Broken Banks

On January 11, 1930, the Ensley Bank of Birmingham, Ala., failed. Since then the wave of banking suspension has increased. Last week the Federal Reserve reported that for the first eleven months 981 banks with deposits of $515,486,000 were suspended, which compares to 372 banks with deposits of $129,000,000 in the relatively quiet year of 1928, 132 banks with deposits of $233,000,000 in the panic year of 1907. Preliminary estimates place the 1930 total at 1,121 banks with $700,000,000 in deposits. Of these failures, the greatest part has occurred in recent months as the follow-ing table shows:

Banks Suspended

July 65

August 66

September 66

October 66

November 236

December* 140

Deposits $ 33,000,000 21,000,000 24,000,000 26,000,000 204,000,000

November's total was swelled by the repercussion in the South which followed the failure of Caldwell & Co. and the A. B. Banks group of banks in Arkansas (TIME, Dec. 1). Last week the South's tally was raised by the failure of ten Mississippi banks, all within a radius of 30 miles. To bankers, aware that a great evolution is changing U. S. banking methods (TIME, Oct. 13), the southern situation provides interesting case histories of what happens to a group of banks when the strongest member goes under. Other case histories are being written throughout the U. S. by closed banks. In Los Angeles last fortnight, the widely-advertised Guaranty Building & Loan Association of Hollywood failed, due to the confessed $8,000,000 defalcation of Gilbert L. Besseymer, secretary manager.

Last week the California Building and Loan Commissioner resigned. One reason: public belief that a careful investigation of the Guaranty's figures would have revealed its condition. In Manhattan the case of Bank of United States may prove a classic example of mismanagement (TIME, Dec. 22). Last week in Manhattan another bank, Chelsea Bank & Trust Co., closed. Not important in the Manhattan banking structure, Chelsea's predicament has interesting points, chief of which is accusation by the State Banking Department that Red rumormongers deliberately started the run on the bank. In Philadelphia last fortnight, Bankers Trust Co. was suspended (TIME, Dec.

29). Rumors about Franklin Trust Co. started. A bad situation was avoided by the prompt action of other banks and statements from financial leaders that all was well. In other cities similar events have taken place, and the banking history of 1930 will contain a long chapter, not without bright passages, on the duty of banks and bankers in time of crisis.

* Estimate from Dec. 1 to 29 by American Banker.

December deposits not available.

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