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How Guaranty Fund Commission Handled Failed State Banks
(Continued from Page Three) the guaranty fund commission changed its rules for handling all banks in its care. Ir Bridgeport, where a mass meeting of depositors was held in December, 1928, to against the results of the guaranty fund commission's handling of the bank, there has been considerable dispute over the size of deposits withdrawn by the new bank group This indefiniteness had its origin in the fact that inventories of bank operated as going concern by the commission are by law secret The law reads: "Neither he (the secretary of the department of trade and commerce) nor anyone connected with the department of trade and commerce, or the guaranty fund commission, shall in any instance disclose the name of any depositor or debtor of any bank of the amount of his deposit or debt to any one, except in so far as may be necessary in the performance of lake official duty.' A representative of The Omaha Bee-News, however, who was sent over the state to make survey of certain guaranty fund commission handlings, was able to view inventories of the Bridgeport bank at the start of and during the commission's handling of the bank. Afterwards, Van E. Peterson himself checked the figures with inventories on file in Lincoln.
Showed Shrinkage
These inventories showed that the bank's deposits shrank from $651,772. when the guaranty fund commission took the bank over in 1925, to $380,441. when the bank went into receivership in September, 1927. The inventories revealed new and increased deposits during the commission's handling of the bank. But these new and increased deposits were not safeguarded by the commission so they could be paid off in full when the bank closed. Persons who entrusted their deposits to the guaranty fund commission agents discovered, after the closing of the bank, they had no stronger claim to their money than old depositors who had put their money in the bank before the commission began its operation. The inventories indicate money represented by these men and increased deposits, as well as money from realization on bank assets, were practically exhausted by general withdrawals.
Made Compromises
The inventories indicate that compromises on notes were made, and notes collected to pay off the depositors who were getting their money out. The inventories showed shrinkage in the deposits of the group of men, including two who were agents of the guaranty fund commission, who were preparing to open new bank when the Bridgeport bank went into reThis group, their immediate relatives, and one very close business associate of one of the guaranty fund commission agents, It would appear from the inventories. drew out of the bank 73 per cent of their deposits during Its operation as a going concern by the commission. Some of these withdrawals were used to cancel indebtedness to the bank J. A. Erickson was guaranty fund commission agent in charge of the bank when receiver was appointed on Sept. 8, 1927, He is cashier of the new bank. The records of the court of Box Butte county disclosed, in the receivership, $5.91 deposit of "Arthur Erickson," $5 savings account of "Arthur Erickson, total of $10.91 Mr. Erickson is known as Arthur. In the court records is also shown one $3,000 deposit of Mabel Erickson, Mr. Erickson's sister. making the total family claims in receivership $3,010.91.
Money Taken Out
In an inventory when the guaranty fund commission took the bank over in 1925 the Erickson family deposits were listed as: A. Erickson, checking $10: Lottle $21; Mabel Erickson, savings, $63: Arthur Erickson, savings $225; Lottle J. Erickson, certificate of deposit, $6,600; Lottle J. Erickson, certificate of deposit, $3,000: Mabel Erickson, certificates of deposit. $300 and $50.35: Arthur Erickson. certificate of deposit $7,500. a total of $17,The same Erickson family deposits were $18,028.33 when C. H. Burk quit as guaranty fund agent on March 27, 1926, and Mr. Erickson became guarantee fund agent, according to another inventory. Thus the records show shrinkage from $18,000 to $3,000 of the Erickson family deposits while Mr. Erickson was guaranty fund agent in charge of the bank. Mr. Burk, banker of McGrew, who preceded Mr. Erickson, did not himself materially decrease his deposits during its operation by the commission. He had $10,231 in the bank when It failed, and $10,007.25 when It was placed by the commission in receivership, according to the commission's secret inventory, and the inventory filed in court with the receivership. He is president of the new Bridgeport State bank.
Drew All Out
However. Mr. Burk's brotherin-law. J. O. Baker, who is interested in the new bank, and Mr. Burk's close business associate,
Ben Roberts. drew their money out.
