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BANKING IN NEBRASKA. The early banks of Nebraska were established by specific acts of the legislature, naming the incorporators, powers, capital and place of business.
The first territorial legislature did not grant any bank charters, but it incorporated the Western Exchange Fire and Marine Insurance company, which by a liberal construction of its powers, became a bank. On January 18, 1856, the legislature chartered the Platte Valley bank at Nebraska City, the Fontenelle bank at Bellevue, the Bank of Florence, the Bank of Nebraska at Omaha, and the Nemaha Valley bank at Brownville. There was considerable hostility to "wild cat" banking, even then, J. Sterling Morton being one of the most pronounced objectors.
The charters of these earliest banks were almost identical. The companies were made up of a very few persons, the capital stock was $50,000 or $100,000 with liberty to increase it to $500,000. The shares were to be $100, and one-half the capital stock in subscriptions was required for the commencement of operations. There was no requirement of any amount in cash to begin business. Power to issue bills, notes and other certificates of indebtedness and all banking powers were conferred. The stockholders were individually liable for the redemption of all the issues of the bank. An annual report of the condition of the bank was to be made to the territorial auditor find to be published in three newspapers of the territory. Efforts were made to throw further restriction on these banks but without effect.
The third legislature was confronted with more than a dozen proposals to grant bank charters, and a conflict of a considerable proportion was engaged in. On February 13, 1857, the Bank of De Soto and the Bank of Tekamah were granted charters by the legislature. These and four other charters were vetoed by Governor Izard, whose position was sustained; in four of the six cases.
In the fall of 1857, the financial panic spread from the east into Nebraska and all of the chartered banks failed.
There were in the territory at this time a number of banks that were not chartered. These also had issued notes and bills. The chartered banks, with one exception, the Platte Valley bank of Nebraska City, were owned in other states.
On February 12, 1857, an act which repealed "so much of the chapter third of the code in relation to corporations, approved January 25, 1856, as authorizes the incorporation of banks" was approved.
On May 25, 1858, Governor Richardson directed James G. Chapman, district attorney of the first judicial district, to file information against certain banks, seven of which were operating without charters.
Upon repeal of the criminal code affecting banking and the failure of the chartered banks, the banking business of the territory was carried on for some time by private banks. There were seven of these banks in the territory in 1865, though one of them had become a national bank, and the others likewise reorganized shortly afterward.
The first general regulatory banking law was that approved March 29, 1889. The limitations upon banking corporations were chiefly the requirement of certain assets in excess of liabilities, the maintenance of certain reserves, provision for reports to the state auditor, and the inauguration of a system of bank inspection under control of the auditor, treasurer and attorney general. Savings banks also were provided for. Provision was made for the local publication of the required reports on the condition of the banks.
An act approved April 8, 1895, created a banking board composed of this auditor, treasurer and attorney general. This act provided for the chartering
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of all banking institutions operating under state law by the banking board; also for inspection by and reports to the board. Quarterly reports were required.A general banking law, approved March 25, 1909, repealed the existing laws and provided for a banking board to consist of the governor as chairman, the auditor and the attorney general. Most of the provisions of the former act were retained; but certain innovations of importance were introduced. All banking institutions, except those operating under federal laws, were required to incorporate. The most conspicuous new feature was the guarantee fund required to be maintained by state banks. The constitutionality of this part of the law was questioned and adversely decided in the federal district; court, but finally adjudged to be constitutional by the United States supreme court in a decision handed down by Justice Oliver Wendell Holmes, January 3, 1911. It was contended that it was a violation of the 14th amendment to the federal constitution; in that it discriminated against private banks in forcing them either to dissolve or incorporate, and that it was unfair to deprive a solvent bank of any of its property to be applied to the private use of making good the losses of insolvent institutions. The supreme court held that the law was a legitimate exercise of the police power.
The law having been sustained, the legislature of 1911 strengthened it by amendment. As amended the law provided for four semi-annual payments of one-fourth of one per cent of the average daily deposits and semi-annually thereafter one-twentieth of one per cent of the average daily deposits. This fund is kept by the banks subject to assessment, and is payable to the state board on demand. These payments are to cease when the depositors' guarantee fund gets above one and one-half per cent of the average daily deposits and to be resumed when the fund falls below one per cent of the average daily deposits.
