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https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Removal Notice 7KHLWHPLGHQWLILHGEHORZKDVEHHQUHPRYHGLQDFFRUGDQFHZLWK)5$6(5 VSROLF\RQKDQGOLQJ VHQVLWLYHLQIRUPDWLRQLQGLJLWL]DWLRQSURMHFWVGXHWR copyright protections. ŝƚĂƚŝŽŶ/ŶĨŽƌŵĂƚŝŽŶ Document type: Journal article Pages Removed: Author(s): Cooke, Thornton Title: The Collapse of Bank-Deposit Guaranty in Oklahoma and Its Position in Other States Date: November 1923 Journal: The Quarterly Journal of Economics Volume: Vol. 38, No. 1 URL: www.jstor.org/stable/1885771 Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org GUAhANTY OF BANK DEPOSITS - ivIISSISSIPPI From Federal heserve Bulletin, September 1925 CONDITION OF GUARANTY FUNDS IN STATES OTIIER 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. • MISSISSIPPI Institutions included.—Every bank organized an fl existing under the laws of Mississippi. Participation.—Compulsory. 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 pern x stanruantie. 13asi cent of (a) regular and (b) special assess--An initial assessment of one-twentieth per me the average daily deposits eligible to guaranty ce .pital and surplus is required of banks entering lei 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 as the superintendent of banks ahaillnake addises depleted 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 banks. 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. a https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis --.11111 MISSISSIPPI [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 ent, 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 aranty t s of the bank depos by the bank 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 , _aiatifig_by act, and that its deposits are guar: ,1"114ississippi 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, nd and conditions and entitled to the same ing benefits s hereinbefore provided for b • https://fraser.stlouisfed.org 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 *i guarantynk. • :. 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 pa in the guaranty fund shall be assessed their properti ate the of the amount in suns ' guaranty fund at the ime at whieh they are admitted and the following prosision is also added: i "'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 clop, or hypothecate as collateral for funds ho be used first for the liquidation of the de f which said collaterals are hypothecated, and a emaining (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 4 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 seater ibsh bearingt guaranteed bank shall certify under annum.• 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." •• r % MEMORANDUM: Mr. Van Fossen April 29, 1926 Operation of State Deoosit Guaranty Laws. MISSISSIPPI: 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. ill :7MORANDUM: 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. • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ••=• 2 • Mississippi: 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. • • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis IV. MISSISSIPPI 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 • • https://fraser.stlouisfed.org 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 5,000. 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 • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis taaimmEma. • anty law became compulsory, and June 1920, there were only three state bank failures with total liabilities of $290,000. In this period no national banks in Mississippi failed. Beginning with the depression that started in 1920 the rate of state bank failures rose, there being 4 in the year ending June 1921,5 in 1922,4 in 1923 and 1924 each, and 3 in 1925, while in 1926 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 • https://fraser.stlouisfed.org 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 (24) - am.1.1.0 • 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. • Summary 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 • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 • https://fraser.stlouisfed.org 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 banking. UMW No; .,5 on Thc Sothorn .) 7 -7 7 " , 74 e3 41014 • , until dc.ficit -,acta Vol.0, JAnuary 1931, p. 20. rcardin ro 4 • , 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 fild: exempt-L 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 UO. 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 t:i.es 11;ssissippi suprere coii unfavoraLlc • 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- r!bn011iteq7 April 1531, p. 95. Refers to Yississippi surrene cou]-t decision upholdin 11 tionality of the act of Yarch 11, ''' Court A.11 review case on aippDal. c, Vol. 57. Apotober 1931, pp. b7-4L. "Sale f Second Lot of Ti.ssissippi .Deposit Guarant r, Re s7.:1 -be1a7cd." constitutional. i 110U6, : - and rIL bbnd purchasing synuicate, consistft optionor sist7-da7 h to exercise a :Iber state, Septefailed fro7 without the 1 een used irrniri ,000,000 bond issue, the proceeds of which were to ha7e : 7--drosit s,- of r-larant. lej,islature. ,a. Love, j. -. placin 1.nto the hands of 20,,.)00 desositors an appr delays thc. issue dispose of orculation in the stqte, other reans are at the dispi. i-rc,diatc 3,00j1000 for +1— • ^-2^ the deposit°-s by :he state 1-.,ankin https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • + ;le, "I" 1-, 1 111, 7 nrcrTr1.(71 r•Ci fnv departcrt. nr"-.11,71 m 41'^ F. trmn , . atur - https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis :otes on TEE 411 ISSISSIPPI PA:= - 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. asked. questions re 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: YitAiVe5aulaa6AlAnd June RargO°041, 14e;TwoPEWSBaffclnliegga•ggflpREt _ - • Issue. Nothing regarding deposit guaranty. https://fraser.stlouisfed.org 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. Septeriber. October. At meeting of executive committee sevtral recommendations were made for --FEiri7es in the banking law of 1914. Not summarized here (Note. Mark of ese proposed chang-s were made in 1916). November. Nothing regardin deposit guaranty. 111 It ft 11 December. 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 t! H H 11 &ugust. VI Vt 11 Septemb,,r It It tt October Vt November. 11 11 ft Vt Dece-ber V. VT 11 January VT It February It March IT It April oUrorident, at Convention, has discussion of operation of 7\Tay. Address 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._, ). r See photostat. Legislative committee bribe' reference to amendments. of digest 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) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 003 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. ft It 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. 11 ft April issue. It It 11 May issue. June Issue. Volume 1 - June 1922-May 1923 Nothing relating to deposit guaranty. June issue. tl It 11 II II July issue. 11 II II It August issue. 11 II 11 f1 September issue It n n n n n October issue. 11 t1 v If t1 November issue. n n n r December issue n n n n n January issue n n n n 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 III https://fraser.stlouisfed.org 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. tt It October issue. e 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. tl February issue. • varch issue. Entire page 7 entitled, "I formation asiga r . a4 hgiRiK er o pm. issues shows Bill 319". Not described but later issues3.