bearing deposits of individuals subject to check; and several others to deposits bearing not more than specified rates of interest. Two bills covered time deposits only and limited the protection to 75 percent. In a substantial number of bills all liabilities not otherwise secured were protected by the insurance or guaranty. In no bill did the protection extend to capital accounts. Further details regarding the protection to be afforded to depositors and other creditors are given in Table 38. Table 38. DEPOSITS AND OTHER LIABILITIES COVERED BY INSURANCE OR GUARANTY IN PROPOSALS FOR FEDERAL LEGISLATION, 1886-1933 Liabilities covered Number of bills Total number of bills...... Complete, or nearly complete, coverage of deposits, and also full or partial coverage of other liabilities-total. Deposits and other liabilities.. All liabilities to creditors not covered by assets or not paid from proceeds of liquidation.. All liabilities, except circulation, United States deposits, and other secured public deposits Deposits and circulating notes.... Deposits, circulating notes, and expenses of note redemption and bank examination3. Deposits and obligations to creditors, excluding creditors for borrowed money, not covered by proceeds of liquidation.... Complete, or nearly complete, coverage of deposits-total.. All deposits. All deposits except those of officers, directors, and stockholders. Deposits not otherwise secured.. Deposits not covered by assets or not paid from proceeds of liquidation. Deposits not covered by assets, with interest at 3 percent. Individual deposits... Depositors' losses for which bank would be responsible in law. Partial coverage of deposits—total.. Deposits, except those for current account bearing over 2 percent interest, and time deposits bearing over 4 percent interest... Deposits bearing not over 2 percent interest, in full; 2 to 3 percent interest, 95 percent coverage; 3 to 4 percent interest, 90 percent coverage; 4 to 5 percent interest, 80 percent coverage; 5 to 6 percent interest, 70 percent coverage; over 6 percent, no coverage. Deposits not bearing interest.. Non-interest bearing deposits of individuals and institutions. Individual deposits non-interest bearing and subject to check. Full coverage up to $10,000 for each depositor; 75 percent of deposits in excess of $10,000 up to $50,000; 50 percent of deposits in excess of $50,000.. 50 percent of deposits... 25 percent of deposits.. 25 percent of deposits, exclusive of interest bearing time deposits and deposits secured.. 75 percent of time deposits.. Deposits, maximum $5,000 for each depositor.. Deposits, except those bearing 4 percent interest, maximum $5,000 for each depositor.. 1 Includes 5 bills which provide for both a premium and reserve fund, with coverage reduced to 90 percent if necessary to draw on reserve fund. 190 percent of loss paid from general guaranty fund, 10 percent assessed upon banks in redemption district in which failed bank was located. * Includes 3 bills with coverage of all "just claims" of depositors, and 8 bills providing for coverage as follows: deposit accounts up to $1,000 to be paid not less than 50 percent, those over $1,000 not less than 25 percent or $500 whichever is greater within 60 days, balance within 1-1/2 years thereafter. Assessments and other sources of funds. The means by which funds were to be obtained to meet the cost of deposit insurance or guaranty were diversified. Table 39 lists the various methods proposed. Table 39. SOURCES OF FUNDS IN PROPOSALS FOR FEDERAL LEGISLATION REGARDING INSURANCE OR GUARANTY OF BANK DEPOSITS Source of fund Numb of bills Total number of bills...... Cost met solely by assessment on participating banks. Fixed periodic assessment on total or average deposits.. Initial or occasional assessment, or both, on total or average deposits. Periodic and also initial or occasional assessment on total or average deposits. Assessment on total or average deposits and on other base.. Cost met chiefly by assessment on banks, supplemented by funds from other Assessment on total or average deposits, and levy on Federal Reserve banks.. Assessment on base other than total or average deposits, and contribution from United Assessment on base other than total or average deposits, levy on Federal Reserve banks, Cost met without assessment (or with supplemental assessment only) on participating banks. 31 Assessment on property holders. 1 Assessment on bank customers, levy on Federal Reserve banks, and contribution from Levy on Federal Reserve banks. Contribution from United States Government. 14 Levy on Federal Reserve banks, and contribution from United States Government. 5744 Cost met solely or chiefly by surety bond premiums paid by banks.. 10 9 Surety bond requirements with portion of cost not exceeding 1 percent of deposits covered chargeable to depositor..... 1 1 Proposed assessment bases, other than total or average deposits, were of the following types: insured deposits, capital stock or capital and surplus, fixed sums, circulating notes (including use of existing tax on circulation as a deposit insurance premium), bonds deposited to secure circulation, redemption fund for circulating notes, and money paid to United States Treasury by national banking associations under existing laws. The proposals for levy on the Federal Reserve banks were of two types: payment of part or all of the net earnings of the Federal Reserve banks into the guaranty fund; and an initial levy on the surplus of the Federal Reserve banks. The proposals for Federal government contributions were of four types: an initial contribution; contributions of amounts received from Federal Reserve banks as franchise tax; contributions of Treasury receipts from payments by commercial banks such as the tax on circulating notes, unused redemption fund