California
June 25, 1952
Ralston Purina Co.,
Visalia, California
We have made numerous poultry
loans since September 1950 to growers
in this vicinity and are pleased to
report to date no losses have been
sustained by us.
It is our experience that con—
siderable supervision is required and
we feel that your field men have done
an outstanding job in this regard.
Very truly yours,

Visalia, California
June 11, 1952
Ralston Purina Co.,
Visalia, California.
This is to advise you that our
experience has been quite satisfactory
in the financing of poultry loans
during the past two and a half years.
I am definitely of the opinion
that a contributing factor to the
success is that proper supervision is
provided by the field men represent—
ing the firms involved.







Cordially yours,

C. R. Nelson,
Gordon Cook,


Plan To See Our New Portfolio
on Production Financing

tank of America


This portfolio gives our own boss experience (amazingly low) in handling many millions of dollars in


Redlands, California
July 28, 1952

production financing. Also the experience of bankers.
It defines the credit needs of farmers for different kinds
of livestock and poultry raising. It shows papers which
can be used in securing such loans.
Our local salesmen have personal copies of this portfolio which they will be glad to show you, or to leave
for your inspection, if you like. Please send coupon
asking to see it.

Ralston Purina Company
Los Angeles, California
Although your poultry financing
loans are comparatively new to this
particular Branch we are favorably
impressed by the plan.
The capable supervision afforded
by your field representatives along
with adequate financing has shown that
this type of program can be profitable
to the grower and lender.
Yours very truly,

With 0 mills located throughout the United States and
Canada to serve farmers

S. W. Blackburn
Assistant Cashier

Mr. E. R. Siler, Treasurer
1611 Checkerboard Square
St. Louis 2, Missouri


Federal Reserve Bank of St. Louis

Please ask the local Purina salesman to stop by with a copy of your new portfolio
on production financing. It is understood that this does not obligate my bank
in any way.





Bank of Rodney, Commercial Bank of
Columbus, Commercial Bank of Manchester, Commercial Bank of Natchez,
with branches at Canton, Brandon,
Holmesville, Shieldsboro; Citizens Bank
of Yalobusha, Citizens Bank of Madison
County, Bank of Northern Mississippi,
Bank of Grenada, Bank of Port Gibson,
and the Bank of Lexington. The crash
of 1837 brought an end to all of these
experiments, and the beginning of another
in the state capital, which had a number
of years before, been moved to Jackson.
The new experiment, as disastrous as
its predecessors, was the Mississippi
Union Bank, chartered January 21, 1837,
with a capital stock of $15,500,000.
This amount was to be raised by loans
through the sale of state five percent
bonds, for which the state's full credit
was pledged, despite the fact that just
a few years before the state legislature
had frowned on the state obligating itself
in such a manner.
The story of the Union Bank in Jackson could well take all the space allotted
to this story of banking. Its fabulous
career began on high hopes ended in
tragedy and the repudiation of a large sum
of bonds, and act which to this good day
Mississippi has never quite lived down.
The Bank was permitted to begin business as soon as $500,000 was subscribed.
The faith of the state was pledged for
the whole capital and interest, and the
state issued $15,500,000 five percent
gold bonds, payable to the Union Bank.
A regular session of the legislature in
January 1837 approved the act, and when
times became so bad that the governor
felt the situation could not wait until
the following year, an extra session was
called to bring relief.
Financial conditions were so bad that
time could not be taken to sell the stock
in an orderly fashion to local investors
and businessmen. The legislature hurriedly prepared a supplementary bill that
would order the governor to take $5,000,000 of shares for the state. Bonds
used for payment were sent by three
commissioners, James
C. Wilkins,
William M. Pinkard, and Edward 0.
Wilkinson, to the Eastern markets, and
Mississippi awaited the results with
anxious concern. Finally, word drifted
back to the state of the good news; the
bonds were sold, and the money was to
be paid in five equal installments of a
million dollars each. Nicholas Biddle,
president of the United States Bank at
Philadelphia, bought the whole series.
A great celebration took place in Jackson, bonfires flamed, guns were exploded,
Federal Reserve Bank of St. Louis



general rejoicing was in evidence. In as
short a time as possible in those days,
the money in the form of Brittish gold
arrived in Jackson. It came by steamship
to New Orleans, then by river steamer
to Vicksburg, and was hauled by a
heavily guarded wagon train from Vicksburg to Jackson over a dirt road. People
gathered along the road to see the gold
that was to relieve the distressed state.
Once in operation, however, the bank
was recklessly managed, terms were very
easy for borrowers, very bad judgment
was shown in making advances, illegal
issue of post-notes was made, and the
legal issue was increased. The Union
Bank became the purest and the most
elaborate example of the weaknesses of
state banking in America. Several other
southern and western banks had adopted
this system, but none could compare with
Mississippi, for none had the $5,000,000
in state funds that Mississippi had so
blithely sunk in her bank. This monstrosity of banking had its home office
in Jackson. Eight banking districts in
the state had branch office banks at
Aberdeen, Augusta, Liberty, Lexington,
Macon, Tillatoba, and Vicksburg. The
charter was granted for 40 years.
Instead of making money, or even
helping bring the state's finances back to
normal, the Union Bank in reality added
to the problems. Before its collapse, the
state which was already involved in the
matter so deeply, took one more fatal
step by taking $2,000,000 in six percent
bonds from the Planters' Bank and placing the sum to the credit of the Union
Bank in order to give it a last chance.
But all to no avail,—the bank was
Summing up the situation, Governor
McNutt in his message to the legislature
of 1840 said:
"The state bonds cannot be sold, and
a sufficient sum cannot be realized in
time, out of other assets of the bank to
pay the past notes due next April and
May. It will take more than $250,000
of the available funds to pay in London
the interest on the state bonds previous to
the first of September
The Union
Bank has certainly failed to answer the
purpose of its creation, and I feel confident even with the most able and
prudent management, it can never be
made useful. I have come to the conclusion that it is our duty to place the
institution in liquidation, or to repeal all
that portion of the charter giving to
private individuals stock in the bank and
privileged loans. The state debt already
amounts to seven and a half million dollars. The interest on seven million is
payable abroad and amounts to three


hundred and seventy thousand dollars
I am bound to recommend that the five million of the state
bonds last issued be called in and cancelled, and that no more shall hereafter
be issued for the Mississippi Union Bank."
He also recommended the immediate
repeal of the charter of the bank.
The governor pointed out that two
other institutions in which the state was
a large stockholder were on the rocks
and could not resume specie payment for
several years. He referred to the Mississippi Railroad Company and the Planters'


Editor's Note: Because of the length
of the History it will be continued in
instalments. Next will appear in the
October issue.

all subject to the same treatment. The
difference between an over-extended
businessman or manufacturer and an overextended installment borrower or farm
borrower is only a matter of degree. The
same question arises each time "Has he
given sufficient thought to how he will
repay when the going is rough and income reduced? Is he prepared, able and
willing to make the adjustments necessary?"
Can we sell the public the dangers of
debt as well as the advantages? Can we
convince them that the danger is as great
or greater to them than to us? Can we
convince them that our principal source
of income is from loans and that we
need and want this income, but that we
far prefer to forego it rather than jeopardize the borrower's future in the event
of deflation? Can we convice them that
our own desire to avoid loss is matched
by our desire to help them avoid loss?
I am not unmindful of the difficulties
of furthering such thinking. I realize
quite well that it cuts across present day
trends of Governmental and individual
behaviour; that many of our people are
unfamiliar with anything but adequate,
free and easy credit; but surely it is worth
our efforts.
How can we attempt to do this?
1. The best way in the world is across
our desks, in our everyday conversations with those who owe us and
those who want to owe us.
2. By carefully worded advertising—
watching always not to scare away
the needy, worthy and wise borrower—we can point up the danger
of too much debt, the wrong kind
of debt and the difficulties of repayment in more difficult times.
Turn to Page 24



OCTOBER, 1952


By J. S. Love, Sr.
(See Index Note, Page 6)


The repudiation proposal became a
political issue, but the resolution passed
the legislature February 18, 1842. Eleven
years later in 1853, a court decision ruled
that nothing could absolve the State of
Mississippi from the liability assumed in
chartering the Union Bank. But the same
year the court decision was nullified by
a vote of the people, repudiating the
Union Bank and the Planters' Bank bonds.
Years later the Constitution of 1890 included a section which expressly forbade
payment of any indebtedness alleged to be
due by the State of Mississippi to the
Union and Planters' Bank. This indebtedness was made up of $2,000,000 in
Planters' Bank bonds, and the $5,000,000
in Union Bank bonds.
One story will well illustrate the situation created in the state after the establishment of the Union Bank. Banks were
issuing specie freely and as it became
more worthless with each passing day,
"shin-plasters" came into existence. They
were notes of towns, hotels, business
firms, blacksmith shops, often individuals.
One gentleman had to make a trip of
about a hundred miles, and before leaving his home gathered an assortment of
"shin-plasters." He spent the night at a
hotel on the way and the next morning
emptied his big bag of "shin-plasters" on
the counter for the owner to take his
choice in payment for his night's lodging. The owner looked over the whole
sorry lot, saw nothing of value, and bade
his guest go in peace.
Thus, it was that Mississippi approached the Civil War days in a financial
plight as desperate as could be imagined.
Looking back, it is easy to see why Mississpipi required such a long period of
recovery. With a background of such
unsound financial atmosphere, progress
made by the state is nothing short of
In the period immediately proceeding
the Civil War, banking fell into the hands
of brokers who charged outrageous rates,
and during the war the troubles were
multiplied by the issue of worthless
cotton certificates and confederate
money. But out of all the chaos, a few
sound banks, small in beginning, grew
and conducted an honorable business.
Among these were the Britton and
Koontz in Natchez, Green's Bank in
Jackson, one in Vicksburg, one in Yazoo
City, and few others scattered over the
At the close of the war, the entire
banking system, along with all other
Federal Reserve Bank of St. Louis


