The Bismarck Tribune Newspaper, January 19, 1923, Page 2

PAGE TWO GUARANTY LAW IST00 LOOSE - SOLONS TOLD (Continued from page 1) 1 reéciver, that the Guaranty Fund | tas no deSnite legal direction as to he method of paying out the money | t ft had no power alvage assets that may} under fore- at there is no method of nating weak banks from the ystem, that the banking board con- ists of elected officials who do not| inve adequate time to perform their that the banking board hi ad ¢ assets of closed | 10 power to sefl th banks although expenses may be eat- ing up the assets. | ‘The commission will later submit| letailed figures of the condition of ch bank to the legislature. Report in Full The report follows: v UaGeaeant to the request contain- | cd in the joint resolution adopted | by you, for a report of the activities | of the Depositors’ Guaranty Fund | Commission for the past two years, we beg leave to report. “The Legislature of 1917 enacted | the law creating the Depositors’ | Guaranty Fund and provided therein for a guaranty of certain deposits | in state banks, througa an assess- | ment upon the state banks propor- | tionate to such deposits, and provid- | ed for a commission of five, of which | the Governor and State Examiner} are ex-officio members, the three re- maining members to be appointed by the Gov or from nominations made by the te banks. th “The work and problems of tais Guaranty Fund Commission for the past two years have been principally | the problems of closed banks. Since | tie enactment of law, seventy state { banks have been closed by the Bank- ing Department and receivers ap- pointed therefor as provided by law. Of the banks which have been closed, | depositors of the First State Bank j at Jud and the Farmers State Bank | of Marmarth have been paid in full; Nineteen banks have been reopened and are now running, leaving now fifty-one state banks closed and in the hands of receivers appointed by the Banking Board. We submit herewith a statement as to these closed state banks show- ing: their condition in detail, and, as a total, An examination of this state- ment will show that no substantial amount can be expected to be realiz~ ed from the assets of these banks aftér paying expenses. Audit Made The state banks, upon waich the burden of losses must eventually fal \at their Annual Association Meéting: held in 1922, appointed a committee consisting of Geo. H. Hol- listér, H. P, Goddard and A. E. Se ereid, to represent them in all things Defgre this commission, and gave to that “committee as full powers as it aunty Fund. For example, “Deposits | otherwise secured” are not guaran- teed by the law and it is the rule in other states, and is our contention that deposits, on which a greater | rate of interest than that permitted by law has been promised or paid, are not guaranteed but are in fact loans. Another class of claims that has been rejected by the auditors is where stock promoters and like se- curity salesmen have exchanged notes for certificates of deposit, it being claimed that such transactions are in fact but an exchange of cre~ dit and do not come within the law. In short, the Commission proposes to treat all deposits as unsecured by the Guaranty Act that are legally ated or received in-tae ordinary and usual course of banking busi- ness as generally understood. Referring to the item of “Ques- tioned Deposits” shown in the state- ment submitted herewith: of this amount $961,656.79 are redeposita, so-called, by the bank of North Da- kota, made by the Industrial Com- nission with full knowledge of the condition of these banks. It is claim- eq that such redeposits are variously secured and for these” and other! reasons, we contend that the Guar- anty Fund is not liable thereon. “We find that after a bank is clos- ed, the assets depreciate very rap- idly, The reason for this is appar- ent; the personal element is immed- iately eliminated; the receiver Aas | very limted authority, his power probabl¥ restricted to collecting and receipting for money, and to realize s rapidly as possible upon the as- s; he may not use any of the funds collected for the purpose of protecting other assets, and general- ly a received is without funds; if fae has made even more than a rea- mnable attempt to collect on the pcurities in his hands, he is finally apt to let matters drift somewhat, | both on account of his lack of pow- er and lack of results of his efforts, | until finally he collects sufficient | funds to pay ais own expenses and lets it go at that. Many of those | owing closed banks do not feel the | same moral obligation to pay or at- tempt to pay as toa going bank. The holders of first mortgages on real estate are not inclined to ex- tend the time of payment of inter- est and principal to the same ex- tent as when the security is under the control of an open bank. We | fing that the depreciation of the as- j Sets increases rapidly, and for this reason we have concluded, and, in many cases recommended, that an jearly sale, in bulk, be made of the assets of these