Farmers State Bank (Marmarth, ND)

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(By Staff Correspondent.)

That the North Dakota Guaranty Fund act is a farce; that the functioning powers of the Guaranty Fund commission and the state banking board are nil; that the laws place a premium on poor banking forcing solid banks to pay the losses of fly-by-night institutions; that the present law would require 100 years to pay off the indebtedness of the 51 closed banks in the state, and that the legislature must take action immediately to revise the whole system of bank inspection, bank guaranty or the financial structure of the state will fall to pieces, are leading features in the sensational report handed to the legislative assembly at 2 o'clock today by the Guaranty Fund commission in response to the resolution passed by both bodies calling for a detailed statement of conditions of closed banks and the supervising department.

72 Banks Closed

Here are a few of the facts set forth:

The Guaranty Fund law was enacted in 1917.

In the last two years 72 banks have closed their doors, and receivers have been appointed. Two, First State of Jud and Farmers State of Marmarth have been liquidated and depositors paid in full. Nineteen have re-opened and today 51 banks are still closed.

"No substantial amount can be expected to be realized from the assets of these 51 banks after paying expenses."

Total deposits in the closed banks were $7,145,636, less than 50 percent being guaranteed under the law.

N. D. Loss a Million

The bank of North Dakota had $961,656.79 on redeposit in the closed banks placed there "with full knowledge of the condition of the banks." This is a total loss.

Loans of closed banks totalled 8,568,766 and after a careful audit $3,850,258 is held good and collectible, but already pledged as collateral for money borrowed from correspondent banks in the aggregate of $1,677,040, leaving $2,173,218 to pay all losses.

100 Years to Pay

Under the law the maximum collectible from the going banks of the state this year is $240,000; the admitted liability is approximately $4,000,000, which the Guaranty Fund department must pay depositors of closed banks; this draws five percent interest or $200,000 a year, leaving $40,000 per annum to apply on principle. THUS IT WOULD TAKE THE STATE 100 YEARS TO PAY OFF ALL DEPOSITORS.

The department now has $573,743.62 on hand.

The situation is that deposits in state banks are guaranteed and promised to be repaid by assessments upon the remaining state banks, yet the guarantors have nothing to say about the conduct, condition or methods of such banks.

Functioning of the state banking board is nil, the governor, attorney general and secretary

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GUARANTY LAW

IS TOO LOOSE

SOLONS TOLD

(Continued from page 1) receiver, that the Guaranty Fund has no definite legal direction as to he method of paying out the money n its hands, that it had no power o protect or salvage assets that may e in jeopardy of sale under fore-closure, that there is no method of eliminating weak banks from the system, that the banking board consists of elected officials who do not have adequate time to perform their duties; that the banking board has no power to sell the assets of closed banks although expenses may be eating up the assets. The commission will later submit detailed figures of the condition of each bank to the legislature.

Report in Full The report follows: "Pursuant to the request contained in the joint resolution adopted by you, for a report of the activities of the Depositors' Guaranty Fund Commission for the past two years, we beg leave to report.

"The Legislature of 1917 enacted the law creating the Depositors' Guaranty Fund and provided therein for a guaranty of certain deposits in state banks, through an assessment upon the state banks proportionate to such deposits, and provided for a commission of five, of which the Governor and State Examiner are ex-officio members, the three remaining members to be appointed by the Governor from nominations made by the state banks.

"The work and problems of this Guaranty Fund Commission for the past two years have been principally the problems of closed banks. Since the enactment of law, seventy state banks have been closed by the Banking Department and receivers appointed therefor as provided by law. Of the banks which have been closed, depositors of the First State Bank at Jud and the Farmers State Bank of Marmarth have been paid in full; Nineteen banks have been reopened and are now running, leaving now fifty-one state banks closed and in the hands of receivers appointed by the Banking Board. We submit herewith a statement as to these closed state banks showing their condition in detail, and, as a total. An examination of this statement will show that no substantial amount can be expected to be realized from the assets of these banks after paying expenses.

Audit Made The state banks, upon which the burden of losses must eventually fall, at their Annual Association Meeting held in 1922, appointed a committee consisting of Geo. H. Hollister, H. P. Goddard and A. E. Severeid, to represent them in all things before this commission, and gave to that committee as full powers as it was possible for them to do. The rating of the assets of these closed banks has been, we think, thoroughly done. Mr. H. P. Goddard of the State Bank Committee and Mr. B. J. Schoregge, supervisor of Receivers, have done the work in detail and the Guaranty Fund Commission and the Members of the State Bank Committee all feel confident that the values placed upon these assets are as nearly correct as can be determined at this time. In making these ratings they took advantage of all information they could secure from every source, and much time and care was used in making the ratings reliable.

You will observe that the total deposits in the closed banks amount to $7,145,636.00, and of this amount, according to the audit by the State Bank Committee, less than fifty per cent is guaranteed under the Guaranty Law.

This same Committee was appointed in June, 1921, by the State Bankers' Association, to aid in the auditing of deposits in all the closed banks, both for their own information and to assist the Commission in developing the facts that they might eventually arrive at an intelligent decision as to what claims were guaranteed and what were not. The origin and detail of every deposit in every one of the closed banks were investigated and the reports are now on file with the Secretary of this Commission, and to which reports reference is hereby made,

Much Undetermined "The Commission has not finally admitted nor denied liability to individuals on their claims for guaranty of ther deposits; the law provides no method for certifying to individual claims. Court decisions will in many cases be necessary to determine the liability of the Guar-

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CLOSED BANK DIVIDENDS TO BE PAID SOON Expiration of Time For Notice of Payment to Bring Action by Receiver Payment of dividends to depositors from funds of closed banks, the first of which was made sometime ago in the case of a Leith bank by L. R. Baird, general receiver, will be continued during the summer months. Mr. Baird said today that dividends will be paid in the Farmers State Bank of Marmarth of five percent and ten to 15 percent in the case of the First State Bank of Jud, to the Guaranty Fund Commission, which had reimbursed depositors, and the non-secured creditors, as soon as proofs of claims are in. Dividends will be made in five other banks as soon as the expiration time of the notice given to creditors to file claims is reached, it being required under court order that four months notice be given to creditors to present claims.