phases of the state government, had to
be reconstructed. National banks made
their appearance in Mississippi, and banking went back into private hands. Conservatism again dominated the scene, and
the gigantic task of rebuilding the banking empire proceeded in a cautious
Unfortunately, records to cite specific
instances and to trace the return of
sounder banking for the period from the
Civil War to the turn of the century are
meager. Many were lost or not kept
during the early years of the reconstruction period, other available records
have been accidentally burned in recent
years. Conditions did change, however,
and between 1865 and 1877 several
private banks and a few state banks were
Until 1890 state banks
could be chartered only by the legislature,
but in that year the general corporation
act was passed. In 1888 a law had been
passed requiring banks to make periodic
reports to the state auditor and to publish
their statements of condition in their local
papers. These were the only two banking laws passed until 1906.
Some figures for comparison's sake
show that in 1877 there were in Mississippi 21 private banks, seven state banks,
or a total of 28; in 1883, 21 private, nine
state, one national, total 31; in 1890,
16 private, 47 state, 12 national, total
75; in 1899, five private, 92 state, 12
national, total 109.
In 1889 an important organization, the
Mississippi Bankers Association, was
founded. During this year there were 17
private banks, 30 state banks, 12 national banks, of a total of 59 banks
operating in Mississippi. W. A. Pollock,
president of the Bank of Greenville, has
chosen the first president of this organization which has enjoyed an uninterrupted period of existence to the present.
Its purpose has been to promote the
general welfare and usefulness of banking institutions to secure uniformity of
action, proper consideration of questions
in regard to laws, financial and commercial usages, and practical benefits
derived from association with personal
acquaintances and discussion of problems.
The organization has been a power and
influence for stability since the day of its
The first ten years of the 20th century
were health years for the banking system.
A compilation of reports shows that in
1901 with 117 banks, capital paid in was
$4,895,211.23; surplus, $717,919.94;
deposits $13,677,775.30; loans and discounts $16,221,055.07. In 1910 there
were 328 banks with a paid in capital of
$12,724,003.42; surplus $2,798,064.87; deposits of $43,364,483.62; and


loans and discounts amounting to
There was quite an influx of capital
into the state during this time, and
optimism caused some failures in 1907,
a panic year, and more during the several
succeeding years. The trend of banking
in Mississippi was watched closely by the
Bankers Association, and the lax banking
laws were a topic for discussion at each
meeting. At the 1910 convention the
necessity for passage of uniform negotiable instruments act, uniform warehouse
receipts act, uniform stock transfer act
was asked. At the 1913 convention the
epidemic of bank failures was cited as
evidence of the need of banking supervision and legislation. Comments from
all parts of the state showed that the
public was interested and felt the need of
a rigid system of bank inspection.
Also in 1913 the Federal Reserve
System was established by the U. S.
No banks in Mississippi
joined immediately.
Banks were still
small in Mississippi, and although the
bankers thought the purpose of the Federal Reserve as good, decided the disadvantages of membership outweighed the
But the following year the first important banking law for Mississippi was
enacted by the state legislature and went
into effect March 9, 1914.
The act provided for a State Banking
Department, charged with the execution
of all banking laws and examination of
all banks twice a year. Three banking
examiners were to be elected, one from
each supreme court district. The act
provided specific instructions for organizing a bank and for liquidation of banks.
Further, it provided for the guaranty of
deposits. A number of limitations were
placed on banking activities, and the
law was a comprehensive one, the first
the state had ever had in the long history
of hectic banking. Bankers opposed the
guaranty phase of the law, but it stayed
on the statute books until 1930.
The period from 1914 to 1916 might
appropriately be called organization
years, and the following eight years could
be designated as testing or proving years
for the guaranty law.
The 1914 act specifically provided that
one member of the Banking Board was
to be a banker, one an accountant, and
one a lawyer, all to be appointed by the
Expense of maintaining the Banking
Department was paid by an assessment
on the total assets of all State Banks that
became members of the State Banking
The law further provided that an anTurn to Page 18





N. S. Rogers—Jackson
Asst. V.P. Deposit Guaranty Bank & Trust Co.,
Credits Session American Institute of Banking Convention
Houston, Texas
Banking is a dynamic force holding
a strategic and powerful position in
a money economy. Its influence is
further magnified in a complex industrial
society such as ours. Since force and
authority need to be balanced in equal
part by responsibility, there is no denying
the American banker's tremendous obligation to the public he serves.
Defining the banker's community responsibility is more difficult. In general
terms, I like to think of it as a position
of trusteeship not only toward depositors,
stockholders, and employees but also in
defense of a sound economy. This
general definition might be spelled out
specifically in a number of ways, but for
convenience I shall group the numerous
responsibilities under two main headings.
First, the banker must be well informed
and then, on the basis of accurate and
adequate information, he must act to
guard the financial health of his community. It shall be my purpose to consider these two overall obligations primarily from the role of lender and financial advisor.
No other institution has done so much
to increase the competence and understanding of bank employees as the
American Institute of Banking. All of us
of AIB today are proof of this fact and
accept without reservation, I daresay, the
value of a broad perspective and a
detailed knowledge of banking.
This knowledge should begin at home
in our own banks. It should include
among other things the principles of
credit analysis, composition of our deposits, the principle of reserves, the
amount of funds available to land, something of the laws affecting lending, and,
generally, the servicing costs for various
types of loans.
Next, the banker should seek an intimate familiarity with business conditions in the area served. Facts and
figures reviewed in a swivel chair are
hopeful, but nothing can supersede the
necessity of going and seeing. Plant
visitation is nearly always an educational
experience. There is no better way to
convert the dry and sometimes unintelligible figures of a financial statement
into real and understandable things and
people. Needless to say, visiting the
customer's place of business pays greatest
dividends when a genuine interest is
Federal Reserve Bank of St. Louis

directed to his operations, layout, employees, and housekeeping.
In studying the local economy, consideration should be given to the number,
size, and types of business in the area.
The banker cannot become a technical
expert in all lines of business, but he
must have a basic concept of the how
and why of the more important lines in
his community. He should be constantly
aware of seasonal and cyclical factors
at work locally, and above all he should
follow the trend of local business and its
condition. Sound
policies may vary greatly between a
rapidly expanding section and a mature
area possessing surplus savings and
The particular form of federal and
state regulation of banking is to a substantial degree a function of the current
state of the nations economy. The banker
who has not ascertained the underlying
reason for and effects of important banking regulations is operating with limited
vision. Without a broad vision of the
national scene, he cannot make intelligent policy for his own bank.
Outside banking and monetary controls
of the economy, being well informed
would require some familiarity with government fiscal policies and, very significantly today, the present and potential
impact of taxes. It would also seem
essential to keep abreast of business
trends including prices, employment,
production, and the financial condition
of business. I'm not recommending that
the banker become an encyclopedia of
business statistics but merely that he be
aware of the way the wind is blowing in
the national economy.
Being well informed simply provides
background support for the discharge of
community responsibilities. In our lending activities, the first responsibility is
the maintenance of the bank's own
liquidity. As commercial bankers, we
should have a fundamental acceptance of
our primary role as short term lenders.
In recent years substantial progress has
been made in this direction, but there
remains a great need to honor the principal of the annual clean-up. Term credits
have an important place in the loan portfolio, but funds so committed should be
reviewed constantly in relation to deposit
structure and total risk assets.


There appears today to be a need
for a careful reappraisal of lending
policies. Prosperity and inflation are not
necessarily permanent, although currently
the total experience of the majority of
bankers has been gained in a period of
easy money. Carlisle Davis, widely recognized authority on bank credit, writing in the March, 1952 issue of "Banking", raises this challenging issue, "Are
We Facing An Increase In Capital
Loans." Mr. Davis points out very effectively that capital loans may be created
by overtrading, by diversion of working
funds to fixed or capital assets, as a
result of operating losses, by slowness of
receivables and inventory, or by the shifting to banks of obligations held by others.
Certain of these conditions are now
evident in financial statements of some
borrowers, and there is a reasonable basis
for anticipating their increase.
In recent years bankers have responded
more or less completely to their responsibility to provide for the sound and legitimate credit requirements of their communities. Today the greatest responsibility may lie in closer screening of credit
requests and a shortening of maturities.
Mr. Davis offers this advice: "Have the
borrower answer satisfactorily two questions. (1) For what purpose will the
funds be used? (2) When and from what
source will repayment be made?" This
kind of vigilant attitude toward the loan
account is a foremost community responsibility of the banker today.
Looking beyond the internal conditions
of his own institution, the banker must
recognize the importance of constructive
advice to his customers. His suggestions
and opinions on financial matters are
widely sought and respected. His influence should be aggressively directed
to strengthening the financial position of
the community.
A good strategy rests in encouraging
borrowers to engage in rigorous selfIn loan interviews and in
counseling, the matter of adequate financial records may be discussed with small
business men. The value of independent
audits may be explained. Questions of
operating production records, of information about costs, and of complete sales
and marketing data may be raised. More
often than not, it is appropriate to recommend a cash budget. This kind of
discussion and advice emphasizes the
necessity of knowing and controlling all
the details of a business. Most borrowers
sincerely desire to operate conservatively
and protect their capital; sound advice
from their bankers can help educate them
to do so.
Capital must of course take risks, but
in the hands of capable management
excessive risks are avoided. The banker




OCTOBER, 1952


who will promote this doctrine must discourage customers in unwise or untimely expansion on borrowed money. He
will urge equity financing for long term
requirements and retention of earnings
as a means of assuring future stability.
He should be patient but firm with that
multitude who hold equipment dear and
dollars cheap. His advice to speculators
should be forthright, and he must on
occasion help customers distinguish
between normal requirements and speculative accumulations. In support of his
advice, it may be desirable to explain
the economic conditions of business
trends which prompt it.
It is equally important to inform interested customers of banking policies
As an example, the
and programs.
Voluntary Credit Restraint Program was
not hard to sell to the public where the
banker thoroughly understood it and conscientiously made the effort. Bank customers usually do not understand the
basis of V Loans and various Federal
Reserve Regulations, even where the
effect is of wide public significance. The
banker who acquaints his customers with
credit programs and regulations fulfills
a community obligation, and at the same
time defends his own position which
might otherwise appear arbitrary.
One of the major areas in which business needs sound advice today is its approach to tax obligations. The present
and potential impact of taxes on business
is significant enough to cause genuine
concern among students of bank credit.
As a somewhat pressing current responsibility of bankers, the matter of sound
advice on handling tax obligations is
entitled to detailed consideration here.
It is a longstanding fact that tax accruals have been used as working capital
by practically all business. The significance and implications of this practice
were most forcefully presented in recent
articles by H. T. Riedeman, Vice President, Chicago National Bank.
Mr. Riedeman's research, based on
last year's Robert Morris Associate Statement studies, reflected the fact that over
90% of manufacturers used at least a
portion of tax accruals as general working capital. More significant, perhaps,
was the fact that 84% of all statements
used in the December 31, 1950, Robert
Morris Associates study reflected no
funding of tax reserves at all. This prevailing tendency was confirmed in the
examination of two groups of twenty
companies, each from Standard and
Poors, which held segregated tax funds
averaging only 40% and 36% of tax
accruals respectively.
While average positions suggest a
lack of adequate segregated funding, an
examination of individual financial state-
Federal Reserve Bank of St. Louis






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this leading financial institution.
Our unique geographical position
means that—wherever you are—
you get overnight service on transit
and collection items. For special
needs, of course. First National

maintains direct wire facilities with
leading financial centers everywhere.
These advantages—plus the friendly
alert service First National accords
all customers—are some of the
reasons why so many correspondents
think of First Nationalfirst.
See if you don't agree. Make First
National your bank in St. Louis.