banks. Notes Gone “The greater portion of the good notes of the closed banks are in the hands of bills payable holders, held as security for obligations of the | insolvent bank. Any bank before it | closes has exliausted every resource | toward collecting its paper, as well jas its capacity to borrow, with the result that the best paper is invar- jiably found as collateral to a loan {from the correspondent bank, while the notes left in the bank are slow and largely uncollectible. Much of this collateral so pledged for loans | has already been forealosed upon and was. possible for them to do. The rating of tne assets of these closed banks has been, we think, thoroughly done, Mr. H. P. Goddard of ‘the State Bank Committee and Mr, B. J. Schoregge, supervisor of Re@eivers, have done the work in de- ai] and tae Guaranty Fund Com- migsion ang the Members of the State Bank Committee all feel confi- dept that the values placed upon thége assets are as nearly correct as can be determined at this time. In making these ratings they took advantage of all information they sowld secure from every source, and muca time and care was used in making the ratings reliable. “You will observe that the total deposits in the closed banks amount to §7,145,636.00, and of this amount, acéording to the audit by the State Bank Committee, less than fifty per cent is guaranteed under the Guar- anty Law. \ “This same Committee was ap- pointed in June, 1921, by the State Bafikers’ Association, to aid in the auditing of deposits in all the clased banks, both for their.own informa- tio® and to assist the Commission in developing the facts that they migat eventually arrive at an intelli- gent decision as to what claims were guaranteed and what were not. The origin and detail of every deposit in every one of the closed banks were investigated and the reports are now on file with the Secretary of this Commission, and to whica reports reference is hereby made, Much Undetermined “The Commission has not finally admitted nor denied Kability to in- dividuals on their clams for guar- anty of ther deposits; the law pro- vides no method for certifying to individual claims. Court. decisions will in many cases be necessary to | determine the liability of the Guar- | AT, SE Indtant Relief from Indigestion, Gas, Sourness, Flatulence ATE 700 MUCH! SE STOMACH full. Digestion stopped! nt you chew a few tablets Diapepsin” your stomach JAH the feeling of indiges- burn, fullnes#, tightness, stomach acidity, gases, stomach and correct, n for a few cents. Pleas- : drug store, f collateral the title passed to the owner of the | bills payable, which nearly always is some correspondent bank in a | large city. Several of these institu- j tions have signified their willing- [ness to accept the amount of their helaims with interest ana expenses, \and release the collateral, provided |it is for the benefit of the, closed j bank and has the approval of ‘the Guaranty Fund Commission. The | right of the Guaranty Fund Com- | mission to use funds under its con- trol for the purpose of salvaging or purchasing these assets has been! questioned, and while legal opinions have been rendered to the Commis- sion to the effect that it can use funds for this purpose, still it has been done only in special cases and to a very limited extent, and in such cases the Commission has de- posited the necessary money in some it, with instructions for such depos- itory to use this money to purchase such assets, to hold them in trust and colleet them for the benefit of the Guaranty Fund. Loans Made “The report herewith submitted discloses that there were loans amounting to $8,568,766.00 in closed banks, and by determination based on the ratings obtained by the Com- mission, the value of these loans considered good and collectible is $3,850,258.00, so that the good and collectible notes in these closed banks are worth approximately, ac- cordin® to the ratings, but forty-four | cents on the dolla The greater amount of these notes is pledged as for money _ borrowed, which amounts to approximately $1,- 677,040.00 including estimated inter- est and expenses. : “The question of having the Guar- anty Fund Law amended to permit the use of the fund for the purpose of purchasing the assets outright has been discussed generally, but it is realized that there is danger in delegating such power to any Commission, and if given, should not be included in the general law per- manently but if given at all, should befor a limited time only and dur- ing the present emergency. “In addtion to the closed banks, there are banks which are in danger of being closed, in fact in ordinary | times would be closed, The Guaranty Law might be amended so as to per- mit the use of the Fund for the pur- pose of preventing the closing of such banks, upon ie well based theory that it would require much less money to save! any such bank than to pay the depositors after the bank has closed. ! “On June 30, 1922, there was on deposit in: the open banks of the State under the operation’ of this ‘Act; about $95,000,000: The maximum assessment under the law, ope-fourta of ohe per cent per ‘annum upon deposits, yields for the current year @ little less than 1$240,000.00. The Ponies lability of the Guaranty to depositors of closed banks, Biving’ due allowance for questions hereinbefore ralsed, to} ‘nesrly $4,000,000.00, which sum un- der the law draws five per cent in- terest, leaving from the 1922 assens- pret cad esaner aman ppl incipal of the’ cla time there were 664 banks. in the under the operation of this legal depository as a special depos- |, Act, with an average deposit of $144,- 000,00 and with an‘average capital of about $17,000.00, The average eae bank was assessed deing the past year approximately $360.00 as its contribution to the Gueranty Fund, something more than two per cent upon the capital stock of the aver- age bank. Any increase in the rate of assessment against banks for tais Fund Would only have a tendency t@ drive-them into the National system or liquidation, thereby reducing sources from which Assessments could be reahzed. “There has been received from as- sessments and otherwise since date the law was enacted, $793,848. 48; $14,629.22 has been returned to banks in adjustments of assessments $24,402.81 is in banks now closed; 41.99 has been advanced to re- ceiver#; $7266.81 has been used for expenses; $171,464.03 has been paid to depositors, leaving $573,743.62 now deposited in banks within the State, operating under. the system, a de- taildd statement of waich is attach- ed herewith and made a part here- of. “By the enactment of this law, as it is worded and as it was adyer- tised, the public was induced to de- posit money in state banks under the belief that the deposits were guaranteed by tae State itself, and this belief is very general today. Lacks Authority “The Guaranty Fund Commission is supposed to have some authority to supervise closed banks, but the law was so crudely drawn and is. so conflicting with the laws governing the duties of the Banking Board that adequate and complete supervision has been impossible. The law gives the Banking Board the power to ap- point a receiver, so-called, and else- where says that the Guaranty Fund Commission ‘shall supervise the li- quidation of the closed banks,’ and for that purpose may appoint a sup- ervisor of receivers, Any receiver so appointed and supervised is useless. “The Guaranty Fund cannot with- draws from a bank in failing circam- stances, nor can it interfere, or in- vestigate a bank that refuses to con- ducts its business in a produlent man ner or carry out the orders of the State Examiner. The situation is, that deposits in sae banks are guar- anteed and promised to be repaid by assessmets upon the remaining state banks, yet the guarantors have noth- ing to say about the conduct, condi- tion or methods of such banks, The state banks by law are compelled to go into partnership wita others over whom they have no control and for the delinquencies of whom they are made responsible. It is eminent- ly unfair that they be not allowed to cause an examination to deter- mine whether they are safe in con- tinuing or to wthdraw as guarantor from any bank of this class. Of Deep Concern s “The matter of winding up some jof the closed banks has been one of deep concern and much thought and work on the part of the Com- mission. Realizing the fact that many of their assets were of little value, that the expense of the receivedships was absorbing all that was being realized from collections, the Com- mission has been working for months to find some way to disposé of these ctosed’ banks and determine the real loss, but it was not only difficult to interest purchasers, but when one was found who | was interested, was as difficult for ourselves as well as for the Banking Board to finally realize that sales should necessarily be made at what on its face semed to be a great sacrifice. Finally, by a combi- nation of circumstances, one case was taken before the District Court in Grand Forks County and it was there made evident that the powers of the Banking Board, the Guaranty THE BISMARCK TRIBUNE — Fung Commission and the receivers were very limited afd that uhless the law is amended, every one of these closed banks must ye be tak- en into, court, adjudicated and final- ly administered, involving much ex- pense and delay with further 1088 | to the creditors and to the Guar- anty Fund, “The State Banking Board consists of the Governor, Secretary of State | and Attorney General, and generally these officials are not expert and ex- perienced in banking problems; they | are members of many other boards. Their time is more than taken up | with important State affairs, and for | these reasons are unable to properly ; supervise the banks of the State. We | believe that had preceding legisla- | tures given our Banking System, more constructive consideratioh, pro- | vided and required more vigorous | and construetive supervision, that many of the closed banks would never have been in trouble and that | generally, banks would now be \in better