[Volume XXVII
THE CHICAGO BANKER
8
THE FARMERS’ AND MECHANICS NATIONAL SANK
OF PHILADELPHIA, PA.
427 CHESTNUT STREET
Capital -	$2,000,000.00	־ ־
Surplus and Profits	1,369,000.00
ORGANIZED JANUARY 17, 1807
Dividends Paid -	$12,917,000.00
OFFICERS
Howard W. Lewis, President
Henry B. Bartow, Cashier	John Mason, Transfer Officer
Oscar E. Weiss, Assistant Cashier
ACCOUNTS OF INDIVIDUALS, FIRMS, AND CORPORATIONS SOLICITED PRESENT NUMBER OF STOCKHOLDERS 930
STATE BANK OF CHICAGO
ESTABLISHED 1879
S. E. Corner La Salle and Washington Streets
Capital -	-	-	$1,500,000
Surplus and profits (earned)	1,500,000
Deposits over	-	-	20,000,000
OFFICERS
L. A. GODDARD, President	FRANK I. PACKARD, Asst Cashier
JOHN R. LINDGREN, Vice-President C. EDWARD CARLSON, Asst. Cashier HENRY A. HAUGAN, Vice-President SAMUEL E. KNECHT, Secretary HENRY S. HENSCHEN, Cashier	WILLIAM C. MILLER, Asst. Secretary
YOUR CHICAGO BUSINESS RESPECTFULLY INVITED
Is Bank Guaranty About to Fail?
law. This is partly because depositors in state banks which have not a surplus equal to io per cent of their capital are not guaranteed, while depositors in other state banks are guaranteed. It will also result from the fact that depositors in national banks are not guaranteed, while depositors in state banks are guaranteed. Further, because depositors in trust companies and private banks are not guaranteed, while depositors in state banks are guaranteed, it is alleged the act will produce unfair discrimination. The discrimination which is recognized in the law between depositors who have savings accounts of various sizes and which will therefore subject them to different treatment under the law is also noted as setting up a distinction between different classes of persons which is undesirable and unconstitutional. Inasmuch as the use of public funds in connection with the new guaranty or insurance fund favors some citizens, while it does not favor others at all or favors the citizens in unequal degrees, it is said to be unconstitutional, and this is the line along which the most severe criticism of the law is directed by those who are now attacking it in the courts. Some special attention is also being paid to the injurious effect that the law may produce upon Rational banks which are debarred by the ruling of the federal authorities from entering the guaranty system. Should the federal courts sustain all or even a substantial part of the contentions which are now being put forward against the law in these briefs the result will probably be to take the support from under the whole bank guaranty plan.
“Our deposits exceed $75,000,” said J. L. Taggart, cashier of the Fidelity State Bank of Uniontown, Wash., “and comparatively little of the grain has yet been marketed. Land values are in advance of last year and some farms have changed hands at good prices.”
Peter Earling, an experienced banker and brother of A. J. Earling, president of the Chi-cago, Milwaukee & St. Paul, who was in Spokane this week the guest of Judge Albert L. Flewelling, may become identified with a local bank.
bank guaranty law must thus be based upon the supposition that the act is confined to state banks in its operation since the federal government will not allow its institutions to join, while it must also be based on the proposition that the bank guaranty scheme is really a mutual insurance association. This is, in fact, the line that is being followed by the complainants against the act.
The form of proceeding which is now to be passed upon by the court in this matter is an application for an injunction which asks that the bank commissioner of the state of Kansas and the state banks which have entered upon the plan be restrained from further proceedings under the terms of the act. The applicants for the injunction are 150 national banks doing business in Kansas, 47 state banks chartered by the state who do not care to join in the guaranty fund and a dissenting stockholder who protests against the action of his bank in entering the guaranty fund scheme. The critics of the act who conceive their interests to be injured are thus:	National
banks, state banks which are eligible to become guaranteed banks, state banks which are ineligible and minority stockholders in banks which are eligible and have decided to come in. The general criticism in which the various parties to the application for the injunction engaged with reference to the act is that the ultimate general effect of the law will be to take money without consideration or compensation from the stockholders of a group of banks which are solvent and give it to the depositors of some other banks which have become insolvent. This, it is claimed, will mean that the money of the state is also taken as well as the money of private individuals for the benefit of private parties, since the state will thus be drawn into the business of operating a scheme which requires large funds for the purpose and which must be supported out of the resources of the private individuals who are stockholders in the banks which share in the plan.
Special discrimination will, it is alleged, result from the operation of the Kansas bank guaranty
Washington, November 9.—Confident expectations are entertained here to the effect that the disapproval which has been visited upon the bank guaranty law in Nebraska by the courts and the breakdown which has followed the attempt to apply the Oklahoma law in practice will be made cumulative by the refusal of the federal courts to ratify the bank insurance or guaranty law of Kansas. The subject is now up for decision by the circuit court of the United States (First Division) for the district of Kansas, and it is probable that a verdict will be rendered before the federal supreme court has dealt with the Oklahoma case now pending before that tribunal.
The Kansas situation is of special interest because it involves a kind of bank guaranty which is different from those that have been undertaken in the other states. The scheme is a mutual insurance proposition, and has been so described by Senator Joseph L. Bristow of Kansas, who wrote to the comptroller of the currency of the United States some time ago that “if it is unlawful for a national bank to join a mutual insurance company to insure its depositor—for that is what the Kansas law creates—then it is unlawful also *	*	* for it to take out insurance
on its buildings or fixtures in a mutual insurance company. *	*	* If the bank cannot partici-
pate in this class of insurance it cannot legally participate in many of the well established classes of insurance, in many of which the banks pay the premiums from their own assets.” The question is then on this ground whether banks may under a mutual insurance association organized by the state employ their depositors’ assets for the purpose of safeguarding the depositors of other banks. This idea has received the substantial opposition of the attorney-general of the United States, since he in a letter to the secretary of the treasury under date of April 6, 1909, wrote that in his opinion the banks had not such a right because “only an act of congress can confer such powers upon national banks.” The argument which is now being directed against the Kansas