The Nonpartisan Leader Newspaper, February 21, 1921, Page 5

REA R 24 Nbfth Dakota Industries Show Profit ~ Net Profits Total $116,427.75 January 1, 1921, Despite Raid of Grain ‘' N AUDIT of all North Dakota state industries, made by the Equitable Audit company, St: Paul, for the North Dakota industrial commission, shows that up to January 1, 1921, the state industries, instead of being an expense to the taxpayers, made a net profit of $116,427.75. . ; “This net profit is over and above all expense, “property depreciation, market losses, organization " and development expenses,”, states the report. - The following summary of the financial report shows the deductions made from the gross profits: , Bank of North Dakota, December 81, Prfi)flz% g ano v o SRS ++.$309,967.23 - Less—Reserve to repay appropriation used toessta‘;i Bank of North Dakota.$'24,108.07 Interest . paid ecn $2,000,000 bank bonds due January 1 and July . o O T S e R S T eI i 100,000.00 - - . Depreciation on fixtures ccoiesseee 9,860.65 183,968.78 Bank of North Dakota SUrDIUS.ecseesccccesens $175,998.50 Lébo- Loka. on Drakeimallls oor o siioe §i7ceesi Deferred expenses Home Building association ...cececassene wssessse 15,000.00 Expense ifldustrisl col?ii-lissi(:infil”" 11,814.36 Fiels nse, an eva- 3 e N o H o 15,088.09 59,570.75 Net profits all North Dakota industries........ .$116,4217.76 The above compilation, it will be noted, charges off all organization expense against the industries. The first industry founded was the Bank of North Dakota, which opened its doors July 28, 1918. Other industries started active operation at a later date and the entire industrial program, at the date of the report, was less than 18 months old. It is the practice of large business concerns gen- erally to spread organization expense over a num- ber of years, instead of charging it all against the initial year of an enterprise, but even by following the latter and more strict plan, the North Dakota state enterprises show a-profit. 2 The report on the Bank of North Dakota shows $6,227,040.61 of public funds redeposited with pri- vate banks. Of the $6,227,040.61, deposits in banks temporarily closed total $492,846.05, or less than 8 per cent of the total redeposits. On this point the report states: REDEPOSITS IN PRIVATE BANKS WELL PROTECTED “The deposits in the state banks are secured by the guaranty fund, with its power of assessment, also by the financial growth of the bank itself and ~ by the double liability of its.stockholders. “Redeposits in national banks are secured by in< demnity bonds (furnished by trust and security companies) running to the Bank of North Dakota, by the financial worth of the management of the bank and by the double liability of the stockholders. “While the Bank of North Dakota had redeposits in a. considerable number of banks that have been closed, it should be remembered that this condition . would be sure to arise, for since October 15 and up to December 31, 1920, the Bank of North Dakota _ had carried redeposits in approximately 800 out of the 900 state and national banks in this state.” Within a few weeks of the time it started busi- ness the Bank of North Dakota had become the largest banking institution in the state, It was handling items of $1,000,000 a day, or at the rate of approximately $300,000,000 per year, at the time the “cutoff” in business was made for the examina- tion, December 31, 1920. - The total expense for handling this business for the year 1920 was $190,- - 130.09. - B Illustrating the strength of the Bank of North Dakota, the industrial commission shows that its liquid assets were 74.4 per cent of total demand lia- bilities, after deducting from the assets all deposits in and cash items against closed banks. " The largest private bank in the state had liquid assets amounting to only 48.9 per:cent of the total demand liabilities. ; ¢ Showing the service that the Bank of North Da- kota was created to render, aside from making farm loans and financing the state government and its industrial enterprises, the industrial commis- sion states: ; <t “The Bank of North Dakota was created and is “being: operated with the view of creating an elas- - ticity in credit conditions in the state and stabilizing the financial situation. In the face of fallir)g' prices - ‘ond heavy withdrawals of funds by institutions out- R T . e e D A A A A3 v ‘Gamblers on Drake Mill North Dakota industries were not es- tablished to make profit. The bank was - established to loan money at cheaper rates to farmers, the mill to pay farm- ers better prices for their grain, the Home Building association to meet the housing shortage and enable working- men to be patriotic home owners, rath- er than dissatisfied renters. The state industrial program has carried out these purposes and has made a profit - besides, this report shows, and this in a period of financial depression that has wrecked innumerable pri- + vate industrial enterprises. side the state the Bank of North Dakota has used its resources in an effort to prevent disaster from falling upon the financial institutions within the state,” : “This in marked contrast to the action of the fed- eral reserve bank of this distriet which forced vast amounts of liquidations within the state of North Dakota at a time when it was extending further credit to other sections in the same