The Butler weekly times. (Butler, Mo.) 1881-1918, 1908-10-01


full cause Of disaster. end il has been
impossible TO secure legislation protect,
ing banks from their own officials ano
directors. Why7 Because there mas
been no mutual responsibility. When All
hanks become liable for the deposits OF
each, the stockholders will insist upon
the enactment of a law making II !
criminal offense for a bank official 10
loan more than the prescribed amount
to one individual. At present we have
law prohibiting the loaning of more than
one-tenth OF the capital and surplus to
one person or corporation. but the law
is only directory. OF course, the comp
troller can suspend a bank II IL violates
the law, but the law is not enforced.
because the enforcement Of such law
would throw the punishment upon IN
nocent stockholders and upon the COM
munity, since the suspension of bank
infiicts a great loss upon stockholders
and disturbs the business OF the city or
town in which the bank is located,
The law should make II criminal OF.
Tense to loan more than the prescribed
amount TO one person, and we would
probably be able to secure the passage
OF law prohibiting market speculation
by bank officials.
The Oklahoma plan Is working salts
factorily. A bank recently failed in Ok
lahoma; within forty-eight minutes af-
ter the notice of suspension, the officer
In charge had authority to pay all de.
positors. and then the banking board
proceeded TO collect the assets of the
bank and to prosecute the officials crimi-
nally. When the business was closed up.
the stockholders passed resolution
thanking the state board for its prompt
action. the action of the board being a
protection to the stockholders, as well as
to the depositors and to the public gen
orally.
Compare this failure under the guaranty
system with a failure where there is no
guaranty. In Oklahoma the bank COM
missioner telephoned the farmers to
come in and get their money, and the
answer was: II am busy today with my
crop; I will be in in day or two"
In Cleveland, Ohio, n bank failed about
the same time, and the papers announced
"twelve hundred Infatuated Italians
stormed the closed doors Of the busted
banking house of Costan Liopea, on
Orange street today. The police drove
the crowd back"
An objection is sometimes made to the
guaranty law that new bank would
start up across the street" and being
able TO promise its depositors absolute
security through the guaranty law, could
draw the deposits away from conserva-
lively managed banks by offering a
higher rate of interest than the latter
could pay. This objection is urged as II
II We're an unanswerable one. But lot
us see how easily IL can be met. Since
the law makes all of the banks liable for
the obligations of each hank, the law
should prohibit any abuse Of this Sc
curity by any bank, and In Oklahoma the
banking board has already fixed the rate
Of interest that can he paid to depositors
According TO the rules of the banking
board, no bank is permitted to pay more
than three per cent on short-time de-
posits or more than four per cent or
time deposits running for six months oil
more.
1t has also been urged as an objection
| that under the guaranty system bis
bank would have no advantage over .
| little bank. Even If this argument were
sound, it could not weigh against the ad
vantages of the system, for banks arr
made for the people, not the people 70
, the banks. While there are advantage
, in having big banks, the advantages a"
not sufficient TO justify the ieonardizin'
| of the depositor or of the business in
terests of n community.
| But. as matter of fact. the big baNl
would still have several advantages owe
| the small one. In the first plac", 4 coul'
make larger loans than the small bank
For instance, bank with 81, geo, 900 capi
| tai and surplus could, rs at present
| loan 500, 900 to one person. while BAN
with sl0O, 900 capital and surplus cou
only loan $40, 900 to one person. This ad
| vantage would in itself draw to the larg
bank the large deposits and the men do
ing business upon large scale, for de
| posits follow accommodations.
| Their, 800. there is certain bushes
| advantage in depo~iting with a big banl
1t is worth something to be able to refe
| to n big bank when ones financial stand
ing Is being Investigated. and worth sti
more to have the advice of man {
large business experience when bushes
enterprises are being considered.
BESIDES =these,-there= =;t=saeiaii advar
III, ~
men who are prominent in the bankin
world. Surely the big banks presto
will be worth enough tn 1t under II
guaranty system; II should not begruda
the smaller banks the advantage whic
the guaranty of deposits will bring
them.
| can not pass from this subject will
out referring to the fact that the b
bank needs the guaranty as well as Il
little one, for big banks fail as well ;
small banks and the bigger the bank Il
, greater the calamity to the communal
when il fails No bank Is so big as
be absolutely beyond danger, and
,, community needs protection against Il
, T. hanks failure even more than again
, the failure of the small banks.
1t has sometimes been objected tn
! the guaranty system would bring in
, the banking business Il lower class
, men and reduce the average in charactt
a On the contrary, the guaranty of d
: posits, l submit would, If il made al
: difference in this resuect, bring into 1
banking business a better class of m
! and raise. if that is possible. the ave
, | age of character. 1t Is not to a mar
. discredit that he is not willing that o
!, OF his fellow men should lose money
| his account. Is it not mark of cha
. acter that man should be careful
a his good name and considerable Of
q esteem of his fellows? At present 81
i -f,,I co. ,Civ,
q induced to take stock in a bank. 1t m
q be that his name is desired to 81
: | standing and credit to the bank, t
: such a man is constantly haunted by
fear that a bank official may be gull
. of criminal conduct which will bring I
II bank into insolvency. 1t Is even possi
that the banks assets may be entir'
:. dissipated, and that the honest citizt
|. who has become a stakeholder, m
n either be compelled to go beyond
7 legal liability or meet the bitter critici
n of the depositors who have suffered
something to the stakeholder, In pei
10 Of mind, to know that the maximum
~ his loss would be the value of his ste
"a and the 100 per cent liability, and Il
n no depositor could lose anything?
l. convinced that the guaranty of depos
"a | would not lead to degeneration In
4. personnel Of the bankers.
a. To Justify a law guaranteeing depc
90 tors, it is not necessary to show that
il advantage to the bankers would amo1
10 to more than the tax. The examinat
to Of the banks would continue to be m,
3. at the expense of the banks. even II
were certain that the examination '
.. of no pecunary advantage to the ban
a. The law would continue to require a {
a tain amount of reserve to be kept
I'd hand even II It were certain that 81
* a law brought no pecuniary gain to
m bank: and so the banks ought to.