Abilene weekly reflector., 1898-12-29
A Delusive Banking Scheme.

vi h"hsas put 10rtn lot tne enuOrse-
ment OF the extra session Of the Pop
legislature is Bank Commissioner
Credentials pet scheme to have
guarantee feature added to the bank.
ing law. Briefly it is this:
Each state bank is to forward to
the bank commissioner 5 per cent Of
its deposits, which is to be listed as a
part of the surplus; the bank COM
missioner is to loan this vast fund so
collected to such banks as apply for
1t at a low rate Of interest; the inter-
est and the fund itself are to be
drawn upon whenever a bank fails
and there is not suflicisncy Of assets
to pay the depositors.
At the first glance the scheme is a
glittering and attractive one. 1t has
such a dazzling assurance that it
seems plausible and many Republi-
can papers which ought to have looked
with care at plan so eminently Pop
ulistic as this have been applaud.
ing it,
The guarantee plan proposes to
make the strong banks bolster
up the weak ones. II two banks are
side by side one shall have no ad-
vantage over the other no matter il
its business methods are wiser. The
weaker may pay high interest on de-
posits and SO get them, then fail and
the solid bank will help pay the de-
positors. Is that fair? Is there any
grocery store in Abilene that wants
to join a combination with all the
groceries Of the State tV make good
the losses of the poorly managed
onesP Does any man who under
stands his own business want to be
tied down to make good the losses of
his rivasp Yet this is what is pro-
posed by the Populists' new banking
law.
The banks that 90 to Topeka TO
borrow the money of the fund will be
those needing it badly and they will
be the very ones that it will be hard
est to collect Of when the fund is
needed. In case of a panic when all
banks are affected and many failures
occur it is doubtful il it will be availa-
BILE at all. The borrowing institu-
tions would carry the loan on their
books as bills payable and it would SO
appear in their statements. Is there
any bank on earth that wants several
thousand dollars bills payable to ap.
pear in its published statement It
is on its face an evidence OF need that
will have to be explained.
The moral effect Of an assurance to
every banker that some other bank
will pay his deposltors cannot help
being bad. He is certain to know his
business better than the bank exam.
iner can or will know it. II his de.
positors are TO be paid ip full the dis
grace of failure will be less serious IN
his eyes. Anybody could start bank
then.
The deposits Of the state banks Of
Kansas at this time amount to about
25,OO0,o00. Five per cent would
mean 81, 250, 900 in the hands of the
department to invest. An immediate
increase would be likely as the ma.
tional banks would probably lose
deposits to the guaranteed state
banks, necessitating larger fund, so
that two million dollars would proba-
bly, be in the hands Of the department.
Eventually, however, when the un-
satisfactory workings of the law
became apparent, the national banks
would regain more than they had lost.
With the state bank commissioner an
officer changing with every political
turn, immense risks of bad loans
would result.
The guarantee system proposes not
alone to guarantee a bank owners
honesty but to guarantee his business
methods and to make good the guar
anteo by taxing the banks which are
soundly managed. 1t is an insult to
the legitimately managed institutions
to propose such action; if there are
any Of the other kind they should not