district. “The reserve bank also refused to extend credit to enable the farmer to hold his crop for a reason- able price, at the same time it was extending cred- its in such manner that the milling interests of the Twin Cities were enabled to use those credits to hold the same crop after it got into their hands. “The Bank of North Dakota was created as a people’s bank and is being run for the benefit of the people: which explains its policy with reference to the situation just discussed. -“In pursuing this policy of attempting to pre- serve the welfare of all the people of North Dakota, including all its financial institutions, the Bank of North Dakota hasin many cases assisted financial institutions, the officers of which were doing their utmost to destroy the Bank of North Dakota, and irrespective of what the future attitude of officers . of such financial institutions may be, the manage- ment of the Bank of North Dakota has announced that it intends to continue to operate in the manner best fitted te serve the interests of all the people of the state.” S = The industrial commission report on the Drake F. W. Ca-lthro, manager and director general of ' - ‘the Bank of North Dakota. ' 'PAGE’ FIVE FNA . mill points out that this mill was established as an experiment t6 guide the state in its later operation of much larger mills. The report of the Equitable Audit company shows that up until July 15, 1920, the mill was making a profit. It was at the same time paying higher prices to farmers for their wheat, selling feed at a low price and meeting the market on flour prices. It had accumulated a large surplus supply of wheat. Following the resumption of open speculation in wheat July 15, prices fell rapidly and prices of clear flour, one of the large products of the mill, at periods fell nearly twice as fast as wheat prices. The fluctuation from hour to hour was so rapid that frequently a hedge could not be placed at any- where near the same price as that paid for the actual wheat the same day or the preceding afternoon. The situation was so generally demoralized that the Northwestern Miller of January 12, 1921, re- marked that the millers “who closed their accounts on the right side of the ledger are to be congratu- lated; for they occupy a position of unique distinc- tion.’ ' Millers all over the United States lost money in this falling market and the Drake mill was no ex- ception. North Dakota anti-League papers had es- timated that the Drake mill’s losses on the volume of business handled would be from $20,000 to $30,- 000. The report sets the loss at $17,668.38, or ap- proximately one-tenth of the net profits earned by -the Bank of North Dakota. MILL PAID FARMERS HIGHER PRICES FOR THEIR WHEAT The industrial commission report says of the Drake mill: 2 “The experience with the Drake mill has demon- strated that even with a small mill, expensive to operate, the farmer can be paid prices for his wheat higher than the market at elevators, in addi- tion to paying him for his screenings, and flour can be produced at a manufacturing profit which will show a good return on investment. In a large, modernly equipped mill, such as is being constructed at Grand Forks, vastly better returns are positively assured.” - It is shown in the report that during 1920 the mill manufactured 23,914 barrels of flour and 967 tons of feed.. The yield was four bushels and 40 pounds per barrel, with invisible shrinkage at 1.135 per cent. . Despite the high eperating expense of a small mill and the fact that it was being used ‘as an experimental mill, the Drake mill showed a mill- ing profit for the year of $4,185.11. This profit was held down also by the fact that the mill paid from 9 to 12 cents per bushel above the market for its local wheat receipts, which amounted to about 42 per cent of the total wheat ground. The milling profit of $4,185.11 represents the earnings of the mill, on the basis of a steady mar- ket. The resumption of grain gambling therefore cost the mill this amount, added to the $17,668.31 direct loss. This is, of course, but a small fraction of what the farmers of the United States lost by the beating down of the wheat price since' the resumption of wheat gambling. > The report on the Home Building association shows that it has purchased and resold four hemes, has built 28 homes, has eight more practically com- pleted and 18 in various stages of construction, The administrative expense. was $15,367.05, while " the value of the houses is placed at $310,000, ad- ministrative expense being therefore approximately 5 per cent, much smaller than the rate of profit figured on by individual contractors and builders. The cost of establishing the industry before it began to operate was only 15 per cent of the total appropriation made by the legislature. The total appropriations used for all state indus- tries, the audit shows, was $238,666.26. ) The industrial commission points out that this was less than one-half of the funds made availa- ble by the state legislature in 1919, when the in- dustrial program was authorized. The net gain shown by all industries of $116,- 427.75 for 18 months, is at the rate of $77,618.83 per year. This, the commission points out, is a - profit at the rate of 32% per cent a year on the money put into the enterprises by the state of North Dakota. 35 5 P e 0 A T N T Mmoo B e o o 530 3 a7 N 3w T S