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Federal Reserve Bank of St. Louis
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MEMORANDUM:
Mr. Van Fossen.
Subject:
WASEINGTON:
April .2
.9, 1926
Operation of State Deposit Guaranty Laws.
Date of approval of law -- March 10, 1917.
On the failure of the 6candinavian American Bank in Seattle
on June 30, 1921, with guaranteed deposits of about $9,000,000, all banks in the
system immediately withdrew with the result that the deposit guaranty system
became inoperative. In 1925 the amount of outstanding warrants, not including
interest, was $2,537,000 and assets not yet liquidated had a book value of
$3,681,000.
MEMORANDUM:
Mr. Foster.
Subject:
Oct.._2
1929
Present Status of the Guaranty Fund Law.
Washington
After being inoperative and on the statute books of the
6tate since 1921, the Guaranty Fund Law was formally
repealed during the first half of 1929. Second to
Mississippi, Washington has had less bank suspensions
in the 1921- 1928 period, than any other State in which the System has operated.
No little amount of credit can be given to the voluntary feature of the law which
practically caused its discontinuance in 1921. On the first day of July the
first guaranteed bank failed with deposits of 8.5 millions.
All banks had withdrawn at the end of that year. As a consequence there has been a pronounced
tendency towards fewer bank failures during these years, and in 1928 only two
banks were reported as having suspended operations.
0
MEMORANDUM:
Mr. Foster.
April 1
1930
WashInatpn
Subject:
Review of the GuaranLty Law _System in Eight States.
The guaranty law, enacted March 10, 1917, had a brief endurance of 4 years
in Washington.
At the outset about 39 per cent of the state banks joined the
system, which was optional. In 1920 there were 116 state banks and 4 branch
banks operating as guaranty banks. The total deposits subject to protection
were approximately $65,000,000, one half of which were in two banks. There were
no failures of guaranteed banks until July 1, 1921, and an amount of $320,908
was credited to the fund during the 4 year interval. When the ScandinavianAmerican Bank of 6eattle, the largest bank in the system, tiled on July 1, 1921,
the guaranty system crumbled. The law provided that banks could withdraw after
six months' notice and upon payment of all assessments and obligations.
All
member banks withdrew and the law became inoperative before January 1, 1922. A
bill repealing the guaranty law was passed in January, 1929, and became a law
June 11, 1929.
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Federal Reserve Bank of St. Louis
•
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Federal Reserve Bank of St. Louis
IX. WASHINGTON
in the state of Washington was
The experiment with the guaranty plan
in its scope and experiences to
short-lived, disastrous and too restricted
y presented. This state adopted a wholly
add anything to the picture alread
optional plan in 1917 and about 39 per cent of the state banks joined the
l of $3,445,/system,or 46 in number, mostly small, having aggregate capita
120
000 and deposits eligible to guaranty of $37,379,000. By June 1921,
0,000.
$71,00
banks were members, with guaranteed deposits of about
00.
$525,0
about
to
fund
the
up
built
Assessments had
It involved
In June 1921 occurred the first failure of a guaranteed bank.
nty in the
guara
to
t
subjec
ts
deposi
the largest bank in the system with
confund,
the
in
then
000
$525,
the
amount of $9,000,000. In addition to
of
assets
The
more.
000
$300,
in
ht
tingent and special assessments broug
ed
receiv
tors
deposi
that
so
,000,
$6,750
the failed bank liquidated at about
,000 or about
from this source and from the guaranty fund a total of $7,575
ts.
deposi
84 per cent of their guaranteed
the member
This single failure broke down the plan. Under the law
and maknotice
s'
banks were permitted to withdraw by giving six month
y withquickl
rs
ing payment of all existing pro rata obligations. All membe
inoper
e
becam
law
drew after meeting their losses and within the year the
tors
deposi
of
nts
ative. It was formally repealed in 1929. The unpaid warra
were about $1,400,000.