ments points up wide variations in tax
funding, tax liabilities, and bank borrowings. As a limited test, I studied statements of twenty of the most highly
regarded borrowers of our bank. At the
extremes I found two highly profitable
companies—one of which had no outstanding bank debt and a funded reserve
exceeding seventy percent of estimated
tax liability; the other was using all the
bank credit it had available but had no
tax funds whatsover set aside against its
substantial liability. Only two of the
twenty held tax notes or governments
and a few of these companies have, to
my knowledge borrowed specifically to
make tax payments in the past.
From the loan officer's viewpoint, the
danger in using tax accruals for circulating capital appears to be increasing because of (1) an unfavorable trend in
corporate liquidity, (2) substantial increase in tax rates, and (3) speed-up of
tax collections. The net effect of these
factors promises to manifest itself in



heavier bank loan demands and less liquid
supporting financial statements.
As related by Mr. Reideman, the
quarterly industrial financial report series
reveals a sharply declining liquidity since
early 1950 in certain manufacturing lines
including food, apparel, furniture, rubber,
tobacco, fabricated metals, and others.
While liquidity has declined in recent
times, tax rates have risen sharply. Corporate income tax rates moved up from
38% to 52% between July 1949, and
April 1951, with the full effects of the
increased only recently being felt. In
1950, a new excess profits tax became
law. The result is a combined rate which
may run as high as 70% of current inIn many instances, then, tax
liabilities have increased from $38,000
to $70,000 per $100,000 of profits,
thereby creating heavy additional current
debts and reducing the amount retained
as working capital and equity funds.
The speed-up of tax collections under
Turn the Page



the Mills Plan is another development
deserving the banker's attention. Tax
liabilities can no longer be treated as an
annual installment note to be amortized
in four quarterly payments. The acceleration of payments under the plan is
gradual, but by 1955 the entire tax
liability must be paid during the first
two quarters.
It is currently estimated that the aggregate tax liability of corporations is
perhaps four times corporate bank debt.
With increased rates and pyramiding of
the debt in the first two quarters, the
majority of companies will face a severe
strain on cash. The potential loan demand
is enormous while liquidity and profits
continue to diminish.
Another fact of the tax problem is
reflected in tax liabilities arising from
partnership income. The banker faces
some difficulty in acquiring full information about the tax status of members of a
Federal Reserve Bank of St. Louis



partnership, for even the most competent
public accountants ordinarily ignore the
matter in audit reports. Almost inevitably, sustantial earnings are the forerunner of substantial withdrawals for tax
purposes. On the other hand, partners
seem prone to assume that funds required
for tax purposes will always be available.
Frequently, the mistake of commiting
profits and
personal funds to an imposing new home
or to other outside investments is made
The partner who acts thus may be
embarrassed at tax paying time or the
business may suffer from excessive distribution of working funds.
It seems essential for lenders to secure
a detailed account of the prospective tax
withdrawals. In reviewing a partnership
financial statement the banker must include this adjustment to assure a comprehensive analysis of its affairs. Equally
important, bankers can, through thoughtful counsel, help partners recognize the



fallacy of considering partnership profits
as immediately and automatically available to spend.
The facts just presented highlight the
growing problem of taxes, which the
banker must play a part in solving. In
most instances, he should vigorously urge
increased funding of tax reserves and
discourage heavy shifting of tax obligations to bank debt. This course of action
will serve the best interest of the customer and the community.
As community lender and financial
adviser, the banker encounters his most
substantial and complex responsibilities.
These cannot be properly discharged except on the basis of positive action supported by a through-going knowledge of
banking, of the community, and of business conditions. In the words of Mr. W.
Harold Brenton, Vice President, American Bankers Association, "Now I am not
expecting bankers to be saviours of the
country, but I do want people to be
better advised. Bankers must be desciples
of sound economic principles, so that we
may have a better informed public and
a better informed electorate to select and
direct the public's representatives."
According to Ben H. Wooten, president of the First National Bank of Dallas,
a 5 day work week has been adopted.

relaxation on
rnear' a
will eventually-days of
A few
Mississippi Gulf
earth fOr
eeded rest
years on
that rn
for a
Buena Vista
to take
family to
bring the
week of
weelcencl or

HISTORY, Cont'd.
nual assessment of 1 /20th of one percent
be made against the deposits of all State
banks to provide a fund to protect or pay
the depositors of failed Guaranty banks.
Banks that failed to qualify for the
Guaranty Fund were to be liquidated.
Governor Earl Brewer appointed the
following citizens to constitute the first
Banking Board.
W. P. Holland, of Clarksdale, as the
Lewis Crook of Meridian, as the accountant;
Judge N. C. Hill of Hattiesburg, as
the attorney.


The principal duty of the Board was
to select and qualify the three Bank
Examiners provided for in the act. One
examiner was to be selected from each
Supreme Court District.
The Banking Board held a written examination on a competitive basis.
Thirteen applicants took the examination
with results as follows:
S. S. Harris, of Tupelo, was selected
from the northern district;
E. F. Anderson, of Clinton, was selected
from the central district;
J. S. Love, of Hattiesburg, was selected
for the southern district.

OCTOBER, 1952


Examiners met and selected Robert B.
Hall of Meridian, as Secretary of the
Board of the Examiners. Mr. Love having
received the highest grade on examination
was named chairman. Thus the Banking
Department was organized and set up to
examine banks.
Examiners had until January 1916 to
examine and qualify State banks for
membership in the Deposit Guaranty
On May 1, 1914, the examiners proceeded to examine banks to qualify them
as members of the Deposit Guaranty
Fund. Much constructive work was done
by the examiners during this period.
More than $4,000,000 was collected
from the stockholders and directors of
state banks for doubtful loans being
carried as assets, in order that they might
qualify under the Guaranty Act.
Back in 1914 the state had made
the largest crop of cotton in history,
prices had gone down, and banking suffered to some extent, however, no bank
failed during the year. Business conditions improved by 1916, but four banks
closed their doors including the Bank of
Commerce at Gulfport and the Bank of
Newton. Newton paid off its depositors
in full, but the Commerce bank had to
fall back on the guaranty fund to make
up the difference. As a result of World
War I, deposits increased in 1917, and
from 1918 through 1920 a period of inflation occurred. "Income was high,
money was scarce, interest rates high,"
and bad bankinng practices crept into the
state's banks again. As long as the war
prosperity prevailed, banks were able to
show a profit. By the end of 1920, however, it was evident that business was on
the wane. As a result there was a banking depression in 1921 and 1922.
Production in this country did not
decrease as Europe got back on her feet
and began making her own goods and
raising her own food. All of a sudden
it dawned on the country that farmers
were still paying high prices for equipment and materials, that they were
getting less and less for their crops, and
that a real scarcity of labor existed, all
of which was quickly reflected in banking circles. On December 31, 1919, the
306 banks in Mississippi reported deposits
of $132,936,114.80, and two years later,
1921, the 328 banks at that time reported deposits of only $56,909,849.64,
a severe drop. Eighteen banks failed
from 1921 to 1923.
The Guaranty Plan which had worked
fairly successfully for the first four or
five years, was proving more and more to
be a near-failure chiefly because the
assessments against the deposits were not
Turn the Page
Federal Reserve Bank of St. Louis



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HISTORY, Cont'd.
sufficient to pay the depositors of the
many banks that failed because of nearpanic economic conditions. Several other
States in the Union; namely Texas and
Nebraska passed similar Guaranty Laws
and these also proved to be failures.
In 1924 the Legislature changed the
banking laws, doing away with the
system of three examiners which was
not working very satisfactorily and created
the office of Superintendent of Banks,
making the superintendent responsible
for the operation of the banking department and giving him authority to employ
all examiners and office help. Assessments on banks were reduced to one
fortieth of one percent.
The law provided that the banks, in a



convention to be called every fourth year
by the Secretary of State of Mississippi,
should meet and select a superintendent
and also fix his salary. Each bank was
given one vote at the convention. This unusual and rather unique way of selecting
the Superintendent of Banks for Mississippi proved a good plan and worked out
very satisfactorily.
In response to a call sent out by the
Secretary of State, each state bank sent
a representative to the meeting held in
the House of Representatives at the
Capitol in December 1924. The purpose
of this convention was to select a Superintendent of Banks and fix his salary for
the next four years.
Several nominations were made. J. S.
Love, of Greenwood, was selected as

State Street Branch
Deposit Guaranty Bank & Trust Company
Jackson, Miss
Every WESTBROOK Layout Tailored To Fit
the most exacting individual taste and to secure
your greater future

Designing and Engineering Service
will be furnished at no cost or obligation

First Since 1902
Federal Reserve Bank of St. Louis




Superintendent of Banks on the first
ballot and his salary was fixed at $7500
per year. Mr. Love was reelected in
1928 and his salary fixed at $12,000 per
year. He was again reelected in 1932
at the same salary.
In 1928 the Superintendent of Banks
reported to the State Legislature that the
Guaranty of Deposit Law was not sound
and was unworkable, therefore, a failure
in his opinion. He reported that there
were more than $4,500,000 of Certificates of Guaranty outstanding held by
depositors of failed banks. There was no
money in the fund to take care of them.
The legislature felt this to be their
responsibility because they passed the
Guaranty Law over the bankers objections.
Therefore, an act was passed authorizing the State Bond Commission to issue
$5,000,000. of five and one-half percent Banking Department bonds, to be
sold by the Commission and the proceeds
used to retire the Guaranty Certificates
outstanding, including the interest at
four percent. This act was a very wise
piece of legislation and proved to be
very helpful in re-establishing State
banks. Indeed it was a turning point
for the better in the history of banking
in Mississippi.
Banking conditions continued to improve from on through the summer of
1929. There were sporadic bank failures,
of course, but both prices and crops were
good during these years. A careful
analysis of the 42 bank failures occuring
from 1914 to 1927 showed that many
more bank failures took place in sections
of the state where the people were
devoted entirely to one crop system. The
Delta section, dependent exclusively on
cotton was hard hit from 1921 to 1926.
But the majority of all banks in the state
enjoyed good profits up to June 29,
First signs of a major depression were
apparent in the fall of 1929. Price of
cotton and all commodities dropped.
Farmers could not pay bills or taxes and
could not buy. Bank deposits decreased
rapidly, and it became impossible for
banks to make collections on time.
On March 27, 1930 for each dollar of
capital and surplus there was, banks held
$10.50 in deposits. By the end of September 1931, this figure had decreased
to $7.60 in deposits for each dollar of
capital funds.
In 1929 there were 334 state and national banks doing business in Mississippi.
The following year 59 banks failed. In
1931, 56 more banks closed, a total for
the two years of 115. In 1932, twelve
more went under, and a great shock to
Mississippi banking circles was the near
Turn to Page 22

OCTOBER, 1952




Are payroll dollars
working only part-time?
Let the
Continental Illinois Bank
help with your training program
Many of our correspondents use our
education and training films and other
visual material to supplement their own
programs for developing the talents of
their staff. This material covers a wide
range of subjects including:
Using letters effectively
Using the telephone effectively
Dealing with customers in person
Handling the customer's business
Managerial education and training
Increasing job efficiency
We shall be glad to share this material
with you, and to work with you in fitting it to your needs. Your inquiries
are invited.




