Wood River times. [volume] (Hailey, Idaho) 1882-1915, 1893-07-20
AN EVIL AND the ssE1EDY.

IAN EVIL AND the RE4EDY.
Communicated
Under tho banking system which
prevailed before the war panics were
caused By che fsilurs ct the bsuk. to
redeem their notes 10 specie. and
run upon . bank WAS . scramble OF
note holders to get the specie for theis
notes - long - tho bank had it to pay.
Under the national banking system
this feature is entirely obvia,ed BY the
government esaranteo that tho circu
lating notes Of the banks will be paid
under any circumstances, 40 matte.
bow insolvent the bank may become.
But while the 10 an Improve men.
upon tina old system il does not go
fer enough TO prevent the evil EFFECT.
Of panies like that which is now eoine
on. and in which rune are made upon
the banks BY their depositors. each
ono hurrying to get hold of HE or hs,
deposit while the banks money hold.
out. for fear that somebody else NAV
get ahead Of them snd exhaust tb~
supply.
The liability 70 these causeless
and senselsss runs during pauick.
times compete tho banks to call 10 al
their available means and hold an un-
usual amount of cash in reserve oil
the time, and makes it impossible fos
them to extend the usual accommo-
dasious to their customers who are
therefore often forced 70 the wal;
where little ready cash would have
saved them. All this aud in fact a.
most al tho evil effects Of . panic are
tho direct result of tho distrust Of the
hanks BY .heir depositors and nigh,
DO ohviated in the same way in which
the d,strust Of the notas was obviated,
namely by . government guarantee
that oil Of the liabilities Of all national
banks 70 their d-positors should b.
paid in full 90 that even If tho bank
failed mother tho d-pnsitors nor The
noteholdess would lose an. thing.
For this purpose the national bank
ing law should be amended 90 % to
authorize the comptroller OF the our.
renoy to levy . special tar upon oil Of
tho banks IN proportion to ,hei,
capital sufficient to form safety fund
to reimburse the government for any
loss that it might incur from settling
the liabilities Of insolvent banks, with
power to make additional levies from
time to time whenever necessary.
Then subject them to q strict exams
nation twice . year. and r,vide that
whom . bsnk failed its assets should
be collected by tho government
until oil of its liabilities were paid,
and the result would be that ounfi-
denoe in the banks would b. com.
plet-ly restored At once. runs would
be unknown. and panics, If they
occurred 1t ell, would DO in such .
mild form that they would be prao.
sically harmless. Moreover, it would
not require . heavy tax, nor . large
safety fund. to accomplish this result,
for under this syssem failures would
DO very rare. and hen they did OCCUR
the assets Of tho failed banks would
como 90 near paying their liabilities
that but small amount, If any, would
have to be drawn out of the safety
fund.
l believe that . measure of this
kind would 60 much further towards
restoring public confidence than tho
repeal OF tho Sherman Jaw, and ,h..
with it and other slight improvements
in tho nation Al banking Law, We would
have . sound, safe and reliable System
OF finance, in which severe panics
would Be unknown.
Ha Lived His Ceustry.