Participation by State. In ten States and the District of Columbia all banks regularly engaged in deposit banking were insured. Seven of the States were in the West-Arizona, Montana, Nevada, New Mexico, South Dakota, Utah, and Wyoming; two in the East-Vermont and Virginia; and one in the South-Alabama.

In many other States participation in deposit insurance was virtually complete. In each of seven States-Delaware, Idaho, Louisiana, Maryland, New Jersey, North Carolina, and Oregon-there was only one noninsured bank of deposit at the end of 1950; in each of two StatesCalifornia and Florida-there were only two.

The percentages of banks insured and of deposits held by insured banks in each State are shown in Charts A and B. These compilations exclude trust companies not regularly engaged in deposit banking. The number and deposits of all banks grouped by type of bank and insurance status are given in Table 1.

In each of four States-Maine, New Hampshire, Massachusetts, and Connecticut-deposits of insured banks amounted to less than twothirds of total deposits. The lower ratio of deposits in insured banks in New England is due chiefly to the considerable number of mutual savings banks in that area not participating in deposit insurance.

Chart A. PERCENTAGE OF BANKS INSURED, DECEMBER 31, 1950

Table 1. NUMBER AND DEPOSITS OF OPERATING BANKS IN THE UNITED STATES AND POSSESSIONS, DECEMBER 30, 1950

In only one State-North Dakota-did noninsured commercial banks hold more than 10 percent of total bank deposits. These deposits were held by five banks, one of which is owned by the State and which accounted for a substantial part of the deposits of noninsured banks.

Chart B. DEPOSITS OF INSURED BANKS AS A PERCENTAGE OF DEPOSITS
OF ALL BANKS, DECEMBER 31, 1950

ACTION TO PROTECT DEPOSITORS

Aid to insured banks for protection of depositors, 1950. During 1950 four insured banks needed financial aid from this Corporation to protect their depositors. In all four cases the Corporation was able to consummate transactions whereby other insured banks in the same localities assumed the deposit liabilities and acquired certain assets of the banks in trouble. The difference between the deposits assumed and the assets accepted was furnished in cash by the Corporation, which in return took the unacceptable assets. To purchase these assets the Corporation disbursed $3,183,000.

In three of these banks large defalcations were the direct cause of the difficulties. In the fourth bank, adversely classified assets were the immediate cause, but defalcations in substantial amounts were discovered after the bank was taken over and its affairs were subjected to close scrutiny. The records in all four banks were found to have been falsified or partially destroyed, and it is not yet possible to give accurate figures for the amount of deposits or the number of accounts involved. The estimates now available indicate that total deposits of the banks were nearly $6,000,000 and the number of accounts over 6,000.

Each of the three banks in which defalcations were the immediate cause of closing was carrying fidelity insurance in an amount approximating the recommendation of the Insurance and Protective Committee of the American Bankers Association. However, the sum of the peculations was more than ten times the amount of fidelity insurance carried. The Federal Deposit Insurance Corporation emphasizes that along with the need for adequate fidelity insurance is the need for more internal controls and ceaseless vigilance by bank directors. The control of fraud in banks is definitely a responsibility of the directors, and not that of a governmental agency. Examinations of banks by supervisory agencies are focused on determination of the solvency and adequacy of capital of the banks, and on compliance with the laws under which the banks operate, and not upon the discovery and prevention of defalcations.

Directors of a bank are the persons to whom its shareholders and depositors look for proper management of its affairs. In accepting his office, each director assumes the responsibility of exercising such care and diligence in the discharge of his duties as would be shown by an ordinarily prudent and diligent man. It is the responsibility of the directors to keep a reasonably close supervision of the bank's activities by means of adequate investigations and audits of the bank's records at intervals sufficiently frequent to act as a deterrent to careless or fraudulent tendencies on the part of bank personnel. Further, the directors have the additional responsibility to see that internal controls are adequate to

prevent losses of the bank's funds through fraudulent and criminal practices of outsiders, such as are involved in check-kiting schemes.