Removal Notice
7KHLWHPLGHQWLILHGEHORZKDVEHHQUHPRYHGLQDFFRUGDQFHZLWK)5$6(5
VSROLF\RQKDQGOLQJ
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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
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Federal Reserve Bank of St. Louis
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Removal Notice
7KHLWHPLGHQWLILHGEHORZKDVEHHQUHPRYHGLQDFFRUGDQFHZLWK)5$6(5
VSROLF\RQKDQGOLQJ
VHQVLWLYHLQIRUPDWLRQLQGLJLWL]DWLRQSURMHFWVGXHWR copyright protections.
ŝƚĂƚŝŽŶ/ŶĨŽƌŵĂƚŝŽŶ
Document type: Journal article
Pages
Removed:
Author(s): Preston, Howard H.
Title:
Deposit Guaranty in Washington
Date:
April 1923
Journal:
Journal of the American Bankers Association
Volume:
Vol. 15
URL:
Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
•
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Oct
WASHINGTON INTERVIEW
Mr. C. J. Lord, Vice President,
National Bank of Commerce,
Olympia, Washington,
Mr. Lord has been with the bank in Olympia since
1890. It was quite apparent in talking with him that the
National Bankers paid little attention to the plan for the
guaranty of bank deposits in Washington. The plan was voluntary among state banks but 1r. Lord was of the opinion that it
was compulsory. The banks which belong to the guaranty fund
had on their window a picture of George Washington with a statement that their deposits were guaranteed. He stated that the
experiment was one of short duration in Washington.
•
He related the following incident concernIng the
termination of the plan: A foreigner who had deposits of about
$4,000 in a savings account in one of the guaranteed banks came
in and asked for his money. The banker realizing that he had
no need for the funds asked him why he was withdrawing them;
then the foreigner replied, "What for you take George Wash picture off your window." There was, however, little feeling among
depositors of insecurity after the break-down of the insurance plan
and its suspension was accompanied by a very few withdrawals of
deposits from the banks.
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Federal Reserve Bank of St. Louis
ter
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Federal Reserve Bank of St. Louis
0
STATE OF WASHINGTON
Division of Banking
Olympia
December 29, 1934.
Mr. Mortimer J. Fox, Jr.,
Chief Statistician,
Federal Deposit Insurance Corporation,
Washington, D. C.
Dear dr. Fox:
We are just now in receipt of a copy of your letter of November 28th, the original of which failed to reach this office, and
hasten to give you the information you desire regarding what was
known as the Washington Bank Depositors' Guaranty Fund:
1.
There was no claim against the Fund by depositors of any bank
except the Scandinavian American Bank, of Seattle, which was the
first member of the Guaranty System to fail.
•
2.
The depositors of tAe Scandinavian American Bank were paid
85% on their claims - 75% of whicn was paid by the bank liquidation
and 10% by the Guaranty Fund.
3.
We enclose a copy of the final report of tne Guaranty Fund
Board. As you will see, the Fund was exhausted, and the unpaid
15% due on outstanding warrants was a loss to the depositors of the
liquidating bank.
After having been inoperative since January, 1922, the
Guaranty Fund Law was repealed by the 1929 Legislature.
Very truly yours,
s)
Howard H. Hansen
Howard H. Hansen
Supervisor of Banking
enc.
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Federal Reserve Bank of St. Louis
Octobr
Mr. J. 'T. Brislawn, SecreLry
W:Lshinton Bankers Association,
Convention,
at4erican Bankere it
nillard Hotel,
7ushia6ton, D. C.
Eletx Mr. Brielawn:
In connection with our studies of the banking laws an4 their operation in the states which have in
the pest had deposit insurance or guaranty laws, it would
be of valuable aesist ncc if one of the member? of this
Division could have a personal thtrvie' ith yw while
you are in lashington.
lour firathan0 knoviedge of the situation
in :::.c.nington wouIC shed 1i.ht on noir the various parts
of the lag operatod.
The office of thc Federal Doposit Insurunce
Corporation are located in utn. NaLionai Press Building,
which is jut across the street from the Willard Hotel.
Our room number is 456 and our telephone number ie DistrLct
1,0, Extension 11;Z.
We would appreciate your granting uo vn interview and advising us when 4ncj -diem it may be had.
