Banking Week

More than 13,000 of the 15,000 banks in the U. S. last week held a shower for the Federal Deposit Insurance Corp. by sending checks to set the corporation up in business and get their deposits up to $2,500 guaranteed for six months. Their total contribution was estimated at $90,000.000 to $100,000,000 and they became liable to be assessed an equal amount later. The U. S. contributed $150,000,000 to the pot; the Federal Reserve Banks $131,000,000. Because banks, for the temporary guarantee, are assessed only on the portion of their deposits insured,* the big banks with big accounts in many cases paid less into the guarantee fund than small banks with small accounts. Not all banks announced the amount paid. Some of the bigger payments:

Bank of America (California) $860,000

Bowery Savings Bank (Manhattan) 800,000

National City Bank (Manhattan) 332,000

First National Bank (Chicago) 321,000

Continental Illinois (Chicago) 247,000

First National (Boston) 245,000

Chase National (Manhattan) 229,000

Because Manhattan banks have generally large accounts the percentage of total deposits guaranteed there was around 10%. Elsewhere the guarantee ran up as high as 95% of a bank's total deposits. All 6,000 members of the Federal Reserve System were automatically taken into the guarantee system. Of the 9,000 nonmember banks in the U. S. upwards of 7,750 applied for the guarantee. Jesse Jones estimated that all but 400 of these applicants would be accepted, thanks to the RFC's having advanced $700,000,000 to buy preferred bank stock.

As chairman of Deposit Insurance Corp. Walter Joseph Cummings was busy up to the last minute passing on the solvency of banks seeking guaranteed status. Showing no qualms about the huge contingent liability for some $40,000,000,000 of bank deposits which his corporation, with assets of less than $500,000,000 (ratio: $1 to 1 1/4-c-), was assuming, he found time to tell the Press, "Deposit insurance should have a stimulating effect upon business . . . should forever end the fear of 'runs' on banks ... should return large sums from hoarding. . . ."

Not one of the 190 savings banks in Massachusetts (largest number in any state) applied for the guarantee, and all Connecticut savings banks were forbidden by the State attorney to participate. In New Hampshire, which has had but one savings bank failure in 30 years, the Governor and State bank superintendent encouraged banks not to join but to form an association of their own, pointing out that the Federal Government's guarantee would cost them more than the total losses in New Hampshire's savings banks in the last 100 years.

Bankers began to argue over how to enter their insurance fee in their books. Some set it up as an investment. Others wrote it off immediately as a total loss.

Other banking news last week:

P: Manhattan's Chase National finally stepped up and offered to sell $50,000,000 of preferred stock to the RFC, planned a write-down of its previous common stock from $148,000,000 to $100,000,000. Thus Chase became one of five banks which together are taking $200,000,000 of the $700.000,000 advanced by the RFC for preferred stock:

Continental Illinois $50,000,000

National City

(Manhattan) 50,000,000

Chase National 50,000,000

Manufacturers Trust

(Manhattan) 25,000,000

First National (Chicago) 25,000,000

$200,000,000

Last week the RFC had agreed to buy preferred stock (or capital notes) of 3,487 banks.

P: George A. Ranney, once International Harvester treasurer, now acting as vice chairman and clean-up man of the ex-Insull Commonwealth Edison Co. of Chicago, who had been invited to chairman Chicago's Continental Illinois National (TIME, Dec. 25), last week wrote a letter to the bank's directors disclosing that: 1) the Federal Reserve Board had given approval for Mr. Ranney's election; 2) the RFC had been asked by letter for similar approval but had never answered. It was so evident last week that the RFC intended to put in Chairman Cummings of Deposit Insurance Corp. as Continental Illinois' chairman that Sewell Lee Avery of Montgomery Ward resigned from the bank's board in disgust. Mr. Ranney announced he would like to have his name withdrawn from consideration.

P: In a State Court in Manhattan the Federal Government filed an unprecedented suit to compel the 20 banks of the New York City Clearing House to pay $9,375,000 for losses of the defunct Harriman National Bank (TIME, March 27). The Government's contention was that when during the dark summer of 1932 officers of the Clearing House promised to support the Harriman, it bound members of the Clearing House to pay any losses to Harriman depositors. To this Clearing House officials retorted that the Clearing House did not and could not give such a guarantee, that the directors of many member banks did not know or approve it, that the directors of the member banks did not legally have the right to guarantee the deposits of another bank.

P: Efforts to promulgate banking regulations under the banking code brought a blow-up from General Johnson, when depositors howled against proposed service charges. Cried he: "If the banks want to commit suicide nobody is going to worry much about it ... but I am interested in protecting the public."

P: A wholesale retirement of directors took place from nearly all the big banks of the U. S. They stepped out to comply with the provision of the Banking Act of 1933 which prohibits a person interested in dealing in securities from serving as a bank director after Jan. 1. Among retiring directors: Floyd L. Carlisle of Niagara Hudson and Frederic J. Fisher (bodies) from Manhattan's National City. Philip Stockton of Boston's First National reversed the drift by resigning from First of Boston Corp. (securities affiliate).

*Under the permanent plan in force July 1 banks will be assessed on their total deposits, all of which will be insured up to at least 50%.

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