ANALYSIS OF CONGRESSIONAL PROPOSALS FOR DEPOSIT GUARANTY OR INSURANCE, 1886-1933 For the entire period from 1886 to the establishment of the Feder Deposit Insurance Corporation, 150 bills for the guaranty or insuranc of bank deposits, including a few proposed amendments to bankin bills under consideration, are known to have been introduced in th Congress. It is probable that the total number introduced was large for it has not been feasible to analyze the content of all bills relatin to banking. The foregoing figure does not include bills proposing the establishmen and operation of banks of deposit by the government itself. Numerous proposals of this type have been introduced in the Congress, some calling for establishment of a Bank of the United States with branches scattered throughout the country, others for a series of banks owned by the government and operating under conditions similar to those imposed upon national banks, and others for expansion of the Postal Savings System to provide for receipt of deposits and their transfer by check at postoffices throughout the nation. The number of such proposals has not been tabulated. Several bills which would have authorized national banks to participate in State deposit guaranty plans are also excluded from the tabulation. Another group of bills, similar in principle to deposit insurance, proposed to authorize national banks to issue circulating notes on the basis of various types of assets or as general obligations of the banks, with a guaranty or insurance fund to which all national banks would contribute. These proposals were numerous during the thirty years preceding establishment of the Federal Reserve System. The number of these bills has not been tabulated. Of the 150 bills for the guaranty or insurance of bank deposits about one-half were original bills in the sense that the proposals embodied in them differed significantly from proposals embodied in other bills. The rest of the bills were duplicates or slightly amended versions of the original bills. These duplicates or amended bills include cases where identical bills were introduced in both Houses of the Congress on the same day or approximately the same time, cases where a member of the Congress introduced the same bill into successive Congresses, and cases where members of the Congress made slight revisions in their proposals and reintroduced them as new bills. However, it is not possible to draw a definite line of demarcation between original proposals and duplicate or revised bills. Many of the bills with definitely original provisions were similar to previously introduced bills with respect to other features. A digest of the provisions of each of the 150 bills is given on pages 80-101. Sponsors. The 150 bills were introduced by 79 different members of the Congress, of whom 22 were Senators and 57 members of the House of Representatives. The latter figure excludes two Representatives who also introduced bills as Senators. The sponsors of the bills came from 30 States in all parts of the nation. Slightly over one-half of the sponsors were Democrats, and nearly one-half Republicans. Three were members of other parties. Character of protection. Three general methods of providing protection for depositors were proposed in the bills. Of the 150 bills, 118 provided for the establishment of an insurance fund, sometimes called a guaranty fund, out of which depositors' losses would be paid; 22 provided for United States government guaranty of deposits; and 10 required banks to purchase surety bonds guaranteeing deposits in full. Table 35 shows the number of each of these three types of bills introduced in each Congress. Table 35. CONGRESSIONAL BILLS FOR GUARANTY OR INSURANCE OF BANK DEPOSITS, 1886-1933 NUMBER IN EACH CONGRESS CLASSIFIED BY CHARACTER OF INSURANCE OR GUARANTY 1 Includes four bills providing for an insurance fund to which government appropriations were to be made sufficient to maintain it at a specified minimum. One fund for all participating banks, except in eight bills in which separate funds were to be established in the various Federal Reserve districts. ' Includes 1 bill in which cost was to be underwritten in part by the United States Government. Several of the proposals for insurance or guaranty of bank deposits were accompanied by other proposed currency and banking reforms. Such reforms related to methods and extent of currency issue, and to the methods and character of chartering, regulating, and examining banks. Participant banks. Most of the bills for guaranty or insurance of bank deposits introduced prior to establishment of the Federal Reserve System in 1913 authorized participation of national banks only, though a few of them also covered deposits in State banks which met specified conditions. About one-half of the bills introduced subsequent to establishment of the Federal Reserve System provided for participation of all members of that system. Most of the remaining bills covered only national banks. Only a few provided for coverage of deposits in banks which were not members of the Federal Reserve System. In a few bills the insurance of deposits applied to cooperative banks, which were to be established, with limited dividends to stockholders and distribution of the remaining profits to depositors. In nearly all the proposals participation was required of national banks, or of all banks members of the Federal Reserve System; such participation was optional in only a few of the proposals. In the cases in which deposit guaranty was made available to State banks not members of the Federal Reserve System, such participation was optional. A more detailed classification and summary of the provisions of the various bills regarding participation in deposit insurance or guaranty is given in Table 36. Administrative authority. Nearly two-thirds of the bills for deposit insurance or guaranty introduced prior to establishment of the Federal Reserve System provided for administration of the insurance or guaranty system by the Comptroller of the Currency. Most of the remaining bills introduced during