Mr. Roberts had $19,200 in the bank on May 15, 1925: in September, 1927, he had nothing on deposit, according to the same two inventories. Mr. Baker had $20,000 in the bank on May 15, 1925: in September, 1927, he had nothing on deposit, search of the inventories showed. Mr. Baker is vice president of the new Bridgeport State bank. Fred R. Lindberg was president of the Bridgeport bank, and is one-fifth stockholder in the new bank. When the Bridgeport bank was taken over by the ommission in 1925, the Lindberg family deposits were as follows: Fred R. Lindberg. checking, $14,395.56; L. Lindberg, his brother, checking, $121.73; Fred R. Lindberg, certificate of deposit, $40: Fred R. Lindberg, certificates of deposit, $10,000, $5,000 and $6,000; L. P. Lindberg. certificate of deposit, $1,500; total, $37,057.29. V'hen the Bridgeport bank went into receivership, the Lindberg deposits were: Fred R. checking, $1,226.90 and $1,401.03; L. P. k ng, $164.35; Peter Lindberg, certificate of deposit, $128: Fred R. Lindberg, two certificates of deposit for $7,000 each; total $16,920.28. When the commission took over the Bridgeport bank the National Bank of Commerce of Lincoln had the bank's note for $25,000, secured by $50,580 in collateral notes of the Bridgeport assets, according to the inventory of May 15, 1925.
Note Was Paid
This note of the Lincoln bank was paid, and the collateral returned to the Bridgeport bank, according to the statement on an inventory made between the guaranty fund commission's taking the bank over, and its going into receivership. M. Well of the Lincoln bank is vice president of the new Bridgeport State bank. Whether the Bridgeport bank is ahead of the game by its purchase of Its own note from the Bank of Commerce is matter that could be determined only by an audit of every one of the collateral notes. It probably was good business on the part of the guarantee fund commission to secure the return of this collateral, however. because the big city banks loaning money weak outstate banks of course demand the best of the bank's promissory notes as colExcluding this deal with the Lincoln bank, the group which formed the new bank at Bridgeport, with relatives, and one close business associate, had $104,357 in the bank at the start of its operation by the guarantee fund commission. and $29,938.41 when the bank went into receivership. With the 10 per cent dividend paid all depositors, in receivership, they have liquidated their deposits 75 per cent, while the man who left his money on deposit has so far received only 10 per cent.
Deposits Jumped
In the meantime. school district money in the bank was increased from $1,882 to $14,759.76, according to the inventories. The situation was taken up with o. S. Spillman, attorney general. early last year. There was promise of co-operation, but on May 7. 1928, Mr. Spillman dropped. out of It with the following letter to William Ritchie jr., Omaha, one of those who presented the Bridgeport matter to him: "With respect to the Bridgeport matter, would suggest that am so limited in funds and help here that It. seems almost impossible to put man on that matter, but am taking If up with Mr. McGuire (then assistant attorney general at Omaha) to see If he can give the time that is necessary. "It would seem that the county at least would be willing to furnish help. wish you would look into the matter and the possibility of such help being furnished, because we have about all we can do in this department without taking on work that should be taken care of by local authorities. want to help in this matter. but now far we can go in these cases, there being so many of them, is a real problem for the department. 'Very truly yours. 'Attorney General.' The Bridgeport deal was called regrettable by H. C. Peterson, member of the guaranty fund commission from the district in which Bridgeport is included. H. C. Peterson wrote R. O. Canaday of Bridgeport after a mass meeting of depositors was held in December. Mr. Peterson wrote Mr. Canaday he was sorry he could not attend the depositors' meeting. and added: "Your letter states that there has been a reduction of about $300,000 in the deposits of the Bridgeport bank before it. was thrown Into receivership. This is a very regrettable state of affairs, and no one regrets it more than the members of the commission. "Although his occurred prior to my appointment the second time, nevertheless am not blaming the former in particular, for it was the thought of the that it would not make so much difference just how the depositors were paid out while the bank was going. for they had funds coming from the of the guaranty fund to take care of any deficiency to the depositors that was not paid out of the assessments. "However, about year and a half ago it become apparent to the members of the commission that this system of paying the depositors would not work, as It was preferring some and letting the rest wait. We immediately inaugurated system of closing the books of the defunct bank at the time the bank was taken over by the commission and simply not paying out any of the old deposits until we paid them all at pro rata share. However that does not alter the mistakes that have been made.'
