Noble State Bank v. Haskell

Background

A bank in Oklahoma sued the Governor and the State Banking Board to stop a state law that required every bank to pay an assessment into a Depositors’ Guaranty Fund. The 1907 law set the assessment at one percent of average daily deposits and, after suit began, a 1909 law raised it to five percent. The fund is used to cover shortfalls when a bank fails so depositors can be paid in full, and the law gives the fund priority and a lien on the failing bank’s assets. The bank argued the assessment impaired its charter and took property without due process under the Fourteenth Amendment.

Reasoning

The Court examined whether the law unconstitutionally deprived the bank of liberty or property. It warned against stretching the Fourteenth Amendment to strike down common regulations. The majority held that the state may require cooperation among banks and small contributions when that serves a clear public purpose. Securing the everyday use of checks and preventing bank runs were treated as valid public interests. The opinion concluded the assessment reasonably related to those goals and fit within the state’s power to protect public welfare, so the law did not violate due process. The Court also said a state may go from regulation to prohibition of banking if it chooses.

Real world impact

The decision allows Oklahoma to collect the assessments and keep the guaranty fund in place, meaning banks in the State may be required to share costs to protect depositors. It affirms broad state authority to regulate banking, inspections, and capital requirements to secure the financial system.