Bank of Medicine Lake - Medicine Lake, MT

Episode Information

Episode UID: 2371131891579
Episode Type: Suspension → Reopening
Bank Type: state
Bank ID: 237113189 hash
Start Date: July 1, 1931*
Location: Medicine Lake, Montana (48.501, -104.505)

Metadata

Model: gpt-5-mini (chosen from majority vote of a three-model LLM ensemble)
Short Digest: 9e87e80c2c8e9e15

Response Measures

None

Description

Article describes an embalming scheme reopening insolvent banks; limited sources so further articles could confirm legal status.

Events (1)

1. July 1, 1931* Suspension

Cause: Bank Specific Adverse Info
Cause Details: Bank had gone broke and depositors' accounts were converted into long‑term noninterest certificates ('embalming') allowing the bank to reopen with frozen obligations.
Newspaper Excerpt: The banks at Scobey, at Flaxville and at Medicine Lake have been embalmed during the past week
Source: newspapers

Newspaper Articles (1)

1. July 24, 1931 The Producers News Plentywood, MT

Article from The Producers News, July 24, 1931

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Article Text

plan has been developed by the banks in this area which have recently gone broke. The plan is this: The depositors in the broken bank convert their checking accounts in the busted bank into certificates of deposit without interest in some cases due in five years from date, and in other cases, the amount is divided into five equal parts, and certificates of deposit with no interest is. sued, due in one, two, three, four and five years, from date. Those holding certificates or savings certificates of deposit due or coming due, return them for cancellation for which new certificates are issued due in either five years from date without interest or as above, five certificates without interest are issued face value for one-fifth of original C. D., due in one, two, three, four or five years respectively. When all of the obligations of the bank are thus signed up the bank is then "embalmed" and is allowed by the banking department to open again for operation with no demands. The "embalmed" bank keeps its old cashier "who knows all about the bank's business" on the payroll. The cashier receives new deposits if anyone can be found SO simple as to deposit more money in such a bank, and there are some such people; cash checks, transfer money, if anyone can be found who will take and clear their checks, and collect the loans due the bank, as they become due, ,if he can. The ower of the "embalmed" bank of course is not asked to come in and surrender his note and give another one for it, without interest, and without security, due in five year, or due in five annual payments. Those whom the bank owes takes certificates of deposits due in five years without interest; those who owe the bank must pay their notes as they come due with 10% interest. Sort of a one-sided arrangement-nobody but a bank could put over anything like an "embalming." The bank officials go out to the depositors in a bunch. accompanied by two or three large goof depositors and tell them: "Now listen! Times are hard, you know that a reeciver can't collect a cent from the borrower this fall. You know what receivers cost, what they do with assets of a bank. If a receiver is appointed you wont get 10 cents on a dollar and probably you wont get that for five years. The community wont have a bank, and you know what a calmity that will be. We need a bank. Now if you will sign up you may get your deposit back. The country is bound to come back in five years. We can't pay you interest; if a receiver is appointed you wont get any interest from the date the bank closed. Now, my friend," they all say, "isn't it better to sign up, let us open the bank and get all your money, than to appoint a receiver and get maybe 10 per cent The argument sounds logical. The depositor does not want to be a wrecker and maybe he might get his money in time, and besides he is surrounded by the bankers and his neighbors, so he takes the pen they force into his hands and signs up his consent for the "emblaming." The bank opens up, and then what? There is one thing the bankers did not tell the depositors and that is that the stockholders of the defunct bank are liable to the depositors for the face value of their stock. If a receiver is appointed he must proceed against them at once and coilect this money which means ruin for the stockholders. But, if they signed up and "embalmed" the bank, that liability is avoided which is no small item for the stockholders, and 13 the reason when he :- so strong for "embalming." In the five years that elapse before the certificates are due, the bank chockholders have pienty if time to transfer all their property to their wives, or incorporate their farms as Frank French did. transfer the stock to somebody against whom a judgment would be worthless, so that when the "embaimed" bank closes again, the bank stockholders are out from under with the confiding depositors holding the sack as usual. The interest on the loans collected from the borrowers will prevent the bank cashier from asking the Red Cross for a miserable dole this winter along with the sacrificing depositors-it will save his sensitive feelings. The banks at Scobey, at Flaxville and at Medicine Lake have been "emblamed" during the past week-a quick job was done at Medicine Lake. Many people are suggesting that all of these "mummies" be collected into one central museum for the purpose of cutting the overhead expenses.