// liquidating or nationalizing 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. "Duri.ng 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 https://fraser.stlouisfed.org 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). 41, 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). https://fraser.stlouisfed.org 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 11,7r1P (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. outstaill.ne. 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 thousand. 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) • https://fraser.stlouisfed.org 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. BeriFr . 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. Se). 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) • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1' MISSISSIPPI BANKER 8 THE MISSISSIPPI BANKER Issued Monthly by the MISSISSIPPI BANKERS ASSOCIATION Vicksburg, Miss. T. H. DICKSON, Editor NOTICE TO ADVERTISERS. Changes of advertising copy should reach this office not later than the 5th of the month. Advertising rates on application. NOVEMBER, 1914 OFFICERS 1914-1915. Henry Hart, Winona.................................................. President First Vice President S. J. High, Tupelo T. H. Dickson, Vicksburg ........................................ Secretary Treasurer Clarksdale Peacock, E. P. General Counsel Mayes & Mayes, Jackson EXECUTIVE COMMITTEE. 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 Gulfport Columbus Senatobla Greenville Okolona Newton Hattiesburg Brookhaven Vicksburg . DISTRICT VICE PRESIDENTS. District District District District District Diptrict District District 1K, No. 1 No. 2 No. 3 No. 4 No. 5 No. 6 No. 7 No.8 Forest Prather R P. Turner R. C. King C. A. Torbert W. D. Cook Frank G. Wisner I. N. Ellis T. B. Lampton GUARANTY FUND AGAT.N. ( From #• Baldwyn Tutwiler Greenwood Ackerman Forest Laurel Hazlehurst Jackson Banker.) 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. CONDITION ok KANSAS BANK GUARANTY FUND. (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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SIX MONTHS OF GUARANTY IN MISSISSIPPI. 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 MISSISSIPPI BANKER 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 9 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 amount. 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 - - $ 30,000,000 200,000,000 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. **** CORRECTED RULING OF BANK EXAMINERS. 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. MISSISSIPPI BANKER 57 WEDNESDAY, MAY FIFTH MORNING SESSION 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. A YEAR OF STATE BANK SUPERVISION HON. J. S. LOVE 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 Mississippi. 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 them. 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis In those days of banking prosperity there were many calls for bank men or bank cashiers. Good 58 MISSISSIPPI BANKER 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' investments. 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis HELP YOURSELVES by HELPING US. 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 legislation. 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- MISSISSIPPI BANK Ell 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 With very few institutions. of our State banking in any yellow of trace no found have we exceptions 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 before. 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The UNDERWOOD •i:...gaiEl •v_ 1' 1 , Nze' j Used and approved by more Mississippi Bankers than any other typewriter First in MECHANICAL SUPREMACY First in SPEED, ACCURACY & STABILITY UNDERWOOD "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 I. 60 MISSISSIPPI BANKER 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 conscientiously. 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 examiners received 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 have received certificates showing that their dethen there have b9en several consolidations. There posits 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 in five have already paid their depositors. Several of however, this law appears to be sufficiently flaw; 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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis II 1;1 MISS!SSIPPI BANKER 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 round. 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 Mississippi. 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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Guaranty Service IX 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 despatch. 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 $ 30,000,000 300,000,000 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: 2 Vrret MISSISSIPPI BANKER 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. Representative 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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Continental and Commercial National Bank of Chicago Capital, Surplus and Profits $33,000,000.00 OFFICERS George Af. I;,, Tl. old- I 'I .., 41••nt .‘rthur Reynolds .. \-ii .• Ralph Van Vechten Vie, President Alex Robertson Viee President nnan Waldeck .. II, Vie. Pt eselent i n C. Craft VI.,l'r•-,i.lent Limes it. Chapman v i, .• 1,1-.•. ,i,I.•nt william T. Itrut•knor s1.14-nt VI, . I'l, .1,ilin R. Wamhburn Nathaniel it. Lossch .• —liter \ -1t ii 4 .:.-111, r Harvey C. Vernon \ ---,I-1,W c.ishier (leorge B. Smith A s,isi.int 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 writer. 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 4 3 NIISSISSIITI BANKER II 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 https://fraser.stlouisfed.org 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. SAFETY PLUS GUARANTY The Merchants Bank & Trust Co. JACKSON, MISS. Capital - - - $250,000.00 Surplus and Profits 80,000.00 4 MISSISSIPPI BANKER 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 legislatots. 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 Mississippi. with fewer than three hundred state banks and less than $30.000,000 of deposits eligible to guaranty? Kansas has contemplated a fund approx imately 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 s. If in the wisdom of the Banking Depart ment 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 somewhat lessened. Some plan could surely be found whereby the banks may pledge their credit instead of their cash—until such time as cash is actually needed. The foregoing comments are not intended a.; an authorized expression of Association though t. They merely suggest a few points that would proba bly be brought out in a general discussion, u,r, such discussion possible. A.B.A. HONORS FOR T. W. McCOY. '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 tion. In selecting Mr. McCoy for this important pest the Fxecutive Committee of the National Bank Section has Aosen wisely. Mr. McCoy is not only a thoroughly trained banker of broad and progre ideas. but has always taken an active interesssive t association affairs and may be relied upon to in do 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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SEABOARD NATIONAL BANK OF THE CITY OF NEW YORK Capital . Surplus and Profits (earned) $ 1,000,000.00 . Deposits 2,775,000.00 29,000,000.00 S. G. BAYNE, President C. C. THOMPSON, Vice President. B. L. GILL, Vice President S. G. NELSON, Vice President. W. K. CLEVERLEY, Cashier L. N. DeVAUSNEY, Assistant Cashier. J. C. EMORY, Assistant Cashier. 