for circulating notes of closed banks, interest on government deposits, and on issues of national bank credit notes; and an appropriation sufficient to meet the cost in excess of other funds. In nearly one-half of the bills the entire cost of deposit guaranty or insurance, and in about one-fourth of the bills the major part of the cost, was to be met by assessments upon the banks. Most of the bills which provided for meeting the cost wholly or chiefly by assessments on banks levied such assessments on average total deposits or on total deposits at specified dates. Several bills provided for assessments upon bases other than total deposits: time deposits, interest bearing deposits, guaranteed deposits, capital stock, capital and surplus, circulating notes, loans and discounts, and fixed sums. The various proposed rates of assessment on deposits are given in Table 40. In this table rates of assessment applicable to periods shorter than a year have been converted to equivalent rates per year, in order to facilitate comparison; and certain special provisions, such as use of capital stock instead of deposits as a base of assessment in the case of new banks, have been omitted. Table 40. RATES OF ASSESSMENT ON DEPOSITS IN PROPOSALS FOR Rate of assessment Number of bills Total number of bills.. Not providing for assessments on deposits or depositors.. Providing for assessment on depositors (annual rates)1. 1/4 of 1 percent... 1/5 of 1 percent.. Providing for assessments on insured deposits with insurance not covering all deposits (annual rates)1.. 1/8 of 1 percent (coverage 75 percent of time deposits). 1/10 of 1 percent (coverage limited to $5,000).... Bills providing for assessments on total or average deposits necessary to cover costs1 Initial 1 percent, additional sufficient to maintain fund at 1 percent. Initial 1 percent, annually 1/10 of 1 percent, and additional necessary to keep fund at 1 percent.. Initial 1/8 of 1 percent, additional necessary to maintain fund at $3 million. Initial (in form of capital stock subscription) 1/2 of 1 percent, additional 1/4 of 1 percent when necessary to meet debits to fund.. 1/4 of 1 percent annually subject to variation if necessary. Sufficient to pay claims (as determined by administrative authority)' Rate to be established by authority administering fund.. Bills providing for fixed periodic assessments proportional to total or average deposits, or such assessments plus limited additional assessments (annual rates)1. 1/10 of 1 percent (for first two years 1/2 of 1 percent), additional not over 1 percent if fund is depleted.. 1 percent... 1/2 of 1 percent, additional 1 percent if necessary 1/2 of 1 percent, additional 1/2 of 1 percent if necessary 1/20 of 1 percent, additional to total 1 percent if necessary? 1/2 of 1 percent (initial 1 percent). 1/2 of 1 percent... $100 million in proportion to deposits (initially equivalent to about 1/3 of 1 percent). 1/4 of 1 percent for reserve fund plus 1/10 of 1 percent for premium fund. 1/4 of 1 percent.. 1/4 of 1 percent on savings or interest-bearing deposits, and 1/10 of 1 percent on demand deposits (for first two years 1/2 percent of all deposits). 1/5 of 1 percent. 1/8 of 1 percent.. 1/10 of 1 percent, if necessary 1/10 of 1 percent. 1/20 of 1 percent.. 1/50 of 1 percent.. $100, additional 1/50 of 1 percent if necessary 1 Rates referred to here as "annual" include equivalent annual rates in cases of semiannual or more frequent assessments. In the digest on pages 80-101 the rates are shown for the periods specified in the bills. In some of these bills levies were also made on the earnings or surplus of Federal Reserve banks; and in some the United States government made an initial appropriation for the insurance fund or appropriated to it certain government receipts from banks. Banks not members of Federal Reserve System assessed twice the rate on member banks. This bill also provided for assessments, at the same rate, on circulating notes, and for special assessments on banks in each note redemption district to cover 1/10 of losses in that district. In two bills these provisions apply to Federal Reserve member banks, with rates applicable to other banks to be established by the Federal Reserve Board. In one of these bills, bonds deposited to secure circulating notes were to be pledged for security of deposits also, with assessments levied on the basis of deposits and deposited bonds if necessary. Two of these bills provided for initial stock subscription of 1/5 of 1 percent of deposits and for coverage of individual depositors in nonparticipating banks at premium rates to be determined by the administrative authority. Another bill provided for a "reasonable" rate of assessment, with the Federal government contributing to the fund if necessary. ? In these bills State and United States funds otherwise secured were exempted from assessment. In one of these bills the rate on banks not members of the Federal Reserve System was twice the rate on member banks; in two of the bills initial assessment was twice the annual amount. • One of these bills required an initial deposit in trust of United States Government securities equal to 2 percent of deposits. The frequency with which assessments were to be collected, and the rates of assessment, show wide variation. The specific rates range from 1/50 of 1 percent to 1/2 of 1 percent per year, while in a number of cases assessments were to be adjusted to meet the total cost. The most common rate was 1/10 of 1 percent. Many of the bills provided for special initial assessments, or for assessments as needed in addition to those collected periodically. In a number of bills assessments upon the banks were supplemented by appropriations from the United States government, or, particularly in the bills introduced in the more recent