Vory truly yours,
!
Fts,Jt
Mortimer J. Fox, Jr.,
Chief Statisticiun.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S
.
V
dr. S. A. Davis* Oreeident
Washington Bankers Association,
American Ban4mrs AssocisUon Convention,
Willard Hotel,
r.iushington, D. C.
Deur Mr. Davis:
In connection with our atuides of the bank—
ing laws an‘J thoir operfltion in the states Which have in
tue pt
uepoelt, insurance or guaranty IzIwat it would
be of Nviuuble assistance if one of the sembers of this
filvieion could 4‘VO u personal interview with you while
you are in Washington.
/our firsthand knowledge of the situation
Id
4uaid aneJ lieit on how the various purts
of the law operated.
The offices of the Federal Deposit Insurance
Corporation arc locatod in the National ?raze Building*
which is just across the stroct frog the 'Miura Hotel.
Our room num4er is ez and our tolephone number is District
1240, Extension U.
re utould appreeiate your grunting US
view and advising us when and :tare it may be had.
ati
inter—
Very truly yours*
A: S. ikele
Mortimer J. Fox, Jr.,
Chief Statistician.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
BASK COM
October 16, 1914
Hon. Howard H. Hansom,
Washington Supervisor of Banking,
c/o National Conference of Sti.ts
Supervising Officials,
Lord Baltimore Hotel,
Haltiaore, Maryland.
Dear Mr. Hansom
In connection with our studies of the
banking laws and their operation in the stctc:, which
hwye in the past bad deposit insuranms or guaranty laws,
it would be of valuable assistance if one of the menbore of this Division could hive a person.F1 interview
with you uhile you are in this ncighborhood.
Your firsthand knowledge of the situation in Washington would shed light on how the various
p,,rts of the lew operated.
Will you please advise us 68 to when
and where this inttrview say be had, either here in
Waohington or in Baltimore. As the time is so short a
telegram sent collect to the Statistical Division,
.urunce Corpov.tion, Waehington,
Federal Deposit Int.
D. C. would be appreciated.
Very truly your,
Wet Poo,Jr.
4
104
,
0
1.
.
Mortimer J. Fox, Jr.,
Chief Stetisticim.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
November
Mr. Howard U. Hanson,
Supervieor of Banking,
Olympia, Washington.
Lear Mr. Hanson:
In our discussion with you in Washington concerning
the guarant.y of bank deposits in your state, the statement
was made that the final repeal of the law was delayed :lend—
ing the settlement of aoue minor claims on the Fund.
A study of the -,.eflortv of the Swervisors of Bank—
ing of Fashin7ton state fnablos us to follow the working
of the Fund from 1417 to 1J21. At that time all of the
banks withdrew fro the Fune.
We are anxioun to know if there were any clable by
depositors in any balics, except those in the Scandinavian
American Bank of Seattle.
What amount of deposit liabilities Was paid by
liquidation or the assets of the bai? and what amount by
the
Guaranty Fund?
The last published rir,ort in 1J26 shows a payment of
80% of the guaranteed claims while the report of the clos—
ng liquidation in 1927 indicates a payment of 85%. Can you
tell us in what manner the final settlement was made and
what aisposition wa3 made of the guaranteed warrants outstand—
ing? If there is available a final statemelt of the rahin-ton
Bank Depositors' Guaranty Fund, we would like to have a coy
of it. Fe would ap:;reclate very uuch such ansistetwe as you
cell give us in this matter.
Very truly yours,
Jr,
Mortir?r J. Fox, Jr.,
aief ::;tatistician.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
STAT.
Decesber 13, 1A4
Ir. liserd H. limieso
lipeevlser of limkingt
Olympia, lashiastesk
Dear Mr. Hasiew
Ws have received no reply to our letter
of November 28. As ft fear that it may have been lost
in the nail, !lc are enclosinga espy of the seas.
We al.° very anxious to coaplets the
study that we are making of the state guaranty funds.
