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 1¼¢), 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:
¶ 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