condition, The situation is now that by reason-of the many fes- | tures referred to herein, neither the Banking Board nor the Guaranty Fund Commission ean properly fune- | tion, and immediate and thorough | consideration at your hands is neees- | sary. “There appears to be no disposi- tion on the part of the average | state bank te_evade any responsibil- ity on acount of the Guaranty Fund, but they do think that better super- vision should be exercised; that the guaranteeing ks should have something material to say as to what sort of a bank, not only comes into the system, for which the other banks are responsible, but particularly to have something to say as to who continues in the system. Causes of Failure One of the principal causes for! the many bank failures and for the unsatisfactory condition of a num-j ber of open banks is by reason of the fact that the State has greatly more banks than it can support. Banks have been opened in towns which were already well and suf- ficently served. Tae result has been an era of vicious banking practices; thaking loans larger than the credit or. security of the borrower would prudently warrant; overbidding for deposit money; overborrowing from city banks; loading up with real es- tate and other immovabte assets; be- coming interested directly or indi- rectly in the sale and promoton of tractors, automobiles, etc., and gen- erally the over-head expense of maintaining these unnecessary li- censed institutions has been a direct and heavy charge upon the com- munity wherein they are located. “For your convenience and definite information, we|will summarize some of the conditions as follow: a “Receivers have no powers; they can only receive. They cannot com- promise debts; they cannot satisfy mortgaes; they cannot sell assets either singly or in bulk, except pos- “There is no recognized authority over a receiver. The supervisor of receivers may direct one taing, the State Examiner another, and “the Banking Board may rescind one or} both orders acording to some moge or less convincing argument at the time presented. “The Guaranty Fund has no defin- ite legal direction as to the method of paying out the money in its hands. Shall it pay the claims in banks in full in order closed? If so, what about two or more which may haye been closed the same day? Shall all claims of all banks be paid pro rata by dvidends? -Or shall they pay on such banks in the year during which the assessment was paid? And how WATCH BABY, MOTHER! CHILDREN’S COLDS OFTEN LEAD TO PNEUMONIA A sneeze or two, a snuffle, and baby’s cold is on its way. The seriousness of the care of themselves. situation ig often ignored. Mothers must. Upon first indications of a cold, Babies cannot take apply a very small amount of Muco-Solvent Salve (which can be had at any store) up each nos- tril. iNo upset stomach. TRY THIS FOR YOUR COLD You Don’t “Take” It. You Inhale it. Clears Head Instantly. For an ordinary cold in the head get from your druggist, we believe |_ all druggists have it, a twenty-five cent bottle of Muco-Solvert Salve. Melt a little in a spoon and breathe the vapors; this will: clear the passages of the nose. Then stuff a little up each nostril. and-breathe deeply. The vapors will sooth and heal the upper respiratory tract and the cold will probably disap- pear, One Night Treatment. A bad cold can usually be driv- en out im one night. Take a good laxative. Use the Muco-Solvent Salve as advised in previous para- graph; apply ‘hot Hoarse Cough Is vee Warning When any coll reaches the hoarse cough stage we recty- ‘Mend. the use of Muco-Solven: ‘Liquid if connection with Muco- Salve. The’ liquid-ts a solution “of antiseptics, 50 comubined ap 'to wet towels to'|' Baby will breathe the soothii val “hi little head and heal the inflamed mea io naaty Senile No nasty medicine. No trouble. Aibsolutely safe and perfectly simple, throat and chest to open the pores; then spread Muco Salve on thickly, covering same with warm @annels —and go to bed. Muco Salve has wonderful pene- trating properties. I will attract the blood to the affected parts and thus aid in loosening the conges- tion. _The vapors ‘breathed. by the patient will have an antiseptic and anesthetic influence, carrying: the medication direct to the air pass- ages and lungs, All this ig much more simple than it sounds, for nature will in ‘reality be doing most of the heal- ing. Next morning the patient will ‘be in good spirits and usually free from cold. Ingredients For Cold Remedy ~— Take This to Drug Store. Get fronr-Four druggist @ quan- tity of highly refined fpelpolateny, a smal amount: of menthol. crys- tale, of] eucalyptus, off thyme, oi! turpentine and camphor. . Melt all together in. proper proportions and allow to cool is the form of senil- solid ointment or daive. Applied \in: nostrils and upon chest this remedy. will often drive.out s cold in_an hour. ‘Itvis- better and much cheaper, ealveas pre- however, to buy the about a bank that was closed yester- day, in respect to banks closed two years ago to whose depositors a