Evening star. [volume] (Washington, D.C.) 1854-1972, 1907-05-19

equalizing the safety of all
is not going to result in any transfer of deposits
from one bank to another; and even the largest
banks may derive much benefit from the fact that
their deposits known to be guaranteed by all
the allied banks. When the mere fact that payment
is refused check that is not properly Endorsed
starts of several days duration on perfectly
solvent bank, the at Pullman, Illinois,
recently no banker can say when or how he is going
to be hit. Even the largest banks have been SUBJ
jected occasionally to utterly senseess runs to
their great inconvenience and sometimes consider
able loss; SO must have some personal interest
in putting check on public emotionalism.
There IS another obstacle however, that has in it
something of menace. The organization of such an
association any really comprehensive plan would
practically put out of business every bank that did
not belong to it. Both strength and danger would
lie in that fact. The association of few banks for
mutual guaranty might not seriously affect the
others, but any general and comprehensive organza
ton would assuredly leave the outsiders stranded.
The Universal guaranty of all deposits within the
association, making loss to depositors, delay
attraction that would destroy competition.
An Element of Strength
TN this there would be an element of strength for
i it would give the association power to enforce
it's edicts Expulsion would have the effect of put
ting the expelled bank out of business; for it would
expulsion would face the recacitrant banker who
refused to conform to the rules of sound finance.
The association might not have the direct authority
to close an unsafe bank; but it would have the
power to do indirectly, for the offending institu-
tion would face the alternative of expulsion or of
having it's affairs wound up and its depositors paid
by the associated banks
This power over financial life and DEATH and even
birth, would be mighty authority to be vested in
even mutual and voluntary association and, unless
restrained by wise regulations, might drift into
practical banking monopoly. As no new bank could
hope to succeed without its sanction, it might
easily bar out any ventures in the banking line
and absorb the business of such of the older banks
as passed out of existence. Of course such short
sighted policy would ultimately wreck the asso-
citation ITSELF but there possibilities of injustice
to be guarded against in formulating the details.
The association should be broad and open In
the very nature of things, to fulfil the purpose of
the organization, the requirements for admission
should be rigid; but any bank new or old, that is
able to fairly meet those requirements should be
admitted Otherwise, the association would fail of
its real purpose, which must be general protection
and in the limitation, of banks or banking.
Such organization, if broad enough in it's scope
and comprehensive enough in it's membership, could
practically put an end to the dangerous and some
times criminal banking methods that are revealed
when an nsovent banks affairs get into the courts.
Such complete and far reaching organization of
banks is not to be expected in the immediate future
but the fact that some smaller combinations already
have been definitely proposed and the further fact
that many minds are busy with the problem seems
to give promise that form of mutual guaranty,
that eventually may be elaborated to cover the
points here suggested, is not an improbablity.