• Continental Illinois National Bank
Federal Reserve Bank of St. Louis

and Trust Company of Chicago
La Salle, Jackson, Clark and Quincy Streets

Member Federal Deposit Insurance Corporation





HISTORY, Cont'd.

Founded in 1903
Assets More Than
Surplus Funds More Than

Serving many of
with our Credit Life Plans
Write or call us for full information.

Chattanooga, Tennessee
CECIL WOODS, President
FRANK HILL, Home Office Manager
GLEN HAMILTON, Field Manager

failure of the Merchants Bank and Trust
Company, largest bank in the state, but
J. S. Love, superintendent of banks, was
able to obtain sufficient funds from the
Federal government to tide the big bank
over this crisis. The Merchants Bank
held large deposits for many of the
smaller banks in the state.
It is not the purpose of this writer to
explain the why and wherefores of the
depression, however, one writer who has
done considerable research on the subject
lists the causes of bank failure in Mississippi as, 1. Change in the general economic conditions after 1920; 2. Overbanking; 3. Bad management; 4. Small
capital and surplus funds; 5. Too high
rate of interest paid on demand and time
deposits; 6. Too many free services by
the banks; 7. Over-extension on real
estate loans; 8. Unwise investments in
purchases of bonds and stocks; 9. Loans
to officers and directors; 10. Long term
loans; 11. Competetive banking; 12.
Taxes; and finally, 13. Lack of confidence
and hysteria on the part of the general
Certainly the fact that the state legislature had repealed the guaranty law aggravated conditions at the time. It is
argued, however, that it was a wise
move because had the law not been


suspended at the time so many bank
failures occurred, the state probably
would have issued more certificates than
could have been paid. It is estimated
that more than $18,000,000 would have
been outstanding by September 1931.
Too, the fact that the depression had
hit all banks, small and large alike, was
a very disturbing factor.
The larger
Mississippi banks depended on the still
bigger banks in New Orleans and Memphis, and they in turn were tied into still
larger banks, connected with the eastern
banks, and so all along the line. Each
bank was having so much difficulty of
its own that little attention could be
devoted to the troubles of the neighboring institutions.
The first place Mississippi bankers
turned for help was of course the State
Banking Department, and the superintendent of banks rendered valuable assistance in obtaining loans and loosening
certain requirements where feasible. The
Federal Land Bank had little money to
lend, but it did cooperate where possible.
In 1932 the Reconstruction Finance Corporation set up 12 regional offices
throughout the country for the purpose
of making loans, and there were several
other government agencies designed to
restore credit. From the Reconstruction
Finance Corporation and through the as-

This is an age of specialization and foreign banking
has been a specialty of the Merchants National for fifty
years. But this specialized knowledge and experience is
not for our benefit alone. It may be used also by those
banks without foreign departments of their own. The
next time one of your valued customers needs help with
some foreign transaction which you cannot handle, just
call the Merchants National. We shall be happy to work
with you, and the world-wide, world-wise service of this
experienced bank is as near as your telephone.

Capital and Surplus $4,000,000
Federal Reserve Bank of St. Louis






OCTOBER, 1952





banking facility
with everypersonalized servBank
dedicated to
routine, is at
and beyond
in Jackson.
your service





Member Federal
Life Bldg.
Main Offices: Tower Bldg.)
and Capitol
Branches: Fondren


sistance of the superintendent of banks,
110 Mississippi bank and trust companies
received loans.
And the banking picture was considerably brightened and improved by the loans
from the Federal agencies. Bankers were
being very conservative in the latter part
of 1932 and early months of 1933, and
although there remained much to be
done, Mississippi banking was probably in
better condition than that in many other
parts of the country.
Moratoriums, placing limitations on the
withdrawal of deposits had been declared
in several states greatly handicapping
general business and trade. Indeed the
whole banking structure of the country
seemed near a collapse. President Franklin
D. Roosevelt came into office and on
March 5, 1933, declared a national
bank holiday. All banks were closed for
12 days.
In Jackson all bankers were called to
a conference. On March 15, 1933, 137
state banks and 18 national banks were
permitted to reopen; by the end of the
year, 212 of the 216 banks in operation
before the bank holiday were deemed
sound enough to do business again. Undesirable assets totaling more than
$4,500,000 had been removed from these
banks, and their capital structure was
greatly increased and strengthen. During
Federal Reserve Bank of St. Louis

the same period six more national banks
were licensed, bringing the total to 24
national banks.
One of the banks that failed to reopen
in Mississippi was the Merchants Bank
and Trust Company in Jackson, the
largest bank in the state. As already
stated, the bank almost failed in 1932,
but was saved by a large loan. When
the Canal Bank and Trust Company in
New Orleans went under, all the available cash and sight exchange of the
Merchants Bank and Trust Company was
tied up, and it was never possible to get
the affairs of the state's biggest bank in
shape to resume business.
The effects of this one bank failure
were far-reaching. At the time of the
President's proclamation declaring the
holiday the Merchants Bank's deposits
amounted to $5,732,032.22, and a large
portion of these deposits belonged to
smaller banks over the state. The bank
was placed in liquidation on April 10,
Congress authorized the Reconstruction
Finance corporation to take preferred
stock in banks approved by the State
Superintendent, thus building up the
capital stock which was weakened by
frozen loans. The RFC took a total of
$9,280,630 in preferred stock in 151
Mississippi banks, strengthening the

capital structure of these institutions and
saving the situation.
There followed a number of developments on the federal scene, creation of
a series of agencies designed to help pull
the national economy out of its cramped
The Intermediate Credit Bank was
chartered and began to make loans on
commodities. The Crop Production corporation made loans on growing crops.
The Home Owners Loan Corporation made
loans on homes on terms that enabled the
owners to hold on to their property and
relieved the banks of many frozen assets
they were holding.
The Federal Land Bank similarly were
able to relieve banks of frozen form loans
on their books.
With all of these agencies functioning smoothly, the financial situation was
eased and also the keen tension which
existed in the minds of the people was
relaxed. Confidence was thus restored
and in the course of a few months time
business and banking began to approach
normalcy once more.
At the beginning of 1934 the banking
outlook was good, in fact exactly a year
from the date of the banking holiday,
Mississippi banks were in the best condition of their entire history. The Federal
Turn the Page



ASSETS OVER $24,000,000.00



SURPLUS OVER $1,800,000.00

Inviting guardianship
fund investments ...
FIRST FEDERAL cordially invites all banks to
invest part of their trust funds in the Association. Our current dividend rate is 2/
2 percent,
and we have always followed the policy of paying the highest rate consistent with sound
We invite your inquiry concerning guardianship fund investments.

Savings &Zoan qssocidion

HISTORY, Cont'd.
Deposit Insurance Corporation was set
up, and practically all banks hastened to
avail themselves of the protection. Liquidation of the 74 banks closed since early
1930 had progressed in orderly manner
and under the prevailing conditions. On
March 5, 1934 state bank reserves including government securities were
$34,400,000 or 38 per cent of deposits.
Liquid cash including $21,000,000 invested in municipal bonds were 46 per
cent of deposits. Total cash and holding
amounted to $58,189,472, or 72 per
Federal Reserve Bank of St. Louis

cent of deposits. Capital structure was
$16,500,000. Bills payable was only
$660,000 as compared with $3,168,134
at the end of 1933.
Credit for the rapid recovery from the
worst depression in banking history was
given to the Reconstruction Finance, Corporation, which continued to aid the
banks, and to the Federal Deposit Insurance Corporation, which offered confidence in the form of insurance.
The Banking Act of 1934 created the
Department of Bank Supervision and the


office of state comptroller. "The management control and direction of the Department of Bank Supervision is hereby
vested in the state comptroller who shall
be directly responsible for the right
functioning thereof," the law read.
Since that time state comptrollers have
been Marion D. Brett, Marks, 19351936; James C. Fair, Cleveland, 19371940; Sidney Lee McLaurin, Brandon,
1941-42; Joseph W. Latham, Lexington,
1942-1947; and Cleveland T. Johnson,
Clarksdale, 1947 to date. Johnson, incidentally, has been with this department
in various capacities for 32 years.
Since the mid-thirties the country has
experienced an era of government spending, of inflation, of war, and oddly enough
prosperity. Since the bank holiday in
Mississippi only one small bank has failed,
and probably that could have been
avoided. The tendency since those tragic
days when fortunes were lost over night,
when suicides were not an uncommon
way out of it all, has been to fewer banks
and stronger banks. The banks have
tended also to take more interest in their
depositors and in the community as a
whole, realizing that the people must be
strong, must understand the handling and
the use of money on a scale larger than
the fence that enclosed their farms. Many
banks have found it to their interest to
promote good agricultural practices, good
industrial and commercial ventures, and in
some instances have maintained an educational program along these lines for
customers, employees, investors, and
bank officials alike.
The years since the mid-thirties have
been good years. The lowest ebb, of
course, was in 1933 when the total resources of the state's banks were $153,641,000, but three years later the total
had crawled back up to $231,123,000;
in 1939, the total resources were $238,534,000, and from then on each year
became a peak year. For instance 1942
—$413,193,000; 1945 — $826,716,000; 1948 — $865,451,000; 1950 —
$873,776,000; and 1951—$941,000,000.
The capital accounts of the state's
banks have correspondingly gained. In
1929 the capital accounts stood at
$29,076,300; in 1952 the capital accounts are $57,400,000.
Thus, has it been for one hundred and
forty-three years in Mississippi banking.
The long period has been divided between
good times and bad times, depression and
prosperity, failure and success. Now, in
1952, Mississippi's 202 banks, 178 state
banks and 24 national banks, are doing
business on an even keel and growing
strong on the lessons of some bitter, bitter
experiences of yesteryears.

Federal Reserve Bank of St. Louis




Federal Reserve Bank of St. Louis

February 17, 1956

Mr. Edison H. Cramer
Chief, Division of Research
and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
In reply to your letter of January 26th,
I will advise that in my opinion, Mr. Warburton has
compiled a very accurate report of the handling of
the Mississippi depositor's guaranty fund.
I wish to concur and approve this statement of facts by Mr. Warburton.


