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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 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 and 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      On February 12, 1857, an act which repealed "so much of the chapter third of the code in relation to corporations, approved' January 25, 1856, as authorizes the incorporation of banks" was approved.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

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      An act approved April 8, 1895, created a banking board composed----of the auditor, treasurer and attorney general. This act provided for the chartering 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 law, 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 fourteenth 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.

      All banks operating under state law, which have completed initial payments of not less than one per cent of average daily deposits for a year, are assessed one--twentieth of one per cent of the average daily deposits twice a year. This fund is kept by the banks subject to assessment, and is payable to the state department of trade and commerce 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. Provision is made for special assessments when the fund is depleted, not to exceed one--half of one per cent in any one year.

      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.

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      The failure of many banks in 1921 and since, owing to the general financial depression, led to the creation by the legislature of 1923 of the guarantee fund commission. This commission consists of seven bankers appointed by the governor upon the nomination of the representatives of the state banks in seven groups of counties. The secretary of trade and commerce is ex officio chairman and member of this commission. Upon this commission is conferred most of the duties formerly discharged by the banking department, in the matter of failed and insolvent banks.

      The bank guarantee fund commission reporting under date of November 15, 1924, states that ninety--five state banks had been closed by the department of trade and commerce since the guarantee of bank deposits law became effective. These banks at the time of closing had total resources of $29,131,365.47, with deposits of $19,976,461.24. All depositors' claims have been paid, if allowed by the court. On June 30, 1925, a total of 914 state commercial and savings banks reported to the department of trade and commerce capital stock of $23,923,700, surplus, $7,065,230.78, deposits subject to check $107,420,370.77, certificates of deposits $156,813,462.54. These banks held $1,043,331.47 for the bank guarantee fund. They had resources amounting to $324,573,531.23.

      On September 28, 1925, the comptroller of the currency reported 170 national banks in Nebraska having total deposits of $206,600,000, and total resources of $247,410,000.

      During 1924, thirteen state and seven national banks were put in charge of receivers. Seven other state banks were being operated by the guarantee fund commission.

      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.

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BUILDING AND LOAN ASSOCIATIONS

      The earliest building and loan association of record was the Omaha building and loan association, incorporated by legislative act approved January 12, 1860.

      The first building and loan law was called a mutual loan association law and was approved February 18, 1873. This act was repealed by an act approved March 31, 1891. The, articles of incorporation, constitution and by--laws of these associations were to be approved by the auditor, treasurer and attorney general, or any two of them, and annual and any other required reports made to these officials by the associations. An act approved April 4, 1899, placed building and loan associations under the control of the banking board.

      No reports are available prior to 1892. Detailed information subsequent to the law of 1891 may be obtained from the annual building and loan report made to the banking department.

STATEMENT OF TOTAL NUMBER OF. BUILDING AND LOAN ASSOCIATIONS
IN NEBRASKA, NUMBER OF SHARES IN FORCE AND TOTAL
ASSETS, FROM 1892 TO DATE

(From Reports of State Banking Department)

LEGAL RATE OF INTEREST

      An act approved on March 14, 1855, fixed the legal rate of interest at "ten cents on the hundred by the year." An act approved Janu-

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INSURANCE

      The first insurance company to incorporate in Nebraska was the Franklin insurance company, which was authorized by legislative act approved March 15, 1855. The incorporators were J. W. Paddock, W. M. Hathaway, J. B. Ellsworth, William Kempton, Experience Estabrook, William Corfield and J. W. Richardson. This company was authorized to transact all sorts of insurance business. On February 12, 1857, the Platte Valley insurance company of Bellevue and on the following day the Nebraska City insurance company were chartered.

      The first attempt to regulate insurance companies is found in an act approved February 15, 1864. This act related only to fire and marine insurance and required semi--annual statements to be filed with the territorial auditor and the county treasurer of the county where the company was located. Companies were also required to obtain from the territorial auditor certificates of right to do business in the territory. The revised statutes of 1866 applied these provisions to all insurance companies.

      An act approved February 25, 1873, and which applied to all forms of insurance companies except life insurance companies, restricted companies to one of five specified forms of business. It empowered the state auditor, in his discretion, to have any insurance company inspected. It also fixed the auditor's fees for certification, filing semiannual statements, and inspecting. The auditor was required to tabulate the statistics of insurance companies and submit them with his regular report.

      From 1864 to 1913 regulation of insurance business in Nebraska was a part of the work of the auditor's office, except during part of 1899, when a legislative act created a separate bureau of insurance. This act was declared to be unconstitutional by the supreme court.

      In 1913 a complete insurance code was enacted, and a separate insurance board created. Under the civil administrative code this has become the bureau of insurance under the department of trade and commerce. The legislature of 1917 established a state hail insurance bureau.

      The total insurance business for the state in 1925 amounted to $48,962,848 paid to the companies, and $30,308,803 returned in payment of obligations by the insurance companies.

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MERCANTILE FAILURES

(Figures compiled by The Mercantile Agency---R. G. Dun & Co.
Through courtesy of S. Vaughn Griffin, District Manager, Omaha)

© 2002 for the NEGenWeb Project by Pam Rietsch, Ted & Carole Miller