Oklahoma's Losses

Another legislative panacea for the conduct of the banking business went glimmering with the repeal by the State Government of Oklahoma of its previous law requiring banks organized under the laws of that state to create a fund which would permit all banks to guarantee each other's deposits. All banks contributed to the fund, and when a bank failed the fund was used to pay off all its depositors in full. This plan largely originated with Senator Owen; it has been urged for adoption by banks in other states, too. Bank failures were to be rendered forever harmless to the public.

Unfortunately, the plan did not prove quite so simple in operation. All banks, since they were guaranteed against failure, loaned money right and left to everyone in sight. The wiser and sounder state banks took out national bank charters and thus retired entirely from participation in the program. In the wave of deflation during 1921 the remaining guaranteeing and guaranteed state banks met their Waterloo. The fund was wholly too small to pay off the depositors of the scores of insolvent banks in Oklahoma, and now the whole law has been abolished. Legislators are wiser, and depositors are poorer. If all such hastily enacted laws could thus be thoroughly tested within our "progressive " states before being enacted as federal legislation, American business would be immeasurably the gainer.