The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1903-10-27
A new BANKING SCHEME
SAMUEL ID. ARCHER Is IN THE CITY
TO INTEREST BANKERS.
Plan COntempIates Central Associa.
ton of Banks to Insure DepOsitors
Against Loss-The Details.

Commission League. with headquarters in
New York city, is in Indianapolis to interest
local bankers in project for the formation
OF national bankers mutual fidelity as
ISOLATION, general association to guarantee
all creditors against loss. which he believes
would make the national banks of the coun-
try almost as safe the government itself.
He is touring the country explaining his
plan to bankers and will spend several days
in indianapolis. He came to this city from
Muncie, where he interested two banks.
The plan, which has been submitted to the
controller OF the currency informally, con-
templates A great central association and
trust company, to which all the national
banks are to belong. and To which all are
to contribute certain percentage OF their
deposits as an insurance to creditors against
the insolvency of any of their number 9th
er features of the plan. Mr.. Archer believes.
would tend greatly to reduce the percentage
of failures throughout the country.
1t is proposed by Mr.. Archer that the as
ISOLATION shall be Incorporated under federal
laws. Its membership shall comprise dele
gates from all the national banks in the
country, one for each institution. A board
OF twenty-five trustees shall be chosen, who
shall have charge of the affairs of the asso-
citation Each bank shall have one vote for
each $4,000 of capital stock. surplus and I'M
divided profits in choosing trustees and in
othef matters requiring general vote.
TO BE HELD IN TRUST
The association is to hold on deposit one
half of ! per cent. of the total deposits Of
each bank, which is to be considered as it's
membership fee and is to be held i'm trust as
guarantee fund and to be used to guarantee
all depositors and other creditors Except
stockholders) of any and all banks holding
membership.
Mr.. Archer notes In his plan that from
the establishment of the present national
bank law TO 1898. a period of thirty-six
years, only 1875 banks failed and that the
total losses to creditors of all these banks
was less than sl5.0O0.O00. He states that the
percentage of loss TO total bank deposits
each year Is only an average of one
twenty-ffth of of one per cent He explains
| that while he proposes that the banks shall
| deposit with the Fidelity Association one
/ half or one per cent. this would be an ex-
| IRENE precaution and if all the national
banks now in existence should join this
| fund would amount to nearly $4,000 600 on
| the present basis of deposits
| very large proportion of this fund
would be invested in federal, state and
municipal bonds and it is expected that the
| interest on these bonds would not only pay
| all the running expenses of the association
but large part of the losses as well.
1t is firmly believed by those who have
studied into this plan, that the increased
confidence that would be felt for a bank
| that was member of this association in
| a community where situated would be such
| that all the other banks would be forced
/ to join In order to hold their patrons This
would increase the membership and conse-
/ quently the guarantee fund to such an ex-
/ tent that with the advantages it would
| have in decreasing the losses there would
| be practically no other calls upon the
banks than to keep their membership fee
up to the above percentage of deposits.
SUPERVISION OVER MEMBERS.
1t is proposed that the association shall
have supervision over all it's members and
that 1t shall annually investigate the as
sets of each bank supplementary pre-
caution in addition to the government ex-
animation. Mr.. Archer also proposes that
the association shall have the right to
change the banking methods and policy of
any of its members where such change
shall be thought to be wise. He also pro-
poses that ii shall establish uniform sys-
tenn OF bookkeeping.
! In case a member should fail to comply
with the rules of the association on the
! recommendations of the board of trustees
IT could be expelled from the association
and it's membership fee returned.
One of the features OF the plan IL that
| every employe shall be compelled to take
two weeks vacation every year, and that
an expert accountant shall take mis- place
dUrins this time and make a thorough in
| vestlgation of his books.
In the case OF a bank failure the assoc!a-
+, ton shall Immediately take charge of the
bank, under the supervision and in cooper
| alton with the controller of the currency
aid shall at once pay all creditors in full,
setting aside sufficient sum to redeem all
! outstanding circulating notes, then 1t shall
take the assets of the bank and make such
disposal of them should be deemed to
the hest interest of all parties concerned.
| In this manner the cost of liquidation
| would be much less than at present and in
| many instances a much better price would
be realized on the assets, but this plan
slx.ap .At afrw@a .1,4- 49,
holders of bank from the 100 per cent.
/ assessment on their stock as now required
by law, as such a release would in many
banking and necessitate a much closer
watch by examiners on each bank, nor is
1t intended to relieve bank officers or en-
ployes from criminal prosecution under ex-
| listing laws or any that may be enacted in
the future. but it is intended TO give greater
positor and creditor. relieve them from the
necessity OF waiting an indefinite period
| for their funds when a bank fails and at
the same time give the bank the advantage
of a much larger circulation of notes and
! the profit thereon.
LARGER CIRCULATION.
Mr.. Archers plan further contemplates a
modification of the present law regarding
national bank circulation, his theory being
that under the system of supervision estab-
lshed by the Fidelity Association 1t would
be safe to allow the banks a much larger
circulation than at present and which need
not be secured by government bonds. He
advocates a circulation plan somewhat
| similar to that described by Secretary
Gage in his annual report and in his ad-
dress to the National Bankers Association
He proposes that with the approval of the
trustees of the association and of the con-
troller of the currency. each bank shall be
allowed to issue it's notes to an amount
not to exceed 80 per cent. of its capital
This circulation may be in addition to it's
present circulation secured by government
bonds
The advantages of this plan over Secre-
tary Cages plan of asset currency are
many, but the principal one is that the
association could scrutinize the character
and standing of the management of bank
applying for membership and go into many
other details before granting an applica-
ton and have much closer watch on
members than could possibly be done under
any law that might be enacted.
! One criticism made against the plan of
Mr.. Archer by the office of the controller
is that the larger national banks generally
would not to join the association. In
a general way the plan would mean, they
say, that the large banks would guarantee
the smaller. and this. they intimate. the
large banks might not care TO do.
/ In a recent issue of the Commercial and
Financial World Of New York city, Mr.
Archer had three-page article outlining
| his plan. and the paper gave him column
editorial commencing the plan as "by far
the most equitable and reasonable and