If it is not pon.ible to furnish al of the information
at once, will you please answer seek queatione as you
conveniently can at the present time
We are enclosing an air mail atased
envelope, and we shall apraciato a rely as *con as
possible.
Very truly yours,
Mortisr J. Fox, Jr.,
Chief Statistician.
loeXeeerea•
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Federal Reserve Bank of St. Louis
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WASHINGTON
FUND,
GUARANTY
OF
MEMBERS
NOT
BANKS
OF
AND DEPOSITS
(Grouped by Amount of Deposits)
1917
Number
1920
Number
1918
1919
Percentage
Percentage
Percentage
-
100.013
100.0%
100.0%
100.01
1917
266
277
50
84
83
43
68
68
20
32
16.3
66
53
70
63
27.
27.1
16.0
25.3
25.3
7.5
24.8
19.9
11.6
25.3
22.7
39
37
65
52
22
18
10
22
20
11
27
20
13
12.7
7.2
5.9
3.3
13.7
8.2
7.4
4.1
24.5
28
18
16
10.5
6.8
6.0
18.8
9.7
7.2
4.7
$252,393
$286,081
$355,212
$322,303
3,585
14,237
29,385
3,079
11,735
23,690
1,351
11,153
19,430
2,178
11,062
22,603
1.4
5.6
11.7
1.1
4.1
8.3
.4
3.1
5.5
.7
3.4
7.0
26,508
28,046
50,509
100,123
25,072
27,894
60,045
134,566
43,135
41,797
55,022
183,324
36,083
38,212
64,539
147,626
10.5
11.1
20.0
8.8
9-7
21.0
39.7
47.0
12.1
11.8
15.5
51.6
11.2
11.9
20.0
45.8
he Bank Commissioners, Washington, 1917-1920.
o
Source: Annual Re or
and Mutual Savings Banks.
e
S
1/ Includes Nation
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d,g&
AA-44-L.7rigt A$1_614
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Federal Reserve Bank of St. Louis
1920
Percentage
269
500,000 to 1,000,000
1,000,000 to 2,000,000
2,000,000 to 5,000,000
5,000,000 and over
500,000 to 1,000,000
1,000,000 to 2,000,000
2,000,000 to 5,000,000
- ^^.000 and over
r.''
1919
Number
306
NUMBER OF BANKS - Total
Grouped by amount of
deposits
100,000 or less
100,000 to 250,000
250,000 to 500,000
DEPOSITS - Total
Grouped by amount of
deposits
100,000 or less
100,000 to 250,000
250,000 to 500,000
1918
Number
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064
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Table7 STATE BANKS NOT MEMBERS OF THE GUARANTY FUND WHICH FAILED DURING
OPERATION OF THE FUND
Langley State Bank
Langley
State Bank of Concrete,
Concrete
Scandinavian-American
Bank, Tacoma
North Side State Bank 7
Seattle
Central Bank and Trust
Company, Yakima
Citizens Bank of
Georgetown, Seattle
Kelso State Bank,
Kelso
State Bank of Black
Diamond, Black
Diamond
February 26,
1918
January 17,
1919
January 15,
1921
January 26,
1921
January 27,
1921
January 28,
1921
March 17,
1921
May 13,
1921
$43,835 2/
$ 43,835
91,000 2/
91,000-
2,718,629
$1,398,665
175,100
83,649
91,451
495,110
136,112
-3.00*7991:t
297,251 v
1k1,801
155,450
423,458
206,244
217,214
4,117,295)
-
141,257j
109,291
•4.611119.filk
11
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$2,331,069
.trl
231 6-/AV°
$3,453,237
$5,784,306
Toft
Loss to
depositors
Recoveries by
depositors
Amount of
/
deposits
Date of
closing
Name
f
peisiortf
/0, ei%?,
yi
1/ Amounts shown have been taken from receiver's statements for each bank
except in The case of the Langley State Bank and the State Bank of Concrete. For the
latter two the deposit figures are those given in the State reports at failure dates.
No receiver's statements were published in the State Reports for either
the Langley State Bank or the State Bank of Concrete. Both banks were reorganized and
reopened within the same year during which they failed and it is assumed that no losses
of substance were sustained.