0. M. JEFFERDS, Assistant Cashier. WE SOLICIT YOUR ACCOUNT This Bank Serves 15 States II J. R. COOKE F. 0. WATTS President Cashier DA. P. COOKE T. WRIGHT Preside Asst. Cashier nt Vice H. HAiLL R. S. HAWES Asst. Cashier Vice President E. C. STUART W. W. SMITH Asst. Cashier Vice President M. E. HOLDERNESS F. K. HOUSTON Asst. Preside Cashier nt Vice W. C. TOMPKINS. Auditor 24 MISSISSIPPI BANKER ADDRESS OF PRESIDENT MR. J. A. BANDI 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 all how very deeply I appreciate the honor you conferred upon me one year ago in selecting me as your President, and I wish now to extend my hearty thanks for the splendid spirit of co-operation you as members have manifested at all times. Such 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 n 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 accomplished. Therefore, in rendering an account of our stewardship. I will rely upon those gentlemen to give you the details and confine myself principa lly to the policy of our Association, for the past year, and make such observations for the future as may be prompted by our experience. https://fraser.stlouisfed.org 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 place your Association on a sound financial basis. The Secretary's report will show the progress we have made. A comprehensive system of bookkee ping and accounting has been adopted, and put into 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. NEW MEMBERS. 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 rily for some local reason, with the expecta tion of Joining during the coming year. BANK FAILURES AND THE GUARANTY LAW. Since May 15th. 1915. all State Banks have been operating under the Guaranty System. A total of 14 banks have been liquidated by the State Banking Deaprtment. all of whose deposits were guarant eed by the Bank Depositors Guaranty Fund. Of this number 10 bands paid all depositors in full upon liquidating. The following named banks did not pay their depositors upon suspension of busines s: 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 that 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 Fund 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 y were issued by the Examiner in charge. These are to be held .until the final liquidation. In the meantime dividends are paid from time to time, and if 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. MISSISSIPPI BANKER 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. GROUP MEETINGS. I can hardly find words to express the satisfaction your executive officers have derived from the Union & Planters Bank & Trust Company MEMPHIS, TENN. Capital - - $1,400,000.00 ORGANIZED 1869 OFFICERS FRANK F. HILL,President ROUT.S. POLK,Cashier ELDRIDGE ARMISTEAD,Asst. Cashier FRANK S. BRAGG,Asst. Cashier NOLAND FONTAINE, Vice-Prest. J. RAMSEY BEAUCHAMP,Asst. Cashier SAM HOLLOWAY,Atty. & Trust Officer SIDNEY READ,Auditor GILMER WINSTON,Vice-Prest. 1 THOROUGHLY EQUIPPED TO HANDLE ALL BUSINESS PERTAINING TO BANKING. ACCOUNTS OF BANKS, BANKERS, INDIVIDUALS, FIRMS AND CORPORATIONS SOLICITED UPON FAVORABLE TERMS. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 95 O'rt) •Y ' l. M ISSISSIPPI I1A NK ER ) 11 59 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 resolutions. 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 Company 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 Profits 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE MISSISSIPPI BANKER , 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. GUARANTY OF DEPOSITS LAW—There are a 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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 15 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 4t, THE MISSISSIPPI BANKER 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 17 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 THE MISSISSIPPI BANKER 19 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 20 THE MISSISSIPPI BANKER 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. The AMERICAN 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 411 411 THE MISSISSIPPI BANKER 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 At 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 menace. 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 21 Committee whose a resolution calling for a special be to see that it will privilege and particular duty ly won before undoubted and signally is contest this 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 e means reasonabl all use and purpose best serve the a special to get every bank in Mississippi to hold for the date that on ers stockhold meeting of its purpose of securing their understanding and sympathetic support and co-operation. And that the banks e in every County co-operate to secure the attendanc or more one at Senator and of their Representatives to 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 re, Legislatu the of session mittee during the late in that writing stated banks State the of 85% about 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? OUR STATE GOVERNMENT 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 THE AlISSISSIPPI 25 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis gc iieial conditions existing and scarcity of money, 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 the 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 ll.at 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 closing. 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 heavy. 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 • THE MISSISSIPPI BANKER 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 of 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 27 the depositors and will be able to present better statements to their correspondent banks, which will 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 it 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 a great deal of information not submitted in the report, yet it is filed as exhibits to the report. For 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. 28 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 158 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 tted. 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 uctive work. I have collected from Directors, stockholders 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 bankers, 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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis NEW ORLEANS BANK & TRUST CO. WITH CAPITAL SURPLUS .1Nii UNDIVIDED pRoFiTs OF AIORE THAN *1.500,000.00 UNDER FEDERAL. STATE AND CLEARIN‘; 110USE SUPERVISION AND New Orleans Securities Incorporated 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 into flow will "Deposits will be many. 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). https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -_=_Aol.1•11•111111 NOTES • • 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). • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 6 THE MISSISSIPPI BANKER THE MISSISSIPPI BANKER • VOLUME 37 BANKERS Jackson Vice-President & Chairman Executive Committee R. P. Parish, Jr. _ Greenwood ASSOCIATION OCTOBER, 1952 ASSOCIATION OFFICERS FOR 1952 - 1953 President W. P. McMullan_______________ THE OFFICIAL PUBLICATION OF THE MISSISSIPPI OCTOBER, 1952 NUMBER 5 W. W. Hollowell Treasurer -- __Greenville Secretary Leigh Watkins, Jr Jackson EXECUTIVE COMMITTEE INDEX TO Terms Expiring 1953 A. N. French . _____ _______..._.