P. 0. 502 328



January 26, 1956

Mr. E. 0. Spencer, President
Mortgage Bond & Trust Company
Walthall Motel
Jackson, Mississippi
Dear Mr. Spencer:
Mr. Clark Warburton, of our staff, has told me about
his conversation with you regarding the closing of the
Mississippi depositor's guaranty Pane. On behalf of the
Federal Deposit Insurance Corporation, I want to thank
you very much for the information that you gave him.
Mr. Warburton has drafted an account of the process
which you described, for use in our study of the Mississippi
depositor's guaranty fund. We shall be glad indeed to have
any corrections, or mdggestions for improvement of the
description, that you would like to make.
Federal Reserve Bank of St. Louis

Very truly yours,

Edison H. Cramer, Chief
Division of Research and Statistics

A description of the process of retirement of the guaranty fund certificates has been provided by Mr. E. 0. Spencer, president of the Mortgage Bond
& Trust Company, Jackson, Mississippi.
A fire insurance company with which
Mt. Spencer was associated owned about $50,000 of the guaranty fund certificates,
largely taken in for payment of insurance premiums from policyholders who could
not pay in cash under the depressed business conditions of 1931.

Mr. Spencer

had also learned that a few banks and other financial institutions held about
a million dollars of the certificates; and after a careful study of the law
providing for a bond issue to retire the certificates, inquired of the legal
officials of the State whether it would be possible for this group of certificate holders, or the Mortgage Bond & Trust Company acting as their agent, to
purchase with cash an amount of the bonds equalling their certificate holdings, with the State Treasurer then using that money to retire those certificates.

The bonds would then be distributed to the certificate holders--in

effect, exchanged for the certificates.

The Department of Banking and the

Attorney General agreed that this process might be followed, provided that
all holders of the certificates be given the same privilege.

The Mortgage

Bond & Trust Company then arranged to act as agent for all holders of the

The lowest denomination of the bonds was $500, and to provide

for "exchaage" of certificates of smaller amounts, bonds of that denomination
would be purchased, placed in trust and participating certificates issued
to the certificate holders.

The participating certificates were negotiable,

which made it possible for them to be collected in appropriate amounts and
then exchanged for the bonds.

The Mortgage Bond & Trust Company, as agent

for the certificate holders in the "exchange,
Federal Reserve Bank of St. Louis


charged a handling fee of

Interview with Mr. E. 0. Spencer, January 16, 1956.


3 percent (5 percent toward the end of the process) which mot most of their
It is impoSsible to determine how much the original depositors in the
failed banks may have lost.

Many of the certificates that had been issued

before it became clear that the fund was becoming hopelessly insolvent had
been taken by operating banks and had remained in their possession.

If the

holders of the certificates, whether the original depositors or not, retained to maturity the State bonds which they received, or held them until
the market price for the bonds was at or above par, they did not lose except
for the commission charged for handling the


But those that sold

their bonds or participating certificates at prices prevailing in 1932, or
soon thereafter, lost just as they wculd have done by selling other State
bonds in the depressed market.
ImEmmaFederal Reserve Bank of St. Louis

Federal Reserve Bank of St. Louis



As of December 31, 1954


Mortgage Bond & Trust Company
Jackson, Mississippi

Cash on Hand and in Bank
Cash in First Federal Savings CT
Loan Association — Jackson



Accounts and Notes Receivable


Accrued Interest Receivable


First Mortgage Loan


Investment in Stocks


Accounts Payable

Jackson Real Estate
repaid License
Federal Reserve Bank of St. Louis



Accrued Taxes


Reserve for Accrued Dividends


Current Liabilities

Capital Stock

Trust Receipts — Bond Equities


Surplus and
Undivided Profits






Total Capital and Surplus



n1 I• 1,71 Spe-rtzbu itagea 24W




— *7----- p •




( („,,,,,/,49/5--i, iirt /.y



647 7,94.----,


c''‘-yi.-•:--- ‘--)vs--t

1.19 t,







3 2\



Federal Reserve Bank of St. Louis



January 23, 1556


Dr. Cramer


Clark Warburton


Report of work for week ended January 20, 1956

Reports of work of the staff of the Banking and Business Section are attached.
Leave - Annual: Dr. Warburton - Jan. 18-20; Mr. Golembe - Jan. 18; Miss Thompson
Jan. 18; Mrs. Bergquist - Jan. 20. Sick: Miss Thompson - Jan. 16.
Spent Monday in Jackson, Mississippi. Talked with Mr. Thompson, one of the
Corporation's examiners, who was examining a bank in Jackson that day.
W. Gclembe had suggested that he might know something about the process
of closing the guaranty fund in Mississippi. He was not familiar with it,
but gave me the names of a few persons who might know about it.
Then I saw Mt. Leigh Watkins, secretary of the Mississippi Bankers Association,
who referred me to Mr. E. O. Spencer, and called him on the phone to make
an appointment for me. Mr. Spencer is President of the Mortgage Bond & Trust
Company, which handled the entire transaction, and who had worked out the plan
for "exchanging" the guaranty fund certificates for the State bonds which had
been authorized to pay off the fund's indebtedness but which had not been
sold when offered in the market. Mr. Spencer told me about the entire process.
During the rest of the week, we made a leisurely drive from Jackson to Washington through the Great Smokies and the Blue Ridge Mountains, reaching home
)Friday evening. Wednesday, Thursday, and Friday will be charged to annual
leave, as I would have arrived in Washington Wednesday morning had the trip
been made by train.
Federal Reserve Bank of St. Louis
Federal Reserve Bank of St. Louis



September 21, 1955

Mr. Leigh Watkins, Jr., Secretary
Mississippi Bankers Association
P. U. Box 37
Jackson, MississipEd
Dear Mr. Watkins:
We are returning to you today, by registered mail,
volumes 15 through 19 of 'The Mississippi Banker", which
you so kindly loaned us. We appreciate very such your
courtesy in making this material available to us.
Very truly yours,

Bdison N. Cramer, Chief
Division of Research and Statistics


Federal Reserve Bank of St. Louis

Septelber 28, 1955

Mr. Dennis A. Dooley
State Librarian
The Commonwealth of Massachusetts
State Library
State House
Boston, Massachusetts
Dear Mr. Dooley:
We thank you very much for the loan of the Mississippi
Banking Report for 1920-19210 which you sent us with your
letter of September 22. We are returning this report, and
enclosing stamps to cover your postage on this report and the
one which you had previously loaned us.
Very truly yours,

Edison H. Cramer, Chief
Division of Research and Statistics






September 22, 1955

Mr. Edison H. Cramer
Chief of Division of Research
and Statistics
Federal Deposit Insurance Corporation
Washington 25, D.C.
Dear Mr. Cramer:
We have just received the Mississippi
Banking Report for 1922-23 which you returned so
promptly and are forwarding the Report for 1920-1921,
for a loan of two weeks.


We hope that the Harvard Law School Library
was able to send you the other reports which you need.
Very truly yours,
Dennis A. Dooley
State Librarian


Federal Reserve Bank of St. Louis

Vice-Pres. and Chairman Executive Committee
J. T. Brown, Jackson

S. E. Babington, Magnolia


C. E. Morgan, Kosciusko

Mississippi Bankers Association
Official Journal "THE MISSISSIPPI BANKER" Published Monthly

PHONE 4-4268

P. 0. Box 37
Leigh Watkins, Jr.

Jackson 5, Mississippi
September 16, 1955

Mr. Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
We are indeed happy to lend you volumes 15 through 19 of
the Mississippi Banker. They are being shipped you by
You can return them at your convenience.


Sincerely yours,

Leigh Watkins, Jr.,

Federal Reserve Bank of St. Louis
Federal Reserve Bank of St. Louis




SepteMber 20, 1955

Mr. Dennis A. Dooley, State Librarian
The Commonwealth of Massachusetts
State Library
State House
Boston 33, Mazsachusetts
Dear Mr. Dooley:
We thank you very much for your letter of September 16
and the efforts you have made to locate Texas Department of
Insurance and Banking Reports for us.
In regard to the Mississippi reports, we are returning
the report for 1922-1923. Unfortunately, an error was made
in our letter of September 12. It is the preceding report,
covering the years 1920-1921, which we had been unable to
locate elsewhere, and would appreciate borrowing from your
Very truly yours,

Edison H. Cramer, Chief
Division of Research and Statistics


BOX 571


September 7/ 1955

Mr. il,dison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
In reply to your letter of August 31 requesting the loan of volumes of The Mississippi Hanker, we regret
to advise you that our file of these magazines does not include the volumes you need.


We have Volumes 5, 7, 8, 9, 10, 11, 12, 13, and
14. Then there is a gap. Our next issues begin with volume
if you can use any of these which we
21 and go through 38.
have we shall be glad to let you have them.
If this Department can be of further service to
you, please do not hesitate to call on us.
Sincerely yours,


Federal Reserve Bank of St. Louis

Charlotte Capers

Federal Reserve Bank of St. Louis



August 31, 1955

Kr. WUUMB D. ilieritaip Director
Department of Archives and History
jocks= 5, Mississippi
Deer Kr. McCaiDZ
Last February we borrowed from your library

several volumes of jal Mississippi Banker.

We would sow like to borrow volumes 15 through
19 which we did net obtain at that time. We shall of
course be dlad to pay the postage on these books both
Yew truly yours,
(Signed) Edison IR.

Ldison H. Cromer: Chief
Division of Research and Statistics
Federal Reserve Bank of St. Louis



June 29,


Mr. William D. McCain, Director
Departmeat of Archives and Hiatory
State of Miasissippi
Box 571
Jackson 5, Aiasiasippi
Dear Mr. McCain:
We are returning to you today, by registered mail,
the Biennial Report of the Banking Department of the State
of Mississippi, 1918-1919, which you so kineily loaned to us.
We appreciate very much the eatension of time we were allowed
in which to return the volume.
Very truly yours,

Edison H. Cramer, Chief
Division of Research and Statistics

4 Nro'


11110o5St Office ;epartntent




Return to

Federal Deposit Insurance

Street and Number,'
or Post Office Box,'



N..1./4_,Asihd_eik 2,

NO.±L1L 1 Q3
Federal Reserve Bank of St. Louis

D. C.

Form 3811
Rev. 1-52


Received from the Postmaster the Registered or Insured Article, the number
appears on the face of this Card.

(Signature or name of addressee)

(Signature of addressee's agent—Ageni should enter addressee's name on line ONE above)

Date of delivery

JUN 16 1S5 , 19

Federal Reserve Bank of St. Louis





BOX 571



June 16, 1955

Mr. Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
Your letter of June 14, acknowledging receipt of the
Biennial Report of the Banking Department of the State of Miss-


issippi, 1918-1919 , has been received.
It will be all right for you to keep this report for
four weeks.

