Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1904-12-23
LESSON IN BANK FAILURES.

LESSON IN BANK FAILURES.
The report of Willard Cox. Of the
banking department of the state audi
tors office, showing a list Of thirty-four
bank failures In Iowa during the past
year, might cause unnecessary alarm
if not judged with careful considera-
ton of the facts. Already the story
is doing scare headline service in east
ern newspapers and will cause II great
deal of inquiry from eastern investors.
But the facts are that these bank
failures do not represent condition OF
distress in the banking business at all,
merely an inevitable result of condi-
lions peculiar and individual with each
particular bank. For instance they
small banks in the very small towns.
Out Of thirtyfour towns represented
only four We're large enough to be in the
1000 population GLASS; and the most
Of them had less than q thousand in
habitants. Out of the thirty-four
failures, twenty-seven Of them were
private banks and nearly everyone OF
these were wrecked by plungers who
were operating fancy stock farms, or
specializing in either grain or cattle.
Business customs are communicative.
What one man does successfully, many
others Of his neighbors are apt to do.
In Iowa it had become a common Gus
tom for rich men to establish small
private banks in the villages all around
them until, in great many counties.
one man would own several small
banks. Because OF this situation, when
the banker failed, two or more little
banks failed with him. This Is what
makes the list in Iowa so large in num-
Der.
A few years ago Iowa was enjoy
ing unprecedented prosperity. Depos-
its piled up in these little banks every
where. There was a great inducement
to use the idle funds and as there
are absolutely no statutory rules or
regulations about private bank, It
was very natural that private bankers
in many instances should use the
money left in their care. They specu-
lated and plunged. Many Of them
made lots of Nancy and the public
never knew how. Others went broke,
and nine of them committed suicide.
On the other hand, banks generally
in Iowa, have been conducted very
successfully. The craze Of land specu-
lation, general hard luck in cattle
feeding and two partial crop failures,
have made banks hard up in many
places and money scarce, but there has
been perfect security for funds at all
times. Only three national banks fall
ed, and all were due to thievery on the
part of officials. -Four other state
regulated banks failed, but two Of
these were dragged down by failures Of
private banks and the other two We're
wrecked by crooked cashiers.
The facts are the Iowa laws are de-
fective in that the state has no super
vision over private banks. A private
bank now Is nothing more than one
mans office and strong box. If he IS
honest and remains rich, there Is no
better bank in the world, but there is
no check on him. His own fortune Is
all the guarantee there is behind the
bank. OF course the bank never fails
until the banker is busted" but then
there is nothing for depositors to de-
pend upon. State and national banks
are stock companies, composed of
several stockholders. each of whom
puts UP his portion Of a stipulated
capital, and is held liable for an equal
amount besides. The law limits loans
to tenth OF the capital to any one
person, and requires a certain cash re-
serve at all times. The state or fed
eral examiners then Investigate the
banks affairs regularly and note COM
mittees of directors check up the CASH
Ter and the banks financial statement
is published to the world. These are
checks that do not always
prevent disaster, but the rec
ord shows that they furnish
protection that private banks do not
have. The failure Of twenty-seven
private banks in one year as compared
to seven state and national banks is an
argument for new law providing
state supervision of all banks.
SALOONS AND WATERMELONS.
Otherwise sane and peaceable men in