This act was amended in 1919 so as to require banks, which were not organized for transacting business prior to the passage of this act, to file complete and detailed reports of their condition within two years after the date of organization.
The effect of the law has been to increase the number of state batiks. On November 1, 1918, there was a total of $1,883,697.92 in this fund.
The first state convention of bankers was held at Omaha on January 22, 1890. The complete organization of the Nebraska bankers' association according to the group system was effected in 1900.
TABLES SHOWING DISASTROUS EFFECTS OF "HARD TIME"
YEARS IN THE EARLY 90's UPON NEBRASKA BANKS.
STATE BANKS.1
Year
Banks Failed Total Number State Banks at End of Year Deposits in Banks Closed Total Deposits in All Banks 1892
7 513 $71,997
$24,891,113
1893
17 504 652,175
17,208,476
1894
8 482 197,283
18,074,832
1895
17 447 584,655
14,200,775
1896
36 414 1,156,888
10,227,537
Total
85 ..... $2,662,998
.....
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NATIONAL BANKS.2
Year
Banks Failed Total at End of Year Proved Claims Against Failed Banks Dividends From Failed Banks Total Deposits in All National Banks (Individual) 1891
4 139 $346,840
$165,018
$24,039,000
1892
..... 137 .....
.....
28,783,000
1893
4 134 1,823,837
445,338
21,272,000
1894
3 127 269,785
74,030
21,549,000
1895
5 117 377,008
127,793
17,994,000
1896
..... 113 .....
.....
17,037,000
Totals
16 $2,817,470
$812,179
.....
Net loss to creditors
..... ..... .....
2,005,291
.....
..... ..... .....
$2,817,470
.....
1Report of the Secretary of the State Banking Board, 1912, XVI.
2Report of the Comptroller of the Currency, 1913.
TABLES CONTAINING DATA FROM WHICH TO DRAW CONCLUSIONS RELATIVE TO THE
VALUE OF BANK DEPOSIT GUARANTY IN NEBRASKA.
STATE BANKS.1
Date
Number of Banks Capital Loans Individual Deposits Nov. 27, 1908
628 $10,900,000
$55,700,000
$65,400.000
Nov. 16, 1909
662 12,000,000
66,000,000
71,700,000
Nov. 10, 1910
666 12,500,000
67,900,000
70,400,000
Dec. 5, 1911
669 12,800,000
67,500,000
72,200,000
Nov. 26, 1912
694 13,800,000
78,200,000
80,700,000
Oct. 21, 1913
714 14,400,000
94,900,000
89,300,000
Feb. 12, 1914
728 14,800,000
85,500,000
90,100,(00
May 16, 1914
737 15,200,000
87,900,000
89,800,000
Oct. .31, 1914
760 15,798,100
91,918,622
43,598,154
Nov. 20, 1917
920 21,056,300
187,868,975
223,499,266
Feb. 25, 1918
930 21,539,300
181,686,662
250,500,824
Nov. 1, 1918
934 22,210,800
204,879,228
239,815,362
Nov. 15, 1919
909 24,881,800
249,387,430
278,753,490
NATIONAL BANKS.2
Date
Number of Banks Capital Loans Individual Deposits Nov. 27, 1008
214 $13,500,000
$75,900,000
$73,000,000
Nov. 16, 1909
220 14,400,000
89,800,000
83,800,000
Nov. 10, 1910
238 15,400,000
92,100,000
86,400,000
Dec. 5, 1911
247 16,200,000
95,000,000
89,000,000
Nov. 26, 1912
243 16,200,000
103,600,000
93,400,000
Oct. 21, 1913
241 16,270,000
102,900,000
94,600,000
March 4, 1914
230 16,280,000
94,391,456
93,100,00
Oct. 31, 1914
218 15,795,000
94,418,868
83,382,579
Nov. 17, 1916
192 14,305,000
130,585,000
116,516,000
Nov. 1, 1918
191 16,300,000
159,119,000
201,456,000
Nov. 17, 1919
189 16,640,000
207,371,000
175,347,000
1Report of the Secretary of the State Banking Board.
2Report of the Comptroller of the Currency.
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