William D. McCain

Federal Reserve Bank of St. Louis
Federal Reserve Bank of St. Louis




June 14,


Mr. William D. McCain, Director
Department of Archives and History
State of Mississippi
Box 571
Jacksono Mississippi
Dear Mr. McCain:
We appreciate your sending to us, at the request of
Mr. Golembe, the Biennial Report of the Banking Department of
the State of Mississippi, /918-1919.
Since the person who is preparing the statistics on
Mississippi is at present on leave, we should like your permission to keep the book for fear weeks instead of the usual
two. We are enclosing, in stamps, the amount of postage
required for transportation.
Very truly yours,

Edison H. Cramer, Chief
Division of Research and Statistics




BOX 571



June 10, 1955




Mr. Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
Mr. Carter H. Golembe, of your Division, has just been
in this Department, and requested that we send you, on interlibrary loan, the Biennial Report of the Banking Department of
the State of Mississippi, 1918-1919.
We are sending this Report to you today.
Under the usual terms of an interlibrary loan, the borrower should pay postage both ways, and the book should not be
taken out of your Agency.

Please return the book in two weeks.

Williar D. McCain

Federal Reserve Bank of St. Louis














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May 23, 1955

Mr. Carter H. lolembe
Room 421
The Walthall Hotel
'ackson, Mississippi
Dear Carter:
Thank you very much indeed for the material that you Obtained
from the Mississippi's Bankers Association. The bound volume of statements arrived this morning and includes those for the two dates that I
had not been able to obtain previously. These will be very usef-1 and
also the biennial report of the Banking Department. Dr. Cramer says
that he will remunerate you for the $2.63 postage so that you do not
need to put it on your expense voucher.
Thanks also for inquiring at the Banking Department. However,
I was able to borrow 1914-1917 statements here in Washington so that I
will return that volume as soon as it arrives.
I probably should have told you in my previous letter that
Mt. Love, Sr., contributed an article on banking history in Mississippi
which was published in two issues of the Mississippi Banker in 1952.
If he is no longer living, his death must have occurred in the past
three years. If you have an opportunity and feel it desirable to
contact the J. S. Love and Company to pursue the inquiry about the
other three biennial reports of the State Banking Department prior to
1.922 I would appreciate it.
Federal Reserve Bank of St. Louis

With my best regards,

Clark Warburton












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Federal Reserve Bank of St. Louis



May 17, 1955

Mr. Carter H. Gals:min
Room 421
The Walthall Hotel
Jackson, Mississippi
Dear Carter:
I appreciate your note asking whether you might be able to
obtain any information pertaining to the Mississippi study. Before
you left here, knowing that you would likely be in Jackson, I thought
about this possibility but did not mention it because we had already
pretty well exhausted such possibilities through correspondence.
However, Amps you might, if it is convenient, phone or
call at the Mississippi Bankers Association, 702 Milner Building,
Pearl and Lamar Streets, Phone 4-4268, to ask whether they have any
of the following:
Biennial Report of t7.kt anking Department of the
State of Mississippi: for 1914-1915, 1916-1917,
1918-1919 and 1920-1921
Statements Shoving the Condition of
State Banks
and National Banks in Mississippi: for December
31, 19190 and for December 31, 1920
We have obtained these publications for other dates but have been unable
to locate them for the dates mentioned. The Department of Archives and
History and the Department of Bank Supervision, in Jackson,have both
been very cooperative, but do not have these publications for the dates
given above. We have not checked with the Mississippi Bankers Association (which very kindly loaned us copies of The Mississippi Banker) to
see whether they might possibly have them. I am not sure that they were
ever published.
Also we have had no reply to a letter written about two months
ago to Mr. J. S. Love, Sr., J. S. Love and Company, Jackson. I am not
sure that Mr. Love is still living, if so he would now be about 83 years
of age. When I wrote I hoped that I might obtain a reply from a mother
Federal Reserve Bank of St. Louis


of his family if he is no longer living, as I think his son was
associated with him in that company. Mr. Love was with the Banking
Department from its beginning in 1914 as a bank examiner and became
Superintendent of peaks in 1924, a position which he held until 1934.
I thought possibly his files might contain the foregoing items, if
they were ever published.
With my cordial good wishes for your success in examining
Federal Reserve Bank of St. Louis

Clark Warburton


















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May 10, 1955

Mr. Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
As requested in your letter of May 4, we are enclosing
copy of the publication of statements showing the condition
of State and National banks in Mississippi for December 31,
Sincerely yours,
Department of Bank Supervision

(Mrs.) Evelyn Gary

Federal Reserve Bank of St. Louis






May 23, 19%

Federal Reserve Bank of St. Louis

111101812RBD NAIL

Dr. Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Dr. Cramer:
At the request of Dr. Carter Golembe made through Jales
W. Thompson, one of your examiners, we are enclosing
herewith bound Statements showing the condition of State
Banks and National Banks in Mississippi at the close of
business June 30, 1914, Decemler 31, 1914 and December
31, 1915.
As these are the only copies of the Statements we have
for the dates shown it is requested that after they have
served your purpose they be returned to U9 by re:istered

With kind personal recards.
Sincerely yours,


ac J. Van Landingham
For the Department
Federal Reserve Bank of St. Louis




3, 1955

Mr. J. S. Love, Sr.
J. S. Love and Company
Jackson, Mississippi
Dear Mr. Love:
You may recall that twenty years ago members of the
staff of this Division had some discussion and correspondence
with you regarding the Mississippi deposit guaranty fund. Our
analyses of the experience of the various States with deposit
guaranty were interrupted before they were finished, but we
are now making an effort to complete the studies.
In connection with the Mississippi fund, we have been
examining the biennial reports of the Banking Department to see
what recommendations vere made regarding changes in the banking
code. However, we have been unable to locate the first four
biennial reports of the Banking Department, pertaining respectively to the years 1914-1915, 1916-1917, 1918-1919, and 192°1921. We do not have these four reports in our files, and
have been nnAhle to find them at the Library of Congress. The
present State Comptroller has been unable to loan these reports
to us, because of the destruction of files which had been left
in a building from which the Department had moved.
We believe that you were a member of the Board of
Bank Examiners prior to your appointment as Superintendent of
Banks, and have been wondering whether you might have in your
own files a copy of these first four biennial reports of the
Banking Department; and if so, whether you would loan them to
us for a few days. If you do not have these reports, would there
be any other member of the Board of Bank Examiners during that
period who might have retained a copy.
Very truly yours,

Edison E. Cramer, Chief
Division of Research and Statistics










February 18, 1955

Mr. Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
In compliance with your request of February 16,
we are sending you on interlibrary loan volumes 5, 7 and
8 of The Mississippi Banker.


Our earliest holding is volume 5 (1918/19) and
volume 6 is missing. We have volumes 9 through 14 (19221930) also, which we will send you in groups of three at
a time.
Under the usual terms of an interlibrary loan,
the borrower should pay postage both ways, and the books
should not be taken out of your Agency.
Please return them in two weeks.
Sincerely yours,


Charlotte Capers



Federal Reserve Bank of St. Louis

Storm MU
Rev. 1-52



Received from the Postmaster the Registered or Insured Article, the number
of which appears on the face of this Card.



,....:1 ,
(Signature or no
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(Signa(ure of addressee's agent—Agent should enter addrassces nada on tine ONE above)

Date of delivery

AJAR 6 1955

Federal Reserve Bank of St. Louis




Vogt Offir




MAR '9
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Return to

Federal Deposit Insurance Corpo

Street and Number,'
or Post Office Box,f





Federal Reserve Bank of St. Louis




'larch 8th 1955.

Miss Amy D. Early, Librarian,
Federal Deposit Insurance Corporation,
Washington 25, D. C.
Dear Miss Early:
The pamphlets containing statements showing condition
of state banks which were formerly published by this
Department were discontinued approximately 15 years ago
because the expense involved was great and did not seem
to justify such publication.


We have in our files a number of these booklets
from 1917 to 1939 but no extra copies are available.
Therefore we are unable to supply copies to your library.
Regretting our inability to serve you in this
instance, I am

--<1 J. W. Latham,
State Comptroller

Federal Reserve Bank of St. Louis

W. W. Hollowell, Greenville

Vice-Pros, and Chairman Executive Committee
S. E. Babington, Magnolia

Mississippi Bankers Association
Official Journal "THE MISSISSIPPI BANKER" Published Monthly

PHONE 4-4268

P. 0. Box 37,
Leigh Watkins, Jr.

Jackson 5, Mississippi
February 28, 1955

Mr. Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. C ruler:


I am shipping to you today, by railway express, Volumes
1-4 and 6 of the Mississippi Banker asked for in your
letter of February 24. When they have served your purpose, will you please return them to me.

Sincerely yours,

LeighWatkins, Jr.,

Federal Reserve Bank of St. Louis

J. T. Brown, Jackson

Federal Reserve Bank of St. Louis



February 16, 1955

Miss Charlotte Capers, Acting Director
Department of Archives and History
War lamorial Building
Jackson 5, Mississippi
Dear Miss Caper.:
In connection with our study of the Mississippi
Guaranty System we would like to examine issues of The
Mississippi Banker during the time when establishment of
the fund was under consideration and while the fund was in
active operation. We have been unable to locate a file of
this journal in Washington. Neither the Library of Congress
nor the Federal Reserve System library has the journal for
that period.
Consequently we are writing to ask if it would be
possible to borrow The Mississippi Banker on inter-library
loan for the years 1913-1930 inclusive. It would not matter
to us whether we received all the volumes at one time or
received a few at a time.
Very truly yours,

Edison H. Cromer, Chief
Division of Research and Statistics
Federal Reserve Bank of St. Louis


December 22nd, 1954.

Mr. Edison H. Cramer, Chief,
Division of Research and Statistics,
Federal Deposit Insurance Corporation,
Washington, 25, D. C.

Mr. Cramer:

Your letter of December 3rd, 1954 to the Reference
Librarian of the University of Mississippi was referred to
our State Librarian for reply who, in turn, has forwarded
the letter to us.
Of the semi-annual publication of statements
showing the condition of State and National banks in
Mississippi which you do not already have, there is on file
in this office only ONE - December 31st, 1921 and we are forwarding this to you today, under another cover. After it has
served your purpose, please return to us as it is the only
copy available so far as we know and we would very much dislike
misplacing it.
I am sorry we cannot supply you with the other
publications required but in moving to our present location a
lot of this material was lost or destroyed in error.
Very sincerely yours,

(signed: C. T. Johnson).
— .TT Jofinioii,— —
State Comptroller.







