FAILED BANKS, COLLECTION ITEMS, AND TRUST PREFERENCES

About 1,200 banks failed in the United States during the year 1930, and failures for the years 1921-1929 averaged over 600 a year. Each of these bank failures doubtless involved several problems regarding collection items. In each case it was almost inevitable that there should be found among the assets in the hands of the defunct bank several items held for collection but not yet collected, and also that a number of items should have been collected but no effective remittance made on account of such collection. There thus arose a series of controversies between the banks or individuals which had forwarded the items for collection and the receivers or other representatives of the general creditors of the failed banks.

The purpose of this paper is to trace the trend of the modem decisions and statutes regarding this struggle for preference, and to advance a theory as to the appropriate placing of the loss in such a case. It is not intended to attempt an analysis or reconciliation of the scores of decisions on preference claims. The authorities are confused, confusing and conflicting. A federal statute for National Banks and a uniform state law, mutually consistent, and founded on a sound economic theory, are much needed.