The Idaho Springs siftings-news., 1908-10-17
GUARANTEE OF DEPOSITS
Bryas1 Scheme Does Not Meet D.
| mandS.
Inherent Weakness Of the Demo-
cratic Plan Pointed Out.
(From Gov Hughes Youngstown
SPECIFY


THE plan proposed by the Demo
catic platform to provide for q guar
antee Of bank deposits is open to seri-
Gus objection. Mr.. Taft promptly
pointed out its weakness, and Mr.
Bryan, despite his skill. has been un-
able effectively to answer his criticisms.
The plan proposes to make the honest
and prudent banks meet losses for
which they are in no way responsible.
Mr.. Bryan replies that all banking re-
strictions operate to curtail the free
dom Of the prudent because Of the
dangers arising from the abuses of
others. But it is one thing to put
business under needed restrictions op-
Grating impartially and quite another
to compel banks to make good specific
losses not attributable in any way to
their neglect or default.
IF this plan is a good one for the
banks. why should it not be applied to
insurance companies? They are
chartered by the state and are subject
to its close supervision. Life insur-
ance, for example. is one Of the es-
sential safeguards Of the home, and the
interests Of the policyholders cannot be
too surely protected. But what would
be thought of a proposition to compel
the well managed and conservative life
insurance company to make good the
losses which would be sustained by those
insured in other companies that be-
come insolvent? This would largely
deprive the former of the just benefit
of its own conservatism and well earn
ed reputation and make easy the efforts
of the unscrupulous.
The business of banking and insur-
ance must be transacted under strict
supervision; but those institutions
which operate fairly and prudently
within the law should not suffer either
from laxity Of governmental supervis-
ion with regard to others or from i'm
have no concern.
Mr.. Bryan tries in vain to meet the
criticisms that the plan proposed
would encourage reckless and dishon-
est men, who would seek deposits on
the faith of such an assurance. It
must not be forgotten that they do not
conduct their enterprises with the ex-
pectation Of failure, nor do they con-
template loss to the depositors; but
deposits are the sinews of banking en-
terprise and to the extent that such a
guarantee would facilitate them In OBJ
tanning deposits the opportunity for the
play OF illegitimate purposes and the
temptation to indulge such purposes
would obviously be increased Mr..
Bryan asks would it not be worth
something to the stockholder in pea ce
Of mind to know that the maximun Of
his loss would be the value OF his stock
and the 100 per cent liability, and that
no depositor could lose anything?" 1t
may be supposed that there would be
an added peace Of mind" on the part
of managing officials. And this diminu-
ton Of anxiety and of the sense of
moral responsibility with regard to de-
posits could not fail to have its effect
upon the prudent conduct Of the busi-
ness and place serverer strain upon
governmental supervision The condi-
tions under such n plan would newt
ably tend to increase banking losses,
however they might be made up 1t
may be added that the guarantee fund
II 1t were established on a scale suffic-
iently large to insure the required pro-
lection, would furnish difficulties both
with regard to its investment and its
availability In emergencies.
This proposed plan does not meet
the demand for an elastic currency
system through which the monetary
wants Of the country may be supplied.
To supply such a system is an urgent
necessity, and its provision would obyi-
ate many of the dangers which have
hitherto existed; but to make banks
pay for losses they have not caused is
to depart from proper principles and
to encourage improper practices"