January 17, 1955


Edison H. Cramer, Chief
Division of Research and Statistics
Federal Deposit Insurance Corporation
Washington 25, D. C.
Dear Mr. Cramer:
Thank you for your letter of January 13th
giving the name of the publication regarding State and
National Banks in Mississippi.
We are sorry to tell you that we do not have
the issues for Dec. 31) 1919, June 30, 1920 and Dec. 31,
1920. Neither do we have the statements for the individual banks in printed or manuscript forms.

If this Department can be of service to you
in the future, please do not fail to call upon us.

Charlotte Capers

Federal Reserve Bank of St. Louis




Yr. bdison H. Cramer, Chief
Division of research and Statistics
Federal Deposit Insurance Corporation
Washington 25) J.C.
Dear Mr. Cramer:


We have your letter of December 3 requesting
information about the semi-annual publication
of statements showing the condition of state and
national banks for the 1918-1921 period and regret
to report that we do not have the publication for
those dates. We are, howevcr, forwarding our
letter ta Mrs. Julia Baylis Starnes, State
Librarian, in the hope that she has what you need.
In the event .hat you receive nothing from Hrs.
Starnes, we suggest that you contact next:
. William U. McCain, Director, Mississippi State
Department of Archives and History Library, War
Memorial building, Jackson 5, Mississippi.
Federal Reserve Bank of St. Louis

Very truly yours,
9r)44.1-bu 014-tee-e

Mahala Saville
Aeference Librarian

Novemter 29:

Dr. Warburton

Helen Thompson


The Mississippi Banker

No issues of The Mississippi Banker are available at
the Library of Congress.


A check through the index giving points cf accessability
for periodicals indicates that there are only two libraries
maintaining a fairly complete collection of the above mentioned
periodical-- (1) Department of Archives and History
Jackson, Mississippi
(2) Joseph Schaffner Library of Commerce
Chicago, Illinois
The New York Public Library and the Yale University Library
maintain a collection beginning as of 1936. The Yale collection, however.
is not complete and has many gaps between 1936 and 1940.

Federal Reserve Bank of St. Louis






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October 2d, 19514


Mr. Edison H. Cramer, Chief
Division of research and Statistics
Federal Deposit Insurance CorporaLdon
Washington 25, D.C.
Dear Mr. Cramer:
We have our recent letter asking for information on the history of
deposit guaranty in Mississippi and have made a search of our files. In
add ttion to the material Which you already have we have very little to
offer; however, we do suggest that you might like to take a look at
the issues of Mississippi banker, a publication of the Mississippi bankers
k.isociation. A quick look at the contents of the last two volumes gave
us references to two articles: "A history of Mississippi banking," by
J.S.Love (September-October, 1952) and "history of banking in Mississippi,"
by W.F.McMillan, r.(April, 1952), and we feel sure that you might find
more articles if a careful search were made. Two articles from the
Publications of Lne Mississippi historical •Society may be of some value:
"history of banking in MissisSiPpi," by Charles Hillman Erough (v.3,
p.317-339) and "Guarantceing bank Deposits," by A.B.Eutts (v.3, Centenary
Series, p.157-183). — We have t*o 'theses on banking in Mississippi, but
they deal with banking in an earlier era than what you areinterested in,
I believe. They are: Union bank of Mississippi, by Willis Levi Meadows,
Jr. (19L9) and history of State Banking in Mississippi, by Charles
Carlisle Alexander (1931).
If you should wish to borrow any of the items which we have in our
collection, we should be glad to lend them through interlibrary loan.

11ahala Saville
Reference LADrarian

Federal Reserve Bank of St. Louis





October 14, 1954

Mr. Edwin H. Cramer, Chief
Division of b-esearch and tatistics
Federal Deposit Insurance Corporation
Washington 25, D.C.
Dear kr. Cramer,
In answer to your letter of October 11 regarding a bibliography
on the subject of deposit guaranty in Mississippi, we find that you
ha ve used practically all the materials that we have on the subject.
We would like to recommend, however, a monthly publication
entitled The Mississippi Banker which is doubtless in the Library
of Congress. We list below a few of the articles during a limited
period so that you may gain an idea of the content of the periodical.
It is being published at the present date.
6e regret that we are not more helpful in answering this
Yours very truly,

1,6Lie„,, 00. doz„—e..,_e_e_
Willie D. Halsell
(Ass't. Reference Librarian)

The Mississippi Banker
Federal Reserve Bank of St. Louis

v. 19 (1934-35),
v. 21 (1936-37),
Address of hon. Jeff Busby, 40-45
F. D. I. C., 13 (Sept.)
Address of M. D. Brett, 27-39
v.20 (1935-36),
v. 22 (1937-38),
Conditions of State banks, 8-9
Heports, 10-12 (Aug.)
F. D. I. C., 19 (Mar.)
F. D. I. C. in Miss., 14
v. 21 (1936-37),
Some interesting iigures, 15 ‘June)
F. D. I. C. (Oct.)



October 21st 1954.

Mr. Edison F. Cramer, Chief,
Division of Research and Statistics,
Federal Deposit Insurance Corporation,
Washington 25, D. C.
Dear Mr. Cramer:
I have your letter of October 18th concerning
the experience of the State of Mississippi in the matter
of insurance or guaranteeing of bank obligations.

Federal Reserve Bank of St. Louis

Several years ago this Department moved from
an old location where it had been for many years and
at that time old files, etc., were left in storage at
the old site. Without consultation with this Department
the Secretary of State took over and destroyed by fire
records going back in some instances to 1918.
At this time there remains little in our
files which would help in the matter at nand. There'ore,
I do not feel it would nrofit the Corporation to send
a member of your staff to this DePartment. If one of
your local examiners would like to drop in it might be
possible we could give him a resume of the law and
something of its effect on bank operations.
With kind regards, I am
Very truly yours,

Federal Reserve Bank of St. Louis

October 18, 1954

Mr. C. T. Johnson, State Controller
Department of Bank Supervision
Jackson, Mississippi
Dear Mr. Johnson:
A number of years ago vs undertook a survey of the
experience of various States with insurance of bank obligations,
out after collecting considerable material completion of the
project was postponed. We have nov resumed vork on the project,
and hope to make the report for each State more complete than any
previous studies.
In reviewing the materials in our files, we find that
ye have little information on the operation of the deposit guaranty
system in Mississippi except the legislation itself, the financial
statements in the biennial reports of the Banking Department, and
a few brief studies of deposit guaranty in various States.
Consequently, we are asking whether the files of your
Department might contain material, other than that published in
the biennial reports, that we would be likely to find useful in
our study. Such material might relate to the financial condition
of the fund, the examinations of the participating banks, the burden
of the assessments on the banks, the causes of failures of participating
banks, the administration of the system, or the handling of the closing
of the system and of the fund.
If you have unpublished material that you think might be
useful to us, a member of our staff may be able to spend a day or two,
or more if needed, at your office toward the end of November.

Very truly yours,

idiom H. Cramer, Chief
Division of Research and Statistics

"?' 6 fr7-.


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Federal Reserve Bank of St. Louis

October 22, 1934.
Mr. J. S. Love,
Superintendent of Banks,
Jackson, Mississippi.

The banking trouble in Mississippi started in 1911 with the advent
of the boil-weevil. That year the cotton crop was a complete failure,and
Assissippi is economically dependent upon the cotton crop. In the following
three years there were many bank failures.
In 1914 the Banking Department was organized. The state was divided
into three districts and a bank examiner was elected by the people of each
district. Mr. Love was a member of this first committee. In the tlOgt year
a law was passed for the guaranty of bank deposits, to become effective
July 15, 1915. The law was passed in response to popular de:hand. An emergency situation existed; banks failed rapidly in the period from 1911 to 1914.
It was necessary to protect deposits and this was the only measure suggested.
The bankers were all opposed except one, and sent a lobby to the state Legislature to prevent the passage of the Bill. The law provided for five assessments of 1/20 of 1% against deposits of "going" banks as and when the bank
Examiner thought such assessment was required.


The time allowed for the examination of banks was not ample. In
Love's district there were 120 banks. At least one-third of these were
in a doubtful condition. This was the first banking examination which had .
ever been made in Mississippi. It is not difficult to distinguish the bank
which is really solid, but it is a matter for serious consideration when the
bank is on the border line.
During the first two years levy was made of only 1/20 of 1%. The
first failure wiped out the fund. Then the banking commission began to levy
full assessment as permitted by law---one in Januz:.ry, two in June and two in
October. In the third year three or four banks failed; in the fourth year
six or eight banks. After that banks failed at the rate of about ten each
The Fund was never adequate. In good years it would seem that some
progress was being made in building up a reserve. Then a bad year would
cause a complete exhaustion of the reserves and the creation of a deficit.
It was like a frog trying to jump out of a well. He jumps up one foot and
slips back two.


Certificates were issued to depositors. These bore 4% in interest
and soon the interest took half of the assessments each year. The assessments
amounted to about $350,000 a year. Certificates were issued at the rate of
600,000 a year. In about ten years the interest on the certificates equaled
the total amount of the assessments.
Federal Reserve Bank of St. Louis


J. S. Love

October 22, 1934

In ten years Mr. Love tried to get the law repealed but politics got
in and the Legislature did not repeal it.
In 1924 the election of the three examiners by the people was changed
to the election of a Superintendent of Banks by the bankers.
In Mississippi the number of banks chartered was not excessive.
Love throughout the period met the situation by direct discussion with those who
applied for a bank charter. He asked them the amount of capital stock which
they intended to issue. The officers who would administer the bank would be paid
a salary which would leave little profit for the stockholders. He showed them
earning schedules of banks then in existence and convinced those who desired to
start banks where there was no economic need for such an institution; that they
would be running at a loss. In this way he was able to prevent the establishment
of many small banks.
mr. Love for two years carried on a campaigna for the repeal of the
guaranty law. He advertised in the papers of the state and spoke before the
eight group meetings of the mississippi Bankers Association. It was quite evident that the guaranty was ho longer of any significants as a means of offering
security to depositors. The legislature, however, was slow to repeal the law
and was, in fact, a party to the deception of the public.


In 1930 a law was passed suspending the guaranty of deposits for
twenty years. It wEs estimated that in that length of time the assessments
would furnish sufficient funds to pay off the outstanding certificates.
A bond issue was authorized to retire the outstanding certificates.
This issue was secured by the future assessments to be paid by Mississippi
banks by the assets of thirty-two failed banks in the process of liquidation,
and by the faith and credit of Mississippi. The bonds were to bear interest
the rate of 4%.
The legality of the issue was questioned. It was claimed that the
action amounted to the Using of state funds to meet a private indebtedness.
The legality of the issue 'aas upheld, but in the meantime the bond market had
become week and it was impossible to sell bonds bearing only 4% interest. A
special session of the Legislature was called and the rate was raised to
During the period when the legality of the bonds was being questioned
the state of Mississippi had encountered serious financial difficulties. The
credit rating of the state was so impaired that these bonds could not be marketed
even at a rate of 50 interest and it was illegal for the bonds to be sold at a
The situation was met by the organization of a finance company which
set up a revolving fund of $100,000. The bonds of this company could be sold
below par. Its bonds were slowly exchanged for certificates of deposit outstanding. These certificates were then exchanged in payment for the Mississippi state
bond issue at par. In case of small deposits one bond was held in trust to cover
Federal Reserve Bank of St. Louis



Mississipoi Interview
Mr. J. S. Love.

a number of small claims.

