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

the writer by Chicago banker several months ago.
Citations of all banks that could meet the necessary
requirements either by States or in large organi
cation. The State plan would offer the advantage
of being less unwieldy than national organization.
and there few cases in which State organiza-
ton would not be amply large and strong enough
to meet every possible emergency. The association
would provide a guaranty fund to which the indi-
vdual banks would contribute in proportion to their
deposits, and this fund would be available to take
over the assets and Immediately pay the depostors
of any bank that might be in trouble.
A statstician has recently figured that an annual
assessment of forty-three cents thousand dollars
of deposits would have covered all depositors'
losses through bank failures since 1868. and this
would include the failures in the panics of 1873 and
1893 The same writer also shows that the actual
losses to depostors not large; but that the
are usually due to the fact that depositors are
deprived of the use of their money considerable
part of it. while the affairs of the broken bank are
being settled. and it may-indeed. usually does.
take several years to close up the business of
bankrupt institution. This delay is now obviated
in cases where the clearing house banks, for their
depositors but the clearing houses of the country
do not at all answer this purpose
Uncertainty of the Clearing House
EOR one thng-and most important feature it is
l. they do not guarantee the deposits of their
members. Each bank rests entirely upon its own
known until the clearing house acts It may decide
that the bank in trouble is not worth saving, and
let it go to the wall There is therefore, nothing to
reassure the depositors- to ward off run
in the fact that bank reported to be in trouble is
clearing house bank. On the other hand there
would be something decidedly reassurng in the
knowledge that the bank a member Of such
guaranty association as the one suggested
Il understand your bank is in trouble" some
one remarks to depositor.
Sorry" is the careless reply; but guess the
other banks good for all that's coming to me-"
The mere knowledge that the depositors are
guaranteed by the central organization would pre-
vent the senseless runs that occasionally are dis
astrous to really solvent banks that caught
prepared In this way would lessen the number of
failures and there would be fewer losses to meet.
There would be further protection in the fact that
the central association, having money at stake,
would exercise much closer supervision over it's
members than can result from any State national
bank examining system. The association would
have its own examiners, and the fact that the
association had financial interest in the SOL
vency of its members would make it's examinations
thorough.
The clearing house does not give these advan-
tages 1t is composed of comparatively few banks,
and has direct financial interest in the affairs
of anyone of them 1t usually learns of the situation
only when trouble comes, and it then decides what
action to take. There is nothing in the general
purpose of its existence to inspire the depostor
with confidence Of course, every bank failure is
indirectly hurtful, in degree, to other banks,