----Byhalia C. P. Fortner . Eupora Buford Yerger Hattiesburg FEATURES 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 Page Corinth Leland Woodville Terms Expiring 1955 J. H. Sasser Carthage 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 . 11 13 Rate War, A Discussion of Savings Account Interest Rates 14 History of Mississippi Banking Continued—By J. S. Love, Sr 15 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 16 President Vice-President Treasurer Retiring President Preceding President A. B. A. OFFICERS FOR MISSISSIPPI _ 12 Livestock Production Loans--By John M. Upchurch, Paris, Tenn... Note: R. P. Parish, Jr. W. W. Hollowell L. G. Simmons W. B. Herring Member Executive Council— Conwell Sykes Greenville State Chairman, U. S. Savings Bond Committee Frank R. McGeoy, Jr._____ ________Greenwood Member State Legislative Council— J. W. Latham Jackson Vice-President for Mississippi— Yazoo City P. C. Williams Sub-Committee on Social Security— Tupelo V. S. Whitesides Member Committee on State Legislation— Clarksdale M. D Brett Member Credit Policy Commission— W. S. Johnson ___ .McComb Members Federal Legislative Council and Finance Committee— Conwell Sykes Greenville Member on Forestry— M. E. Cooper Wiggins Member Committee on Relationship between FDIC and State Bank Supervision, and Member State Bank Division— Bay St. Louis Leo W. Seal Trust Division MBA_ Laurel Geo. F. Openshaw, President, GROUP VICE PRESIDENTS (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 Cr. 1. 2. 3. 4. 5. 6. 7. 8. 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. Baldwyn Sardis Cleveland Starkville __. Forest Vicksburg McComb Richton CHAIRMEN OF STANDING COMMITTEES Agriculture Entered as Second Class Matter, June 30, 1922, at the Post Office at Jackson, Magnolia S. E. Babington Magnolia Bank President, Mississippi, under the Act of March 3, 1879. Bank Management A Khayat ... Pascagoula Asst. V. P., Pascagoula-Moss Point Bank Federal Legislation Greenville Conwell Sykes President, Commercial National Bank Public Relations W. B. Brannan Meridian Vice-President, First National Bank State Legislation J. W Latham _____ Jackson Vice-Pres., Deposit Guaranty Bk. & Tr. Co. E • 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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r OCTOBER, 1952 1 , THE MISSISSIPPI BANKER Banks in every part of the Mid-South have made our bank their bank p https://fraser.stlouisfed.org Air Federal Reserve Bank of St. Louis 5 • *your inquiries are invited... UNION PLANTERS NATIONAL BANK Since 1869 Memphis, Tennessee Capital, Surplus and Undivided Profits Over Seventeen Million Dollars MEMBER FEDERAL DEPOSIT INSURANCE CORPORATION • 4 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 https://fraser.stlouisfed.org 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. Co. 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 18 THE MISSISSIPPI BANKER A HISTORY OF MISSISSIPPI BANKING by 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 allied time, of span the is $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 description. 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 patriotism. 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 charter. 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 demand the States, United the of state a years. was climaxed for an authorized bank https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SEPTEMBER, 1952 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 payments. 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. • 1 • 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 • SEPTEMBER, 1952 • • THE 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 sale. 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 1131 / 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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MISSISSIPPI BANKER Comes now the third bank for MissisEstablished in 1833 again at sippi. 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 $552,986. 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 security. 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 19 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 duration. 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 vimaymayjciawAskyuyjim "POULTRY AND LIVESTOCK • FINANCING CAN BE PROFITABLE I 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. • .30•• of Amtrira Vank momss Zook wommi of Amtrint SANGER BRANCH KINGSBURG BRANCH NATIONAL ASSOCIATION Sanger, California June 7, 1952 Ralston Purina Company Visalia, California Gentlemen: 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 Manager NGL/jmg https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis NATIONAL ASSOCMTION Kingsburg, California March 11, 1952 Ralston Purina Company Checkerboard Square St. Louis, Missouri Gentlemen: 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 producers. Yours very truly, B. '''. Bergstrom, Manager. 130.• tonit mums% of Amtrira tank of Antrrint FRESNO MAIN OFFICE VISALIA BRANCH Fresno 17, California June 25, 1952 Ralston Purina Co., Visalia, California Gentlemen: 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. Gentlemen: 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. NATIONAL • ASSOCIATION NATIONAL mat.tra ASSOCIATION Cordially yours, C. R. Nelson, Vice—President Gordon Cook, Manager. CRN:A CC:MM • Plan To See Our New Portfolio on Production Financing tank of America NATIONAL ASSOC IATION This portfolio gives our own boss experience (amazingly low) in handling many millions of dollars in REDLANDS BRANCH 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 Gentlemen: 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, RALSTON PURINA COMPANY ST. LOUIS 2, MISSOURI With 0 mills located throughout the United States and Canada to serve farmers S. W. Blackburn Assistant Cashier Mr. E. R. Siler, Treasurer RALSTON PURINA COMPANY 1611 Checkerboard Square St. Louis 2, Missouri SWB:JW • https://fraser.stlouisfed.org 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. Name Bank Address City • State I 22 THE HISTORY OF BANKING, Cont'd. 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, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MISSISSIPPI BANKER 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 doomed. 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 SEPTEMBER, 1952 hundred and seventy thousand dollars annually 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' Bank. • Editor's Note: Because of the length of the History it will be continued in instalments. Next will appear in the October issue. LOAN COLLECTIONS, Cont'd. 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 THE CONTINUING A HISTORY OF MISSISSIPPI BANKING 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 amazing. 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 state. At the close of the war, the entire banking system, along with all other https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MISSISSIPPI BANKER 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 manner. 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 established. 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 beginning. 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 15 loans and discounts amounting to $45,292,332.57. 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. government. 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 good. 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 governor. 