The first application of the safety fund plan to protect deposits was in the form of a bank law in New York State in 1829, though the apparent intention of the legislature was to guarantee notes only. After a near failure of the scheme, because of the inadequacy of the fund to protect both notes and deposits, its application to deposits was abandoned in 1837. The heavy bank failures during the depression after the panic of 1893 injected into the more general Populist movement of the mid-west states a demand for the guaranty of deposits. Only the returning prosperity after 1898 stemmed the inauguration of the system in Kansas and Nebraska at that time.

The next demand for guaranty of deposits was occasioned by the panic of 1907, which broke October 22. When Oklahoma became a state on November 16, 1907, an effort was made to put deposit guaranty into the Oklahoma constitution, but the attempt was killed in committee. On December 17, however, the bank guaranty law, to go into effect in sixty days, was passed as the second act of the first legislature. The frontier is "preeminently the land of sanguine radicalism and experimental legislation," and more subject to what Brice has called "legislative temerity" and extreme "confidence in the power of the state" than the older and more conservative states. The idea of guaranteeing deposits proved very popular and was at once seized upon by the political parties as political capital. It was adopted by the Democratic Convention at Denver, in 1908, as a plank in the national platform, and in Kansas the same year the Republicans bolted their own national platform and declared for deposit guaranty. In 1909, deposit guaranty laws were passed alike in Kansas and North Dakota, Republican states, and in Texas and Nebraska, Democratic states. The political nature and execution of the laws have been to a large degree responsible for the poor working of the plan.