Oklahoma Banks

Several years ago, Oklahoma initiated what she considered a valuable banking law. Western banks had shown an irritating habit of failing, and accordingly, the plan developed of having all banks in the State guarantee each other's depositors, by contributing to a common fund which should be used to pay off in full the uncovered debts to depositors of an insolvent bank. This plan spread to several Western States and was enacted into law; it was advocated by the Progressive platform of 1912.

Recent experience has left the proponents of mutual guarantee systems a little less sure of their theories. For the effect of thus guaranteeing a bank against the results of failure was to lead directly to the creation of weak banks run by inexperienced men, and to the acceptance by banks of business ordinarily refused as unsafe. Oklahoma, which gave birth to this plan, has had the bitterest experience with it. It has been found that in periods of pressure, more failures result and greater losses to depositors, than would otherwise occur. Since this guarantee plan has never been introduced into the National Bank Act, State banks have been able to escape its effects when enacted in the State under whose jurisdiction they lie, by converting themselves into National Banks. The tendency of the best State banks of Oklahoma a few years ago to do this, was the main feature which prevented the serious collapse of banks in that State from making a clean sweep of Oklahoma's banking institutions.