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 System. The law further provided that an anTurn to Page 18 16 THE MISSISSIPPI BANKER COMMUNITY RESPONSIBILITIES OF A BANKER By N. S. Rogers—Jackson Asst. V.P. Deposit Guaranty Bank & Trust Co., Before 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 https://fraser.stlouisfed.org 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 lending condition. Sound financial policies may vary greatly between a rapidly expanding section and a mature area possessing surplus savings and capital. 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. OCTOBER, 1952 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 analysis. 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 THE 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- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MISSISSIPPI 17 BANKER THE FIRST, NATIONAL BANK IN ST. LOUIS OVERNIGHT SERVICEANYWHERE AND EVERYWHERE! A distinct advantage of doing business with First National Bank in St. Louis is the central location of 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. FIRST NATIONAL BANK IN ST. LOUIS MEMBER FEDERAL DEPOSIT 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 INSURANCE CORPORATION 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 come. 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 18 THE RESPONSIBILITIES, Cont'd. 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MISSISSIPPI BANKER 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 anticipated partnership 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 OUR FRIENDS THE BANKERS, ARE ALWAYS WELCOME OCTOBER, 1952 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. beautiful the relaxation on few rnear' a will eventually-days of now Coast A few you Mississippi Gulf and earth fOr eeded rest years on -n uch more that rn for a Buena Vista to take now the plan joyment. family to en bring the week of a 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 banker; Lewis Crook of Meridian, as the accountant; Judge N. C. Hill of Hattiesburg, as the attorney. OVERLOOKING THE BEAUTIFUL GULF OF MEXICO 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 THE 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 Fund. 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MISSISSIPPI BANKER 19 Take advantage of the correspondent banking services of Guaranty Trust Company and you place extra banking facilities at the disposal of your customers. Broad and effective, these services enable you to meet the requirements ofindividuals,as well as financial,commercial and government organizations, anywhere. Branch offices in Europe and correspondents in every part of the world also enable Guaranty Trust Company to help you understand local conditions and gain on-thespot information wherever and whenever required. Guaranty Trust Company of New York Capital Funds $382,000,000 140 Broadway, New York 15 Fifth Ave.at 44th St. Madison Ave.at 60th St. Rockefeller Plaza at 50th St. New York 36 New York 21 New York 20 LONDON PARIS BRUSSELS 32 Lombard St., E. C.3 Bush House, W.C.2 4 Place de la Concorde 27 Avenue das Arts Member Federal Deposit Insurance Corporation 20 THE 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 MISSISSIPPI BANKER 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 WESTBROOK FIXTURES First Since 1902 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WESTBROOK MANUFACTURING COMPANY JACKSON, MISSISSIPPI OCTOBER, 1952 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, 1929. 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 • THE MISSISSIPPI BANKER 21 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. • _A -Atel - • Continental Illinois National Bank https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis and Trust Company of Chicago La Salle, Jackson, Clark and Quincy Streets LOCK BOX H, CHICAGO 90, ILLINOIS Member Federal Deposit Insurance Corporation 22 THE MISSISSIPPI BANKER HISTORY, Cont'd. Founded in 1903 Assets More Than $50,000,000.00 Surplus Funds More Than $4,100,000.00 Serving many of MISSISSIPPI'S FINEST BANKS with our Credit Life Plans Write or call us for full information. THE VOLUNTEER STATE LIFE INSURANCE COMPANY Chattanooga, Tennessee CECIL WOODS, President FRANK HILL, Home Office Manager GLEN HAMILTON, Field Manager CROUP CREDIT LIFE DEPARTMENT 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 public. 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 OCTOBER, 1952 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- FOREIGN TRADE SPECIALISTS FOR YOUR BANK 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. MERCHANTS NATIONAL BANK OF MOBILE Capital and Surplus $4,000,000 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MEMBER FEDERAL DEPOSIT INSURANCE CORPORATION MOBILE, ALABAMA • • • OCTOBER, 1952 THE MISSISSIPPI BANKER 23 banking facility with everypersonalized servBank A dedicated to and routine, is at and beyond above ice in Jackson. your service , r- 4ANK cultt=4-x JACKSON , MISSISSIPP I Corporation Insurance Deposit Member Federal Life Bldg. Standard Main Offices: Tower Bldg.) (Formerly St. 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 https://fraser.stlouisfed.org 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, 1933. 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 condition. 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 24 THE ASSETS OVER $24,000,000.00 MISSISSIPPI BANKER 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/ 1 2 percent, and we have always followed the policy of paying the highest rate consistent with sound management. We invite your inquiry concerning guardianship fund investments. FIRST FEDERAL Savings &Zoan qssocidion JACKSON, MISSISSIPPI 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 https://fraser.stlouisfed.org 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 OCTOBER, 1952 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. • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MORTGAGE BOND 8c TRUST COMPANY 214 WA_LTHALL HOTEL BUILDING E.O.SPENCER TELEPHONE 2-3567 JACKSON, MISSISSIPPI PR ES ID EN T https://fraser.stlouisfed.org 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. EOS:vm P. 0. 502 328 CW:jk Stat 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. https://fraser.stlouisfed.org 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 1/ & 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 certificates. 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, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1/ charged a handling fee of Interview with Mr. E. 0. Spencer, January 16, 1956. -2- 3 percent (5 percent toward the end of the process) which mot most of their costs. 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 exchange." 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. https://fraser.stlouisfed.org ImEmmaFederal Reserve Bank of St. Louis S. 0. KUYKENDALL Secretary-Treasurer https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis U. S. GOVERNMENT, STATE. COUNTY AND MUNICIPAL BONDS MEW FINANCIAL STATEMENT As of December 31, 1954 WI Mortgage Bond & Trust Company Jackson, Mississippi ASSETS Cash on Hand and in Bank Cash in First Federal Savings CT Loan Association — Jackson LIABILITIES $29,704.92 50,000.00 Accounts and Notes Receivable 936.02 Accrued Interest Receivable 750.00 First Mortgage Loan 300,000.00 Investment in Stocks 322,011.42 Accounts Payable Jackson Real Estate repaid License https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 7,047.26 None Accrued Taxes 4,501.17 Reserve for Accrued Dividends 4,613.50 Current Liabilities Capital Stock Trust Receipts — Bond Equities $ Surplus and Undivided Profits $ 9,114.67 $175,000.00 543,848.62 17,488.67 25.00 $727,963.29 Total Capital and Surplus $718,848.62 $727,963.29 • • n1 I• 1,71 Spe-rtzbu itagea 24W '" )in _ (--i — *7----- p • ,-, 7-, -------„ey -0 a1 ?XiViiir6-71/7 Ae ( („,,,,,/,49/5--i, iirt /.y A.,t407'Co, 0 .,-1,a 647 7,94.