The Guaranty of Bank Deposits

Report Outline
Bank Failures and the Hoarding or Currency
The Guaranty of State Bank Deposits
The Federal Reserve System and Deposit Insurance
Current Proposals for Federal Guaranty of Deposits
Special Focus

Bank Failures and the Hoarding or Currency

Failure during the last two years of 3,643 banks in the United States with total deposits of $2,556,225,000 have caused losses to depositors of at least three-quarters of a billion dollars and perhaps as much as a billion and a quarter of dollars. These losses to depositors and the resultant hoarding of currency, which at its peak early in the present year was estimated to be withholding a billion and a half of dollars from use as a basis of credit, have directed attention to projects for the guaranty or insurance of bank deposits by the Federal reserve system.

Since the opening of the present Congress last December, at a time when bank failures were more numerous than ever before in the history of the country, twelve bills have been introduced—nine in the House and three in the Senate—to provide a federal guaranty of bank deposits. The most important of the House measures was offered by Rep. Steagall (D., Ala.), chairman of the Banking and Currency Committee, on March 7. A similar bill is said to be in preparation by Senator Norbeck (R., S. D.), chairman of the Senate Banking and Currency Committee. A substantial measure of support for such legislation has been indicated in both houses of Congress.

Bank Failures and the Hoarding of Currency

Prior to the present depression deposits tied up by failures of national banks and state banks in the Federal reserve system averaged less than half the amounts tied up by suspensions of state banks outside the reserve system. During the last two years, however, there has been a notable increase in failures of Federal reserve member banks.