21
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8. BANK FAILURE RATE IN WASHINGTON, 1917-1921
Failures per
100 operating
banks
1/
Total - all banks
All State Commercial
Guaranteed
Not guaranteed
Deposits in failed
banks per $100 in
operating banks
.6o
1.14
.77
2.50
.29
.98
1.03
1/ Includes State commercial, National and Mutual Savings
banks.
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Table
9.
ASSESSMENTS AND OTHER RECEIPTS OF DEPOSIT GUARANTY
FUND IN WASHINGTON, DECEMBER 31, 1921
qates of as
sessment (percentage of
deposits 1/)
1917
Amount of
assessment 2/
050
1918
40
1919
so
1920
••
1921
.6o
$
77,913
39,426
85,702
675,474
-91,984
920,690
Adjustments 3/
Adjusted total
Ratio of
aggregate
assessment
to total
capital and
surplus
Ratio of
aggregate
assessments
to total deposits of
guaranteed
banks
3.01
1.32
.58
1.17
.34
Miscellaneous
receipts
.14
( 53(
.05
.11
1/ Includes initial cash assessment and
thereafter, excludes bonds or cash deposits as security for payment of
assessments.
2/ Includes initial and special assessments in accordance with
the rates in the preceding column and also additional assessments because
of increase in deposits and from new banks opened.
3/ Difference between figures given in statement of fund for
December 31, 1921, and in final statement. This difference is due to
refunds on claims which were pending in court on December 31, 1921 1 omm4...
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rable 10. RECEIPTS OF THE DEPOSIT GUARANTY FUND, INCLUDING PROCEEDS
FROM THE LIQUIDATION OF SUSPENDED BANKS, AND COMPARISON WITH
CLAIMS UPON THE FUND IN WASHINGTON
Years
Assessments
and miscellaneous
receipts
-(„pts from
liquidation
of closed
banks
134,158
77,913
39,426
85,702
676,011 1/
1917
1919
1920
1921
1922
1923
1924
1925
1926
1927
•
15,633 2/
Total 19171,028,843
411Est-91,984
nts
Adjusted
936,859
total
1/
2/
3/
I/
5/
Total receipts including proceeds from
liquidation
of suspended
banks
Total depositors' claims
and expenses
of administration
-375,715
7,271,944
117,857
117,857
-91,984
+25,873
-117,857
-117,857
7,297,818
7,297,817
0
0
1,573,335
6,360,958
7,389,802
1,743,167
1,602,427
1,635,071
855,564
1,557,702
418,173
382,062
820,945 4/
Includes interest for the period 1917-1921.
Represents interest for 1922-1927.
Includes administration expense 1917-1921.
Includes administration expense 1922-1927.
Loss on deposits in Scandinavian-American Bank.
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Federal Reserve Bank of St. Louis
I
134,158
77,913
39,426
85,702
140,740
Cumulativc
surplus or
deficit
212,071
251,497
337,199
477,939
477,9:
477,9L,
493,572
493,572
493,572
117,857
1,067,156
1,635,071
855,564
1,557,702
418,173
382,062
445,230
Vvr 1E4g-
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surplus or
deficit
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Causes of bank failures.
(Insert discussion of causes of
failure of Scandinavian American Bank).
Though the deposit guaranty nlan in Washington was in operation 00/fii only during six months of the
decade
covered by the Federal Reserve Committee on branch, Group, and (Main
in its survey of causes of suspension, it is perhaps desirable to include here a summary of the cuases of failure reported on the suspension schedules collected,
TWifiriifi
by that Committee for the
period 1921-30.
A classification of the primary and contributing
causes reported
for 46 banks which ffliled in Washington/during
1921-30 is given below:
Number of cases
Primary Contributing
Decline in real estate values
Losses due to unforeseen agricultural or
industrial disasters such as flooRs,
droughts, boil weevil, etc.
Insufficient diversification or incompetent
management
Defalcation
Failure of affiliated institutions or of
correspondents
Heavy withdrawals or failure of large debtor
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