----, , ,,,49 ..._,41e (---? ; air,d, J c''‘-yi.-•:--- ‘--)vs--t 1.19 t, LIA4 7_7. LPL e144 " 42 t4C9 , , , .1 e-VemAo-- c 3 2\ 2,) , . /7.7-) • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Stat 11111111117:jk January 23, 1556 1/1/ 1 MEMORANDUM TO: Dr. Cramer FROM: Clark Warburton SUBJECT: 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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CW:jk Stet 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 Stet CW:jk https://fraser.stlouisfed.org 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 Enclosures -e ) fr ,W-ervie/_Wereyeerzir • a/14.,-, a(Wide, 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, fifrez-r A Dennis A. Dooley (/ State Librarian enc. • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Vice-Pres. and Chairman Executive Committee J. T. Brown, Jackson President S. E. Babington, Magnolia • Treasurer C. E. Morgan, Kosciusko Mississippi Bankers Association Official Journal "THE MISSISSIPPI BANKER" Published Monthly 702 MILNER BUILDING PEARL & LAMAR STREETS PHONE 4-4268 P. 0. Box 37 Secretary 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. Express. • Sincerely yours, Leigh Watkins, Jr., Secretary LW:m • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis a CW:jic Stat 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 library. Very truly yours, Edison H. Cramer, Chief Division of Research and Statistics Enclosure DEPARTMENT OF ARCHIVES AND HISTORY STATE OF MISSISSIPPI BOX 571 JACKSON CHARLOTTE CAPERS September 7/ 1955 WAR MEMORIAL BUILDING 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, CC:jwm • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Charlotte Capers DIRECTOR https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CW:jg Stet 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 ways• Yew truly yours, Cramer (Signed) Edison IR. Ldison H. Cromer: Chief Division of Research and Statistics https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CW:rh SUM June 29, 1955 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' 7,1•• , 11110o5St Office ;epartntent OSE TO AVOID PAYMENT OF POST GPO) OFFICIAL BUSINESS JUN 23° Return to Federal Deposit Insurance Street and Number,' or Post Office Box,' (NAME OF SENDER) n N..1./4_,Asihd_eik 2, REGISTERED ARTICLE NO.±L1L 1 Q3 INSURED PARCEL NO. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WASHINGTON, D. C. Form 3811 Rev. 1-52 RETURN RECEIPT Received from the Postmaster the Registered or Insured Article, the number which appears on the face of this Card. of 1 (Signature or name of addressee) 2 (Signature of addressee's agent—Ageni should enter addressee's name on line ONE above) Date of delivery JUN 16 1S5 , 19 U. I. GOVERNMENT PRINTINS OFFICE • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 16-12421-2 • DEPARTMENT OF ARCHIVES AND HISTORY STATE OF MISSISSIPPI BOX 571 JACKSON WILLIAM D. MCCAIN DIRECTOR June 16, 1955 WAR MEMORIAL BUILDING 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. Sincerely, William D. McCain WDM:mZ,e • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • EBC:rh Stu June 14, 1955 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 closure DEPARTMENT OF ARCHIVES AND HISTORY STATE OF MISSISSIPPI BOX 571 JACKSON WILLIAM June 10, 1955 WAR D. McCAIN DIRECTOR MEMORIAL BUILDING 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 WDM:ma • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MODERN • FIRE PROOF • AIR CONDITIONED ikeWdlthall ( llotel J ACKSON MISSISSIPPI ,44,,* *444, 4,mf,(4c 24. 4P1 -et aiAT 7 : 21i. •4 4 7 -4E,4/ / 7 4< /V-t A #4 /2(2:i iy 74cd .%6V1-,j/ Z,vei ali74 frvIceeJ ,y frifAr:t41 azt i ov/A7 co/Aze a,74 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4/7,t Ave 41 i4^J QtA. 14==ii-exvst • A-74- -74 //-4fyL -4 ,r.zt -ti ?1/ x44A 414 it/t/t -i41vA,c6( 154,4 4te, egz, , 4 9-41 ( 11 . iv/4- ez4A 7 v 1-e-x4 17. f 44/y:/1/ https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis /144' 5`‹• 46-1 -if , fri4 II4 24 -&, -)4 f4t 14114 /44442-4( 1 A74 e -e444 , 1 THE HOTEL POST 01,ICE SOX 2SS . . . MONTGOMERY 1, DINKLER HOTELS ALABAMA HOMER SPIN. lic••••4[1. CARLING DINKLER. PAEsiRENT CARLING DINKLER. JR.. ViCE.PnEsiDENT T.10.7 mmmmm THE Di t • ▪ Tx• Di mmmmm mmmmmmm Or.d °Arm LA •L• NIONTOONSINV. ALA. D TWA D •••••••• 24 1t/44,A.", j4a4-/e 20 . ft14/ 'tee A4r- Yivvv(A--- -vvx4 rvvL Pnit- /at 4-n ,A 4trx 5e L( 6 K . /,te;et-ref -144/ 4V 40i /v/-/ 14-4-4<-7 tl)er'i • 2./\' .,, 74 /94,7 4,„7 A k-(. • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 46 42t-, 4,-t TELETYPE SERVICE NO. MG 300 At, a4e-t‹-- • cAtA4 , tw- -0( -)A'tee jA4 / 4( ee)-( wit4 Ptc, aAr -P44' `-1 ifroc. ( —YvtAii-Avy A;_/ 7'4 ‘6,V /)-0 A'' ‘e IC',,. n/z4see4 At-f . 446,1fMJ ,4A-e-e-4, /4„,(7 r /1711fAt / / w 66es . ,1"fri* . potek 41 / 4Q . https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 44/4/c/i lat 471'. • • 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 $2.63 postage so that you do not need to put it on your expense voucher. Thanks also for inquiring at the Banking Department. However, I was able to borrow 1914-1917 statements here in Washington so that I will return that volume as soon as it arrives. I probably should have told you in my previous letter that Mt. Love, Sr., contributed an article on banking history in Mississippi which was published in two issues of the Mississippi Banker in 1952. If he is no longer living, his death must have occurred in the past three years. If you have an opportunity and feel it desirable to contact the J. S. Love and Company to pursue the inquiry about the other three biennial reports of the State Banking Department prior to 1.922 I would appreciate it. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis With my best regards, Clark Warburton • MODERN • FIRE PROOF • AIR CONDITION jeWaltliali(Hotel J ACKSON MISSISSIPPI Ae g474,144, 4/vvuz, -4 4 A 64,4-?x4A 4% ,r1 44/ ( -1v,rovA, ti 41A1/67 /4/ 4/p_/7 ()\ dA144/i1,1 7y/py.;trf-fr 2-y-Ate t 9,(t AL( m-e( ?X. " iI a/A , YLA) K/I1j1 \AA1 At 144;4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Pkadti )2t 6 / 7Ytt . 11 j A / V j /5"( ii7a4A44 / Zr 1444t 6t14--P-v le47% 4.,.4-t -A.tzzy 144 %44, yeA44 -kt-1044-el 4,44.e/ 4 /./4y4,6- 4AA-4,-$T , Wa, / • miletf pc< 6 '-et, AfAfrei%Al //'`-‘" 121°Q " 1 -(Att ihr49 -zA'wf '1/7/ -vvt^i,f le/A-1 -z 4A40x 4rw-t-,fr" AA71/ 1 4 4oz"w, tete,‘", ) , •,n/) 2470. . c4i\tc4, y 4v4,-(e(f_4it vlIA( 44Aii z1v,4ly-A/A43 4•4/ ifr/ 5i /t4&r -$4/yLt4 /•f,64 -fj /.4 #it -4411c(-( ei cci , (et. of-6v44,4 "fri5-tycea. • d.tt otA ( --(1 z4,40; iikyrtA,y/4-tt https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis c,71„.„.4 A4-//tal 7.< https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CW:rh Stet 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2 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 banks. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Clark Warburton MODERN • FIRE PROOF • AIR CONDITIONED rfieWalthaii(Hotel J ACKSON MISSISSIPPI P1)'44C 1 4/All 4e4P ) L r 7 7 /Z" ()2 /Htf 4,,r( 4V-4 -1-7 4tAtfr •4,7a,A4 " .