The deficit of the fund anounted in All to %but,

The reasons for failure of the laississippi guaranty of bank deposit,,,
1. Unsound in principles.
2. Not sufficient assessment to cover risk.
3. Lack of funds at the beginning of the guaranty.
4. Risk not distributed.
Mr. Love offered to answer any question which we might desire to ask
him and to furnish information concerning the operation of the fund contained in
his reports to the Legislature.


Federal Reserve Bank of St. Louis

November 1, 1964.
J. S. Love
Superintendent of Banks

Mr. MortLer J. Fox, Jr.,
Chief Statistician,
Federal Deposit insurance Corporation,
Washington, D. C.
Dear Mr. Fox:
Acknowledge receiA, of your letter of October 27 asking
that I supplement the information given you on October 22 regarding the operation of the Guaranty Fund in Mississippi covering a
period of fifteen years by furnishing you copies of the publicity
used by me and speeches and newspaper articles in attempting to
secure the repeal of the Guaranty Law, as well as reports made to
the Legislature concerning the operation of the fund.


I am very glad to send you under separate cover, using
the frank you sent me, co.Dies of our biennial report to the
legislature, making reports on the ol2eration of the Guaranty Fund
over a period of years. I am sure that you will be ipterested in
two or three of the Last reports which deal more particularly if,ith
the operation of the Guaranty Fund.
Unfortunately, I do not have copies of the speeches made
by me publicly or to the group meetings of the bankers advocating
the repeal of the Guaranty Law. Most of these talks were impromptu
and I have no copies of them in the office. I am sorry I am unable
to give you this data.
With kind assurance, I am

Very truly yours,
(s) J. S. Love
Superintendent of Baas.
Federal Reserve Bank of St. Louis
Federal Reserve Bank of St. Louis




kb1it, realueat
r. U. 4
Willard Hotel,
Washington, D. C.
Dour kr. Chaublises
In conueot.lon viLh our utudifis of ti-le Owlkins lams and their operation in the statec rftich hive in
the puut wAd deposit IG,A11,41C:j or gul.rvnt.y luwr, it vould
be of valuable asaistence if one of the members of this
Diviuion could have u p-..rcouL,1 'erecursrlow with ;loll Ail('
you are in Washington.
Your firsthund knowledge of thu tiwtion
tu ks..ociasip;A.
AltA .1.1.
on ho
of the law operated.
The officeu of tht, Feder:!1 :Japoit IntrarPllue
Corpt.ioa tzt;oealu
;41,:,iouL7A Prei:e
thich is •just across talc strout from ',he .71.11ur Hot91.
:Jur room numbr le 4F, 6410. our t,oleAloae irzal,tx le L'Iot.rt
140. Extension 112.
We would apprTciate your granting uc an interview cad Ldvising ue when e.nd pierc it may

Very truly T.Nurz,
. J. rititik
uuj 4.
Mortimer J. r;N.r, Jr.,
Chita' fitatle.
• I 404.
Federal Reserve Bank of St. Louis




October 16, 1934

Ron. J. S. Love,
Mi3sissip24 Superintendent of Banks,
Jcp Nbtionnl Conference of Sttte
Suervistng Officikle,
Lor0 PlatLiore Rotel,
b,,ltkraore, dc.ryiend.
1*.:.r Jr. Loves
In connectima with our studies of the
banking laws and their aeration ia the st,te:, which
have in the past had deposit insurance or guaranty laws,
it would be of valuta', assistance if one of the mem.
berg of this Division could have a personal interview
with you while you ere in this neighborhood.
Your firsthand knowledge of the situu—
tion in Missiseipi would shed light on how the various
parts of the law o.der4ted.
Will you please advise us us to when
and where this interview may be hAd, either here in
Washington or In Baltimore. As the time is so short a
telegram sent collect to the Statistical Division,
Federal Depocit Inmur:nce CorporAion, WLtington,
D. C. woul0 be e,vreciAted.
Very trn14, your,
1HaMmd) M,J.1117)kar
liortimer J. Fox, Jr.,
Chief Stttisticien.
Federal Reserve Bank of St. Louis


Octlber :7, 1)34.

L!r4, J.
,S. Love,
Superintendent of Banks,
ckaoa, lississippi.
rear Li'. Lowat
The Lafornotion which Ya,:: furnioted by
will :7110,v.,, el value
you in your intermit.' qf October
rerrty of
ti Vis Corr,oretlen im ite stuity of 'tete zn,
uik de?oaite. We op2rectr,te very tomb the
in the Alst lf * tem, cemeention you took tile to dis—
cuss the saWr sith us.
At that time you offered to give to us
further inferm-.tiorseonteined ir your reortl to the
Legtslitnra eoncrning the operation of the fur, te
Also wrwulA be vs!ry glad to he', eooies of tro publicity
tv, you tR e24...otute
0.-veneper ertiolts while
you Ir're attempting to tecure the repel of the law.
I, are rueloeinl a frank eh1eh Ivey be efe4
uAilly tSe e*teriel ta us.
in 2ince of ?note!" in 4k
Very truly yours,

Mortise, J. P02, Jr.,
Chief Statistician.

Federal Reserve Bank of St. Louis




November 7, 1i)34

Mr. J. S. Love, Sup rintncnt of Rants,
St:At? Samitint Lap„rtment,
Jackson, MLissisipli.
Dear Mr. Levet
The Biennial Reports of tbe 11$..41:,dng
Deofirtm9nt A* the Bt1.41 of Nissinsippl sent by you
have been received. They cortAn wiry inttre:Aing
materi(A. The reports oV thf Guarr:nty Fund in
iaiipr.t z' unuswily full - nz:. explicit.
aporeci• to vrry ruch the fact
thr.t 3%).a tent ! these reports %.:7 tey renot
v, 1 1 .351e !n Any :X the itiashin0,)n
Very truly ylurs,
liortimer J. Fox, Jr.,
Federal Reserve Bank of St. Louis


Ootobfkr 19, 1954

dr. Gorge B. Power, Boaretery
vtsplissii..,pi Bankers Aseoeiation,
Anrte:n hankers Aseoeiution Convention,
aro !!‘:,telt
14,uh1ntjon, I. C.
Dtu.r Ur. Power:
battleIn connaction ulth our atutileec t
ing 'loos riT; thiAr oerN,tion in
the paet ht* doporit insur/axe
blt of valuable assistance if one of the members of this
Division could have u personal interview wit:, ;.:Q11 alle
;rou are in Washire!
Your firsthan6 knowledge of the situation
Mississippi would shed 'Light JR 4ow Uhe verioue prwts
of .ho law operated.
The lff:ces of the "Lidera' Celosit iAtAtr_ance
Corpora-taxi era /oczttou in the National
,Olich is just 4OP...1On the street from the NtiLwr3 Hotel.
Our room number is 43;$ and our telephone hualLor i,,
LAO, Extension 11.
We would appreciate your grantin's up an inter—
view siw. isuvising uu *hen aul titaare it Aay be Ilad.

Very truLy,yourit,
Marti:Air J. rOY, Jr.,
Chief Statistieitn.


J ournal, Febru ry 1361, is an article, "Guaranty
in the Mississippi Law '
of Bank Deposits il Eight states," by A. B. Butts, sumfv!rizinr: the laws and
experience of these states.
Mr. W. J. Price has copy of this
In Novembor, 1929, issue of same journal, same author has an article on
'h Mississippi law and its operation after 14 years. Copy with 'tr. ''rice.

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Dec. 21

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Bay St. Louis
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jrenada Bank
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Dec. 27

Dec. 31

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Head offices

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Bay St. Louis - Hancocir Colunt
Pass Christi;a1 - "-Pearlington --


Blue Mountain - Bvik o BlueMountain Ashland - Ashlana Branch Bgnk -


Grenada - Grenada Bank - 12 :„branches
Ackerman - 14.nk'of ckermafi
Beligla' - Beik Of aillatCR4 IL., ":. ......
Calhoun City- d1huptountiBank
Charleston -'Ban
Eupops.- BanK"ofLouisville.---Bahk o LouisV'ille
McCool - Bank of-McCOol
Moorhead - 1nk fMborT,iead
Noxapater - Bank'oftbiapater
Oakland - Bank
Vardaman - Bgik of Vardaman(47.....44,w
Woodland - B..6k-Of Woodland



Holly Springs - Merchants/And Farmers Bank 1- 1 branch
Byhalia - Byhalia Bank

Macon - Merchants and Farmers Bank - 1 branph
Shuqualak -Nercflards & Farmer's Bank
,4-Pascagoula - Merchants & Marine Bank - 1 brinch
Moss Point


Tupelo - Bank of Tupelo --_2 branches
Fulton - Fulton2Za4 Nettleton - Bank of Net'Cleton'
Tupelo - Peoples Bank & Trust Company - 2 branches
Nettleton. Rienzi

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Pope - Bank of Pope
Bay St. Louis - Hancock County Bank - 2 branches
Pass Christian
Blue Mountain - Bank of Blue Mountain - 1 branch
Ashland - Ashland BAhcH Bahk


Grenada - Grenada Bank„- 12 branches
WM& --- Mat of'AdkerManCalhoun City - Calhoun County Bank
Charleston - Bank of Charleston
Eukiia - Bank of Eurmmu+-Nes.
Louisville - Bank of Louiiville
McCoo/ - Bank of McCool
Moorhead - Bank of Moorhead
Nomapater - Bank of Nomapater
Oakland - Bank of Oakland /4' / 47i-/9)7 a, --4,7#!-7-45
Vardaman - Bank of Vardaman /4
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Woodland - Bank of wood4nd /10,4y)),

Holly Springs - MOrshapts and Farmers Bank - 1 branch
Byhalia =- BYbalia Bank
Macon - Merchants and Farmers Bank - 1 branch
Shuqualak - Merchants & Farmers Bank
Pascagoula - Merchants & Marine Bank - 1 branch
Moss Point

Tupelo - Bank or Tupelo - 2 branches
Fulton - Fulton Bank
Nettleton - Bank of Nettleton
Tupelo - Peoples Bank & Tryst CoMPLAY - 2 bran

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