Aid to insured banks for protection of depositors, 1934-1950. From the beginning of deposit insurance on January 1, 1934, to the end of 1950 the Corporation made disbursements in 415 insured banks. These banks had about 1,354,000 deposit accounts, totaling approximately $533 million. The Corporation disbursed $273 million, exclusive of advances for the protection and maintenance of collateral, liquidation expenses, and the cost of assets purchased from receivers of closed banks or liquidating officers in absorption cases. Including such advances and expenses, the Corporation disbursed $319 million. The number of depositors and their losses, together with the disbursements and estimated losses of the Corporation during each of the 17 years, are given in Table 2.

Table 2. LOSSES TO DEPOSITORS AND TO THE FEDERAL DEPOSIT INSURANCE CORPORATION IN INSURED BANKS IN FINANCIAL DIFFICULTIES,

1 Number of depositors in receivership cases; number of deposit accounts in absorption cases. ? Excludes unclaimed deposits on which insurance has been terminated or the claims barred by statute of limitations. Includes restricted or deferred deposits.

Sum of losses in the cases in which the disbursement by the Corporation to protect depositors was not repaid in full. Excludes interest or gains in cases in which the disbursement by the Corporation was fully recovered, and gains or losses on assets purchased by the Corporation from receivers of closed banks. For the net loss of the Corporation, see the item, "Losses estimated net total," in Table 16, p. 28. Principal disbursements only. Does not include expenses. Detailed data: See Tables 120-123, pp. 278-82.

Of the banks in which the Corporation made disbursements, 245 were placed in receivership and 170 were absorbed by other insured banks. In the receiverships 334,425 depositors were paid in full, including those who failed to make claims but whose funds were held in trust, and 48,339 sustained some loss after payment of the insured deposits

by the Corporation. In the absorptions none of the 971,408 deposito: experienced any loss, as all deposit liabilities were assumed by the at sorbing banks. The depositors in the banks absorbed, together wit those in receiverships who were paid in full, constituted 96.4 percen of all depositors involved. In amounts, recoveries to depositors ar estimated to be $531,358,000, or a total of 99.6 percent of all deposit: in the 415 banks. In addition $59,000 was paid into funds held in trust for depositors whose claims were not presented within the prescribed time. Further details are given in Table 3.

Table 3. NUMBER OF DEPOSITORS, AMOUNT OF DEPOSITS, RECOVERIES, AND LOSSES IN INSURED BANKS PLACED IN RECEIVERSHIP OR ABSORBED WITH THE FINANCIAL AID OF THE CORPORATION, 1934-1950

1 1,514 depositors will lose an estimated $1,788,000 in accounts which exceeded the limit of $5,000 insurance and were not otherwise protected, and 969 depositors will lose about $41,000 in accounts which had been restricted or deferred prior to 1934, or were otherwise ineligible for insurance protection. Excludes advances for the protection and maintenance of collateral, liquidation expenses, and the cost of assets purchased from receivers of closed banks. Also excluded is $17,000 set aside for payment of depositor's claims not yet proven in the receivership cases. For the amount of disbursements including these items, see Table 16, p. 28.

See note 8 to Table 2.

Detailed data: See Tables 120-123, pp. 278-82.

Receiverships. All of the 245 receiverships of insured banks occurred prior to June 1944. Since that date the Federal Deposit Insurance Corporation has successfully protected all deposits in insured banks. That is to say, for nearly seven years receiverships of insured banks in difficulty have been avoided, and no depositor of any insured bank has lost a single penny because of bank failures. This constitutes an all-time record in the nation's history for bank solvency and safety of deposits.

The Corporation's disbursements to depositors in the 245 receiverships were $87,044,000. In addition, $17,000 has been set aside for unproven claims. This figure is slightly less than was previously reported due to final determination of unproven depositors' claims, which had been carried as insured deposits by the Corporation pending such determina