( *A°4 7 547/ 4-f-i4 a4•,‹Aei4 Ai -- 1: 1) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis èJd 14J--e 7 4_ (/..e,KA kw! Yt7 P 4790v-b DEPFIRTMENT OF MINK SUPERVISION J.FICKSON, MISSISSIPPI J. W. LATHAM STATE COMPTROLLER 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, 1921. Sincerely yours, Department of Bank Supervision (Mrs.) Evelyn Gary • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 'SO DEPHRTMENT OF -st(p 131-INK SUPERVISION JFIGICSON, MISSISSIPPI ET m eaUMMeMeee J.W. LATH May 23, 19% STATE COMPTROLLER https://fraser.stlouisfed.org 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, JJV:lwh ac J. Van Landingham For the Department https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Stet CW:rh March 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 STATE OF MISSISSIPPI DEPARTMENT OF ARCHIVES AND HISTORY WAR MEMORIAL BUILDING • JACKSON 5, MISSISSIPPI WILLIAM D. McCAIN CHARLOTTE CAPERS DIRECTOR ACTING DIRECTOR (ON MILITARY LEAVE) 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, ct Charlotte Capers CC:jg - LL ' ' • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Storm MU Rev. 1-52 • RETURN RECEIPT Received from the Postmaster the Registered or Insured Article, the number of which appears on the face of this Card. . ....,42 ‘ 1---4,--x:ii . 2 414' . i .ae; ,....:1 , (Signature or no iJ f • • / eadditee) ,7 -,2.1.. (Signa(ure of addressee's agent—Agent should enter addrassces nada on tine ONE above) Date of delivery AJAR 6 1955 U. M. GOVERNMENT PRINTIMG OFFICE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 19 16-12421-I 14. 7r." Vogt Offir OF epartment PENALTY FOR PRIVATE USE TO AVOIC PAYMENT OF POSTAGE. $300 (GPO) far8 MAR '9 1;30:14 k 5 ). Return to Federal Deposit Insurance Corpo SENDER) (NAME OF, Street and Number,' or Post Office Box,f RsiadiL k _, REGISTERED ARTICLE No.LThg INSURED PARCEL • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WASHINGTON, Dtt DEPFIRTMENT OF MINK SITPE R_VIS I ON ,IJICKSON, MISSISSIPPI J. W. LATHAM STATE COMPTROLLER '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. S 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 • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis President W. W. Hollowell, Greenville Vice-Pros, and Chairman Executive Committee S. E. Babington, Magnolia Mississippi Bankers Association Official Journal "THE MISSISSIPPI BANKER" Published Monthly 702 MILNER BUILDING PEARL & LAMAR STREETS PHONE 4-4268 P. 0. Box 37, Secretary 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., Secretary LW:m • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Treasurer J. T. Brown, Jackson Fir https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Stat CW:rh 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Jackson, December 22nd, 1954. Mr. Edison H. Cramer, Chief, Division of Research and Statistics, Federal Deposit Insurance Corporation, Washington, 25, D. C. Dear 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. STATE OF MISSISSIPPI DEPARTMENT OF ARCHIVES AND HISTORY WAR MEMORIAL BUILDING JACKSON 5, MISSISSIPPI WILLIAM D. McCAIN CHARLOTTE CAPERS DIRECTOR January 17, 1955 (ON MILITARY LEAVE) 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. Sincerely, Charlotte Capers CC:m11 • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ACTING DIRECTOR UNIVERSITY OF MISSISSIPPI UNIVERSITY, MISSISSIPPI THE LIBRARY 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. (7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Very truly yours, 9r)44.1-bu 014-tee-e ) Mahala Saville Aeference Librarian Novemter 29: MEMORANDUM Dr. Warburton TO: FROM: Helen Thompson SUBJECT: 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. • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ioc clt.c.„, LA-si C.;\ (4 ) / S 4.4.9 -4tht. td&S t .N•MIO".krS https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ‘'s 11.41k bc 4„ C,ArrtiAt.A OW. C. * tket‘tc3) , \tik essiss https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4\f-c_ s v ovN \i4A LcIA https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 1 vv'0 1 11 vr,\V-71) t • ' https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r„. • el6 )J4 ()) ItAtv zt. r...5C711 tve \A„, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis \ c <s? .)0 -1 4- (.4b L. L1. 07, UNIVERSITY OF MISSISSIPPI • UNIVERSITY. MISSISSIPPI October 2d, 19514 THE LIBRARY 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. Sincerely yo....rs, 94,4 11ahala Saville Reference LADrarian • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis z MISSISSIPPI STATE COLLEGE LIBRARY • STATE COLLEGE. MISSISSIPPI 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 request. Yours very truly, 1,6Lie„,, 00. doz„—e..,_e_e_ Willie D. Halsell (Ass't. Reference Librarian) The Mississippi Banker https://fraser.stlouisfed.org 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), (July) Some interesting iigures, 15 ‘June) F. D. I. C. (Oct.) DEPIIRTMENT OF BFLNK SUPERVISION JJICKSON, MISSISSIPPI C.T. JOHNSON STATE COMPTROLLER 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. • https://fraser.stlouisfed.org 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, son, omntroller. https://fraser.stlouisfed.org 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-. • ) 5170 ic_ert'a. 4.-vt y .7;7 Alt • (9Arla' • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis October 22, 1934. MISSISSIPPI INTERVIFX 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 year. 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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 Interview Illktr.ssissipoi 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 discount. 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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 3 III Mississipoi Interview Mr. J. S. Love. a number of small claims. $5,000,000. The deficit of the fund anounted in All to %but, The reasons for failure of the laississippi guaranty of bank deposit,,, were: 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. • • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SIAlL BANKING DEPAhTmi,NT JACKSON, MISS. 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. jz1-gm https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Octobdr 1nt 1954 kb1it, realueat r. U. 4 Ban:cars Association. Mississippi JWSCOCidt.1,41 Canvuution, 1644:44nre iv.arioan 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. v41:10...4a 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 or. uuj 4. Mortimer J. r;N.r, Jr., .ikt.u. Chita' fitatle. • I 404. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Fasra' ETAT WHIK COW 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. 4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis XLT 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, not 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. rnciocure. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis AsIEJ STA? BANK CON 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 !..is these reports %.:7 tey renot v, 1 1 .351e !n Any :X the itiashin0,)n Very truly ylurs, J liortimer J. Fox, Jr., Chirf https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MAT 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 which have in states the ing 'loos riT; thiAr oerN,tion in .4ea1d It 14.-wel guaruni4. or 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 :ton. ;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, Dls6rf.ci, 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, J.ralabh% Marti:Air J. rOY, Jr., Chief Statistieitn. FEDERAL DEPOSIT INSURANCE CORPORATION WASH I NGTON 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. • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 6/(-4---) 7 •"---` -917- 4e- / • 3 -2 5`-i4 5 / /6-1) , 6, ff 3 5-, 3 , /2/3 • '13' 3C / • I , -CU, - https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ‘225,)-13 • 411.441•Tif acic, 6.12"., • ta,311//q Aa-19 -3q ii?p,6 •Vt""'"'-t,\-4,--- 414.. Ou Ura:4 Joyiv c 60. t,L, n/? 