per- eentage may have already been paid? Is the Commission’s rule final as to whether a deposit is’ guaranteed or not? “The Guaranty Fund Commission probably has no power to protect or salvage assets that may be in jeo- pardy of sala under foreclosure, for @ small proportion of; their worth. Can’t Eliminate Banks “Once # bank is admitted to tae Guaranty Fund System there is no method of its’ being elimiriated no matter what it does or what condi- tion t is in except to close it, and as to whether a bank is to be closed or rt, the Guaranty Fand Commis- sion who represents the guarantors have no power and often know noth- ing abut the prospective failure un- til the bank is closed and in the |hands of the Banking Department. “Tne Guaranty Fund Law, as it stands now, is nothing more than an advertising dodge to attract depos- apparently intended to deceive and worded so that the mass of pub- lic do, with reason, think that the State of North Dakota itself guar- antees these deposits, “A Banking Board consisting of “| elected officals only, who by reason of the many other important duties imposed upon them by law and on account of the vagueness of the, present. banking laws, are unable to adequately administer the very im- portant duties as members of the Banking Board. “The Guaranty Fund Commission now is nothing more nor less than an adviser. It can figure out what ought to be done, only to realize that on account of legal or other rea. sons their conclusions cannot be put into operation. “The Banking Board has no power to sell the assets of closed banks. The expenses may be eating up the assets nd everyone may agree that ‘Sustained sibly for face value. } it should be sold, yet it cannot be done. “There are too many banks. One to each 759 population. The average in the United States is to one to each 3600. Ovethcad, cost to maintain two banks—often three or four—-where one will serve, is a, direct tax on that community, Have less banks, closer supervision and better banks. Serious Problem In closing, we realize our inabil- ity to put in @ report such ‘as this, everything that pertains to the sub- ject. We learn of new obstacles at every meeting. The subject is so full of problems that as you proceed, you will become, as we have, somewhat dazed at its magnitude and serious- ness. However, we have some very strong convictions as to what should be done, generally, and, 4 invited, will be glad to present ouf ideas in the shape of concrete laws for your consideration, Signed; R. A. Nestos, Governor, ex-officia member; Gilbert Seming- son, state examiner, ex-officio mem- ber; M. R, Porter, S. G. Severtson, C. B, McMillan, mbembers of Guar- anty Fund Commission LIVESTOCK MEN ELECT CRABBE AS PRESIDENT Fargo, Jan. 19.—Livestock men of North Dakota were urged to make use of the livestock depagtment of the Fargo fair as an adjunct in de- veloping the livestock industry by J. P. Hardy, secretary of ‘the fair as- sociation in an address at the meet- ing of the North Dakota Livestock Breeders’ association. I. B. Johnson, of St. Paul, asssit- ant manager of the Central Livestock Shipping association, gave a report of the successful working of that or- ganization. H / \ FRIDAY, JANUARY 19, 1923 5 i Logan- beret Fence aeinglese Beats N Spinach, Blended Soup Vegetables UY eae ‘KINGS Dehydrated 8 Finest table quality products In Hi AT Economical Sanitary YOUR Healthful Cartons GROCER'S Convenient, ‘KING'S FOOD PRODUCTS CO. Originators of Practical Dehydration) IRTLAND, OREGON DRINK OFFERED 'BY NEW @ FRIENDS NEARLY FATAL Minot, N. D., Jan. 19.—Generosity of newly found friends is blamed by Oscar Kagley of Tagus, N. D., for his being in‘a local hospital in critical condition, as a result of drinking what attending physicians says gives indication of having been wood alcohol. Kagley is expected to recover, He took a drink, it is stated, and about 30 hours later recovered con- sciousness, unable to talk, his sight impaired and seriously ill girls’ club leader of Nortn Dakota discussed the part that North Da‘ kota young people aye playing in the development of the livstock bus- iness. through their organized clubs. At the annvfal dinner and business mecting of tie livestock association last evening, which was addressed by JH. Sheppatd of the agricultural college and E. R. Montgomery of Grand Forks, the following officers were elected: President, S. F. Crabbe, Fargo; vice president, B. W. Aylor, Mayville; secretary, Geo. J Bakes, agricultural college. Follow- ing is the board of directors: John Harris, Park River; A, H. White, Bottineau, W. W. Fritch, Valley City; J. G. Nelson and S. D, Joan- Have you tried “Never Fails” flour. Ask -your gro- cer. Your Guarantee of Service ned Pulling Power. Winter Driving - BA ‘When the snow is deep or the road is bad, you need mustained power — the kind of power that enables your car to buck a drift if nec- essary—the kind of power to keep moving through a muddy stretch. If you lose traction and your wheels spin you're stuck. 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