years, by levies upon the earnings or surplus of the Federal Reserve banks. In a few bills the only provision for meeting the cost of insurance or guaranty was an allocation for this purpose of part or all of the earnings of the Federal Reserve banks, and in several cases the cost was to be met solely or chiefly by the United States government. In the cases where the insurance or guaranty was in the form of purchase of surety bonds, the cost of such bonds was to be borne by the banks. In many of the bills a maximum was placed upon the accumulation of funds by the insurance or guaranty system. In a few bills assessment rates were to be adjusted by the administrative authority and required to be sufficient to meet all losses to depositors or to maintain the fund at a given size. In some bills, the fund was authorized to borrow if necessary; and in others, to issue certificates to unpaid depositors if the fund was depleted. Changes in bank regulation or supervision. A substantial proportion of the bills providing for deposit insurance or guaranty also provided for significant changes in the regulation or supervision of banks. These changes are summarized in Table 41. In some of the bills insurance or guaranty of deposits was only a part of comprehensive plans for currency and bank reform. In several cases deposits of banks were limited to 10 times capital, or 10 times capital and surplus; in others, minimum capital requirements were made more stringent. A number of bills contained provisions for the issue of emergency currency or for a more elastic currency, a few authorized the United States Treasury to make advances to banks under specified conditions, and a few made changes in reserve requirements. More frequent bank examinations were specified in several of the bills, and in some of the bills Federal bank supervisory authorities were given more authority regarding chartering of banks or the issue and enforcement of regulations regarding banking practices. Maximum interest rates on deposits, and limitations or restrictions on the payment of dividends, were embodied in several bills. In a few bills repeal of the double liability of stockholders was proposed. Table 41. SIGNIFICANT CHANGES IN BANK REGULATION OR SUPERVISION ACCOMPANYING PROPOSALS FOR FEDERAL INSURANCE OR GUARANTY OF DEPOSITS Character of proposed change Number of bills Currency issue and central banking Circulating notes of national banks to be issued upon security of specified types of loans Changes made in conditions of issue of bank notes, eliminating required deposit of United 1 2 Treasury notes in amount equal to the insurance fund to be issued and used for government expenses. 1 Issue of currency by any financial institution or any number of persons depositing United 2 United States Treasury authorized to make advances to persons or corporations in the form of circulating notes, on approved security.. Issue of emergency currency if necessary to pay certificates of deposit issued to depositors of closed banks.. Comptroller of the Currency authorized to make loans to banks when deposits are suddenly withdrawn or losses exceed accumulated surplus and to appoint manager of borrowing bank. Increased rediscount facilities. Federal Reserve banks to be owned by United States. Reserve requirements Reserves required of banks insuring their deposits one-half that specified for other banks.. Capital requirements Deposits of banks covered not to exceed 10 times capital.. Deposits of banks covered not to exceed 10 times capital and surplus. Larger minimum capital.. Elimination of double liability of stockholders. Capital of banks to consist of coin or bullion, United States bonds, State bonds if above par, and real estate mortgaged to United States.. Interest on deposits Interest on demand deposits (except correspondent balances) prohibited and on savings Interest on time deposits limited to 3-1/2 percent and on demand deposits to 1 percent per year.. Interest on time or savings deposits limited to 8 percent per year.. Interest on time or savings deposits limited to 2-3/4 percent per year. Maximum interest on deposits, 2 percent per year.. Maximum interest on deposits, 3 percent per year. Maximum interest on deposits, 4 percent for one year or longer, less on deposits for shorter periods, none on demand deposits.... Maximum interest on deposits, 5 percent... Maximum interest on deposits, half of legal rate in respective States. Interest on deposits prohibited except 2 percent on government deposits.. Bank examinations and reports Banks to be examined monthly, never over twice in year by same examiner.. All banks covered to be examined twice a year by examiners of the Corporation ad- Comptroller of the Currency or Federal Reserve Board to examine all banks covered Banks to report their condition weekly to the Comptroller of the Currency. Insured banks not members of Federal Reserve System to be examined by Federal Reserve 1 Bank management and banking practices Governors of the Federal Reserve banks and Comptroller of the Currency given power to suspend bank officials for violations of laws or regulations or repeated warnings against unsound practices.. Each director and officer of a failed bank to be imprisoned for one to ten years unless it is proved failure is not due to violation of law.. Restrictions on salary increases, new loans and investments, and dividends when bank surplus below amount reported or government loan to bank outstanding... Limitation on loans.. 1 Restrictions on and regulation of affiliates, loans to officers, and loans upon stock and bond collateral... Federal Banking Commission created and authorized to make rules and regulations, not inconsistent with Federal Reserve and National Banking Acts, deemed necessary properly to regulate and control bank practices... 2 3 |