8(P 63 6,w `L^cL4--r 01) cu,r . eA,1 LL -L wr Lk, 6 L. Nair's—Le, TO- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ILILJ hqt u. tt:LL 31)300 ttt Cci243)i 11 S-GS, 4.s c-I9/9f • &PIN *Kt (Dalt Li tt 3ii--‘ - 1(..9 3 ‘. to-1 -1111 4 it b s 9SS' "i“ss-37, I/7 2 rtN•- 41.4_,3C.u, gLiq i cval AL 4.1), Li 2. Sla7)-33,SIM • z=iti muoli) CAL /306', 3.ct, /, 1(4 (0,; 31, eictk CLAA.,0-^ -,vve (,/ t3 \!, ,Igs 653, CM (b3, 71, ,Lhz I,el° ptx-1,,Ln 103 Boi,16LIS SSD 4,41• ‘ 4 44,1rAA 'YNT \a.4)C iNedesw%-• https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis oc/ (•1 a•-7 ccii•saL, 3 ,R34"11, 115' 0201 • .-13 113 V? .s0 `PP crt1 / 44 5 Jaa 33 ifi 4(91 3-6,1 ,?,G14 o cor ziisdi? Z‘85,ct Si 0/6411.1 k I thilEh /1. 1.0Z1/7 it'hO! Lb 7h ibsit0 nlo • 1,11,.hip, ,I_•- 1 ') co') lc. 4/. s L hok L9 h31:, t, 70. bkl, ?urz1 117 Sl•thh ti?`") criti.1511 IL •2CI 0Q1 • •Iclir. L c) c 'En r n ‘ ' $h /..L I hqt, r • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis "•,+-",,vrtlf •4•••"1''Ys...7A-IN*Ny'-ov^c) zh'14£. Lbi I I .-L.,011%09 i1,1,0b*e •OIE0EL.0/ (rb 1-irs 2411D 0 rvvITY) .. & . •"4—Cr'D https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rerLo-').gr4i ci.D.N1V1, -`713"ovs'a oLs (1.5-0.5%.5 69. 4107 , oN\kk c hs95 o --.-r"../r-WI176%1I ; ( 9 510 OC_S E91 5TAN 11.11)11 st.v95si, LE•Ti S t‘ l T-e° 119 ' 1r rhbv4-1 c2T,AhvA ‘.."1—"""si E QL kscoet 1.1'? 'QS( 61err''CI kl//` w%ert oc•Sot bqt c• Qloe As/ rya() rm C. Er Lc)I ' 1-1L 51 1E https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis IT —.2r—mtrL) _ •Prw-tr6 I 5'45 11.Sb 't 1,-cE LE I 1E. io • 1_,S17 EnS ri • lloh . tt TS ill va • " E. h)Li 0i 11 .ets 80e 7' —.COO \ \i \t„. re"\A https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis g kAtkA. -a> — . 31 - gy- ivy cr-AA. (r—f-L-1 1-3-Ific 31— oA.-"rto4 • fol-0 s). a- Ai, 1-7 / /11. . - e f„30.)4/ 1- lqA t: 1,94— /72.2. IQ ?/. Li 0-AA, "4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I 0-4-- 31— he? a, _ 3 - _ yis" 3 1 I a 7 .--C1S-Q - ),„26 11IL- /1- - 3 2. 3 ...)( P-41- // ol _ t../ / .3/ p https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MI& DEPOSTTS 17 FrKs OF BATINGFRACHFS, • Dec. 31 191 5 Dec. 21 1917 Dec. 27 1916 279.3or ank of Batesville L branch Aft Bank of Batesville 111, Balk of Pope ('3' /1 6 27 ank of Blue Mt. & branch Far of Blue Mountain 22`1 /970..(C) *)90 417./6 • .<1ft',42 • 2 s“,,• : /s7 cc9 • efri • Dank of Charleston s'*) eil • of of Louisville of McCool of Moorhead / 24 '2•/ •S*,(2 / // 2Z'6•Ir Bank of Oakland Bank of Vardaman • yank of Woodland Y/ Al. J1? C7eGC ?.r/ • /49..3yr. 3‘6.2/1 • As- • / 6-2 d o ' 9/ /c 9 .2.9 • 232 s-s-2. • 676? T:erchants and Farmers Bank, !-:olly Springs e.z branch •f11747 64Merchants and Farmers Bank 44 - 3, //osq-zr @Rnants and Farmers Bank tl Shuqualak " " " Voss Point II------ It https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 173 p_f_1.2-2:a_ /097992 s 1.14 7 Yz‘i 6e, 7?-k213 /Ito • gZ /44 221 gg. . G/ 3''/27 • g'Y 773 4,P4i/• r et3 • /12ze2 • /6000/7 f(6 2-1% 77 5 72e 3.04,1;.7 ,9/5--02/ M Y3'1 /75-7cf 12.1 V4 6 * 3575-/ 1C4 7..2019,‘ • /(Y3%' ;ZZ/'7Op?‘ / vv / • 27/ Fog • ? 7/ ' .r.0 1t3 , /37,/4'•ii • Soo..3,1 / • 7.4.04v.vi • /o3y7of:" hzo 0..20 • /8t7 741 fjJjL 4.-YV Ft 7y 57 9,1_5; fvo1.2 / ...,/,3 CH. .96/ 7y7 s:',12,23•C • g/ "erchanti and-Larine Bank 110 '-ascagoul a and branch- -/ PW,i/ i/7-r9f • /2e070/ 490-5-Y9: 1 1' 2(.1 1.1. • Pyhalia Bank 411 c..rchantp and Farmers Bank, and branch /el /70:5( _ry0 II a5/304? -, 4V-6;49c Zoq eAq Balk of Noxapater 7 1 e' . }ank of Belzoni 17a1houn County Bank I tlija 7318'381 20741,4 to_i_SaLZfLth 0 es-i? • se, ifa (f /P /44,,pg Ashland Branch Bank ascagoula 10 ;07614 41, Bank Bank Bank Bank Dec. 21 1 •••=4b " i './4.2. 2o u,A • -ancock County Bank L branches'/2/ ./.20 Bay St. Louis Pass Christian Pearlingten renada Bank & branches jrenada Bank 5ank of Ackerman Dec. 21 F7:-' /li; 711 Go r 'I • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Lb . TOTAL DEYOSITS TANKS OPERATING BRANCH7S 17 MISSISSIPPI - page 2 Dec. 31 1915 Dec. 27 1916 Dec. 31 1917 Dec. 31 1918 1.). 31 191Y ..5-77rau Bank of Tupelo and branches f-9.21, t3 ' Itr* 719 : /2/_72(1 • -2o ,c* • /2/9f or .:S':Se> 39SI • .S17 f • Bank of Tupelo ;LP 91.'• aser? " /09 40e1 • /f7 /.5'1 Fulton Baik 2762-4 Bank of Nettleton /76 dV 1'1223 • Peoples Bank e.L Trust C OrIPaTlY ftec-41)., ; Oat Tuptio and branches 0-5.•.3• • 4:46Tupelo milir Nettleton 6.", ,//2 • di 3Z2944. /447796' erchants & Farmers Bank LO., Lexlngton and branch a . 70_1.; meileiiAlli;°E Farmers Bk tTr3‘6*-1-:.! Bank of Black Hawk s6i 2s'S' 3 • / https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 9-9 7/7q77 /77J /33006 32311132... a,-„te7 • 2.09C 41 • 375-17-'1? 12/f ,?C 24/7/ 6/ ort.') • 9y tr, ienzi (-L./ /04, re, • /071619 lorre):17 /0774” otok9/ Ha 3 -?3 • A • STATE BANKS OPERATING BRANCHES IN MISSISST777: qur.11 30 1919 3 Head offices ! 0413 CD ci0 - 0 :"- t:104'D 111 I-'• tD CD CD ,1 O ',"C" 0-4 1-'0 li Hfr ,7) F-0 13) 1-1•0Hti 0.1 1-' 1---1 1-14) CD (IC) ' III V zoa t'd w 0 tiii--)oco •iu al M"i cit. , "o c N--0HO O P) 1-f) H 0 1--haq CD 1-43 hi 011 e+ ,-J. 1? Oh-'w Z 'CD I--f• o i 1 tr.1-•O H f-i SD co co i--. , Cio U aa4eT Puy eT6T 10.1 1-sTT 1--, - ri1-GrQ Z m Batesville Pope Vrnches 1- P16' ; h(01/7 Iiiin i 1 Banke .f4t!ffirille i 1 branch Ban - Bay St. Louis - Hancocir Colunt Pass Christi;a1 - "-Pearlington -- br&hes Blue Mountain - Bvik o BlueMountain Ashland - Ashlana Branch Bgnk - nch .. Grenada - Grenada Bank - 12 :„branches Ackerman - 14.nk'of ckermafi Beligla' - Beik Of aillatCR4 IL., ":. ...... Calhoun City- d1huptountiBank Chgil6iton,v Charleston -'Ban Eupops.- BanK"ofLouisville.---Bahk o LouisV'ille McCool - Bank of-McCOol Moorhead - 1nk fMborT,iead Noxapater - Bank'oftbiapater Ogkland Oakland - Bank Vardaman - Bgik of Vardaman(47.....44,w Woodland - B..6k-Of Woodland V „e' 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 11-65ti / 4 https://fraser.stlouisfed.org rol Federal Reserve Bank of St. Louis gkigV"" Oaf 1,1.. • 74.° 19•M tvand/Flpmevz Bankor Black Ha nk and trust -o J • • 'i• f / _ 0• e I 6( 3 3 (13C • „ 4 e-g-i'Ae ( t /I • • if/J:1 Aviv,1 fk https://fraser.stlouisfed.orgeiJ Federal Reserve Bank of St. Louis t el #14 • • fr •..4-0 cs eti 1 tr 1 -**? • t..;• (9 -7 ,1•41 ehrs;, d / • /7"-, e .5;4 „.• . tje .21 4.0j44 )04i . 44,„ L. A , 1441ePr-e 444-1 1, „of-1 'tit 77/e ,4 p14- .411 74 1 1. 1‘ 4h4,104.) • f " *VVi. iLitefte: ATE SAJICS 'OPERATING BRANCHES IN mthsissiin June 30, 1919 , r/I, 4. 9 Bead offices 1.4 -3 23 branches Batesville - Bank of Batesville - 1 branch Pope - Bank of Pope Bay St. Louis - Hancock County Bank - 2 branches Pass Christian Pearlington Blue Mountain - Bank of Blue Mountain - 1 branch Ashland - Ashland BAhcH Bahk L•oc/' 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 /.7/ArZla.A.4 " 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 ye•ci-of#1 , Woodland - Bank of wood4nd /10,4y)), "'n 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 Nettleton Rienzi / :"'\ i;i•• https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis '146(44-t— . Vfol /yr? ...V.'1- - f Jo' /0'0 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • • [4-, if, • e ; • ; ),•'; ,/ .7i, / ,., - + L , si-------- - . 4et " n: 774- •"' ' . •V e ,i.l, •,` t t 6$,2,15' , 1 .. 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Av. d v 4o- "4'3;74.a 4447 " ) :4. ) , /3 1/1 6 r ,. /V-.4c74-4.-' W 6;)t,-614 tek" „ciVie i 4p4i, .c vs.) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1/ I 44.4 4c.4-.S-4 r74 • /1 e.,..,,.. (-,0...-7,0• ,/ t r. -- ,- ( c, , ,.., „ ..i• • • 41,!.i;;;/.. el:1r ;LOt04 57 R.47, ,4,47/ E.4‘44se tr LI: 40(77* ‘,JitsoT.4--te • 141 C-A/4-4 '