that period provided for administration of the system by the Secretary of the Treasury. A few, however, named the Treasurer of the United States, and in two cases new boards were proposed. In the case of bills for deposit insurance or guaranty introduced subsequent to establishment of the Federal Reserve System, about one-fourth provided for administration by the Comptroller of the Currency and nearly one-third by the Federal Reserve Board or by the Federal Reserve banks under supervision of the Board. However, nearly one-fifth of the bills introduced during this period provided for special administrative boards. In many of these the Comptroller of the Currency was to be a member of the proposed administrative board. In a few cases one of the members of the Federal Reserve Board was to be a member of the board in charge of the insurance system. Table 36. BANKS REQUIRED OR PERMITTED TO PARTICIPATE IN DEPOSIT INSURANCE OR GUARANTY PROPOSALS FOR FEDERAL LEGISLATION-1886-1933 Total bills introduced.. National banks-total. All national banks.. All national banks members Federal Reserve System1. All national banks organized under the Act. National banks in satisfactory condition.. National banks found solvent by the Comptroller of the Currency National banks accepting the Act. All national banks in each Federal Reserve district in which fund is established by majority vote of the bank.... National and State banks-total. All national banks; applicant State banks solvent and properly managed. All national banks; applicant State banks under conditions prescribed by the Comptroller of the Currency. National and State banks accepting the Act. Solvent national and State banks accepting terms of the Act.. Any applicant national or State bank certified as sound by the Secretary of the Treasury or State banking authority, respectively, and approved by the Federal Bank Liquidating Board. All national banks; applicant savings banks agreeing to same regulations and examinations as national banks. Federal Reserve member banks-total. All Federal Reserve member banks. All national banks and all State banks members Federal Reserve System1 All Federal Reserve member banks except those under a State deposit guaranty law. All Federal Reserve member banks, with State banks members of State funds having privilege of withdrawal.. All members Federal Reserve System in each district in which guaranty fund has reached size prescribed by Board. All Federal Reserve member banks "deemed sound" or certified as to "apparent solvency" by the Comptroller of the Currency.. Federal Reserve member banks and other banks. 1 2 12 All members Federal Reserve System; other applicant banks with total capital account of $25,000 or more which are certified to be in sound financial condition (or which maintain a satisfactory condition and management) 3 All members Federal Reserve System; other applicant banks certified by State authority to be in sound financial condition.. 1 All members Federal Reserve System; other applicant banks upon approval by (or complying with requirements of) the Federal Reserve Board. 2 All members Federal Reserve System; other applicant State banks approved by directors of insurance fund. 2 All members Federal Reserve System; other applicant State banks certified to be solvent by State authority and approved by directors of fund.. 2 2 All members Federal Reserve System; other applicant banks and building and loan associations found solvent.. All classes of banks. All banks organized under the Acts. Any applicant bank organized under the Act. All national banks and all banks under State charter, including private banks. All Federal Reserve member banks, with all banks of deposit required to become members of the Federal Reserve System.. Cooperative banks to be organized. Federal cooperative banks.. 1 Membership in the Federal Reserve System is optional with national banks located in territories and possessions. These bills also offered insurance to individual depositors in banks which did not apply for insurance. These were general banking reform bills, under which all or most operating banks were expected to come under provisions of the proposed Act. The various methods of administration proposed in the bills are shown in Table 37. Deposits and other liabilities protected. Four-fifths of the bills provided for insurance or guaranty of all, or nearly all, deposits. In some cases deposits otherwise secured, or deposits of officers, directors, and stockholders, were excluded from protection. In most of the bills providing full coverage of deposits, payment from the insurance or guaranty fund was to be made as soon as practicable; in a few bills, the payments from the fund were to cover the deposits not paid from the proceeds of liquidation. In most of the latter cases depositors would be required to wait until the completion of liquidation before they could obtain payments from the fund, though in a few cases advances to receivers or liquidating agents were authorized. Table 37. ADMINISTRATIVE AUTHORITY IN PROPOSALS FOR FEDERAL DEPOSIT INSURANCE OR Guaranty LEGISLATION, 1886-1933 1 Prior to establishment of the Federal Reserve System. 1242212 1 22 1242212 Subsequent to establishment of the Federal Reserve System, including proposed amendments to the Federal Reserve Act while that Act was under consideration. Includes one bill with administration by the Treasurer of the United States and Comptroller of the Currency. The bills which provided for only partial coverage of deposits contained a variety of limitations. Three provided coverage of 50 percent of deposits in excess of $50,000, 75 percent of deposits in excess of $10,000 up to $50,000, and full coverage up to $10,000 for each depositor. Four limited the coverage to 50 percent of deposits; one to 25 percent of deposits; and six to 25 percent of deposits other than interest bearing time deposits and deposits otherwise secured. Three limited the protection to $5,000 for each depositor. Several bills limited the protection to noninterest bearing its of individuals and institutions or non-interest |