The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1907-01-01
BREAKERS AHEAD.
Bank Commissioner John Royce
Expects Opposition.
Says That Bankers Will Try to
Defeat His Law.
WILL PASS ANYHOW.
Senator F. DnmoHt Smith
Places Himself on Record.
Writes q Letter Setting Forth
His Ideas.
WILL PASS ANYHOW.

'T expect severe opposition to the
proposed law, guaranteeing deposits in
state banks said Bank Commission
er. John Q. Royce today ''In fact I ex-
pect that certain bankers who oppose
the law will have a strong lobby here
to work with the members. and Try to
defeat the proposed measure. But IN
spite of all that. the bill will pass 1t
Is gaining strength every day, and if
there were so days more between now
and the time of the Legislature, there
would not be so very much. opposition
to it,
Mr.. Royce has received two strong
endorsements OF his plan One comes
from j. T. Dickerson of Chickasha, a
brother-in-law. of Governor E. w.
Hoch. and one of the federal judges
of the territory. Judge Dickerson
made a speech not long ago in which
Z he advocated the guaranteeing of bank
deposits by a similar plan to that out
lined by Mr.. Royce.
The other endorsement came from
Fred Dumont Smith of Edwards. coun-
ty,- who has not been looked upon as a
man who would be friendly to the pro
posed bill. ~
Senator Smith also enclosed in his
letter copy of letter which he had
written to G. c. Warner of Liberal,
Kan, a banker who is opposed to the
guaranteed deposit scheme. When
Mr.. Royce read the letter, he wired
Senator Smith for permission to have
it published without using Senator
Smiths name. Senator Smith wired
back: --.-
use the letter as you see fit. name
and ALL >
The following is senator Smiths
letter:
My own idea of a guaranty deposit
bill is not Just the same as the bank
commissioners. / would levy small
direct tax upon each bank, based upon
dennSifS TIrpnfV-fiV6 wears
peFience under the national banking
law shows that the ultimate loss to the !
depositors has been about one-thir-
teenth of 1 per cent of the deposits.
An annual tax. therefore, of one-tenth
of per cent upon the deposits would |
more than cover the loss by failure. |
My idea would be when bank fans to I
have receiver appointed by the bank
commissioner step in and take charge
of the assets and close the doors
Next day he would open the doors,
pay. every depositor by a draft drawn
against this fund in the hands of the
state treasurer. He would then pro-
coed to liqutdate the assets of the bank
and cover them back into the treasury
to- make good the amount paid out of
The first result of this plan would
be this: Whenever there. came a
panic wild cat rumors about. the
would be no danger of run on that
bank because the depositor would
know that even if the bank closed it's
doors they would reopen the next day
and he would get his money. Instead of
laying out of 1t year or two until the
bank iquidated, he. would be absolute
ly Indifferent as to whether the bank
failed or not, and with such a protec-
ton there never would be a run upon
a state bank and there never would be
a bank panic.
note what you say about wildcat
banks being started. That is abso-
a. q,
plan, and if you will allow me to sug-
gest it, it is being a little. overworked.
Let me say further at this point that
I would eliminate from the protection
of this guaranty fund certificates of
deposit drawing interest and confine
It entirely to deposits subject to check
for this reason, and I think this would
eliminate much of your objection. If
we put the guaranty fund back of
time certificates drawing interest,
weak banks would pay excessive rates
Of interest in order to secure money to
use, relying upon the credit given
them by the guaranty idea. -t'
hold that a man who loans
money to bank upon; time certificate
drawing interest, should loan it upon
his own responsibility, with out any
guaranty. The guaranty should mere
~ be for the working deposit in the
bank and think you will agree with
me on this. Your argument and. the
argument of other bankers who are
opposed to the scheme is that it places
weak banks and strong banks on the
same level and that 1t will encourage
wildcat banking. This is the only
argument, as 1 say that L have ever
heard against the proposition.
The answer to A.Iat is that the penalty
against wildcat banking should be +
made more drastic. There should be
more publicity of :ts affairs and a
stricter supervision. Now and then
there might be a wildcat bank under
the guaranty idea. What would re-
s,,Itr All the banks of the state would
contribute a very trffing amount to
make up the loss andin return they would
secure absolute protection against I'M
reasonable panicS, runs that are diff
ci1It for any bank to meet that would
carry a smaller reserve, loan more of
their money and, as a matter of fact
by this protection and by their national
loans more than earn the tr1fiing tax.
Take, for instance, a country bank with
81 GOO 900 deposit; its tax would be 500
a year. Would not any bank be will
ing to pay 800 year to be guaranteed
against suspicion, runs and panics? 1
would raise the legal reserve to % per
cent instead of Is per cent. AS things
stand now since the experience of 1893
banks dare not loan so as to- reduce
their reserve below 40 per cent, and
capital is tied up because of this fear
of panic or a run. This, of course
tends to increase interest rates to the
borrower. A guaranty fund protecting
El0 DdIlk WOu1Q IL " AOe1h QOWA
more closely. An extra thousand dol
lars loaned in the course of a year
would pay this tax. The wildcat bank
would be restrained by the severe pen
alties imposed upon the president,
cashier and every director. If there is
anything at all in punitive measures.
Jasper Branch Nearly Completed.
The Jasper & Eastern. a branch of
the Gulf. Colorado & Santa F'e, has been
Extended during the past year from