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Bank Guarantee Fund To Suffer by Salina Crash. Large Part of Reserve May Be Used in Payments. ACCOUNTS ARE BEING CHECKED Bad Paper May Amount to as Much as $400,000. New Bank Using Equipment of Defunct Institution. Kansas state banks which for ten years have zealously built up the state bank guaranty fund, may now apportion a large slice of their funds to the defunct Kansas State bank of Salina. Closing of the doors of the Salina institution has occasioned no excitement. Depositors know they will get dollar for dollar. What is more, certificates on the state guaranty fund draw 6 per cent interest from date of issue. John Hunt, representing the state banking department in handling the legal tangle, returned today from Salina. He said that of the 400 depositors of the bank, fewer than thirty Of called for their money Tuesday. the $13,000 worth of certificates issued by Frank J. Harper, examiner in chargè of the bank, practically all of the money was redeposited with the Reserve State bank at Salina. This bank received a charter several days W. ago, was incorporated by Fred Knapp, state auditor; Walter L. Payne, state treasurer: Guy T. Helvering, former congressman, and their associates. New Bank in Same Building. Tuesday morning when the Kansas State was closed by order of Walter E. Wilson, state bank commissioner. the Reserve State opened for business in the same building and with the same fixtures. No bank failure in Kansas since the enactment of the bank guaranty act has threatened such a heavy jolt for the fund The exact amount of bad paper in the bank is unknown. It is estimated at from $250,000 to $400.000. To meet this paper Commissioner Wilson expects to reduce losses from sale of considerable valuable property owned by officers of the institution. A total of $1,202,000 worth of assets are in the bank guaranty fund. This includes $402,000 in cash and $800,000 worth of bonds deposited by banks operating under the law. The fund will easily absorb the Kansas state bank losses without the necessity of an extra assessment on the banks. None the less there is every prospect that losses of the Salina bank will eat a big hole in the cash reserve of the fund. The cash and bond fund has been steadily growing since the legislature passed the law in 1909. Had the state banks of Kansas been able to weather the present year without losses, further assessments of participating guaranty banks might have been evaded. The law provides that each bank participating under the fund shali make a cash payment to the fund in an amount equal to onetwentieth of their total deposits. They shall also deposit with the state treasury bonds equal to $500 for each It $100,000 or fraction in deposits. has been under this system of assessment that cash and securities amounting to more than $1,200,000 have been accumulated. Under the law further cash assessments would have ceased when the cash reserve reached a half million dollars. This figure might have been reached this year without failures of participating banks. L. A. Johnson, assistant state bank commissioner, is in Salina checking the accounts of the Kansas State bank. Frank J. Harper. an examiner, is in charge of the business affairs pending appointment of a receiver. John Hunt, former assistant attorney general, will direct the legal fight connected with the settlement of the bank's affairs. Hunt was in charge of the affairs of the institution when the Felix Broeker smash came some months ago and the bank was reorganized. Broeker is interested in the present tangle of the Salina bank. He is said to be in New York, where he is seeking to raise funds with which to clean up some of the objectionable paper in the hands of the banking department. H. J. Lefferdink, cashier of the closed bank, left Salina Monday morning. It was reported that he had gone to Kansas City. Commissioner Wilson said today that the department had been unable to find the bank cashier. No arrests have been made in connection with the failure.
