Nebraska's Guaranty

Nebraska last week put aside as a failure its 19-year-old bank guaranty law (TIME, Dec. 2). Once the law had helped to attract bank deposits from adjoining States. Today it leaves a $20,000,000 deficit and some 65,000 depositors waiting to get their money back.

Under the now abandoned law, Nebraska's State banks were taxed to maintain a special State fund with which to pay depositors in banks that failed. It seemed like a sure guaranty until farm deflation sent banks into bankruptcy faster than the State fund could be replenished. The State fund was $20,000,000 in the red when the Nebraska Legislature decided fortnight ago there was something wrong.

To clean up the fund deficit in part the Legislature provided for a .2% tax per year on the daily deposits of all State banks for ten years. Next November Nebraska voters will pass on a proposition to appropriate $8.000,000 more to dispose of the wreckage left by the guaranty law.

But Nebraska depositors will not be without some semblance of protection from bank failures. Under a new guaranty law effective last week, State banks must set aside 20% of their profits per year until each bank creates an internal fund equal to 50% of its capital stock and surplus and equal to 10% of its daily deposits. Under the old system guaranty was by a common State pool. Under the new system each bank will have to provide its own guaranty or be run out of business.

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