Weekly Watertown leader. [volume] (Watertown, Jefferson County, Wis.) 1908-1909, 1908-09-18
VIEWS or Al EXPERT.
Shall Banks Be Made Liable for
One Another's Debts?
Recognized Authority on Financial
Questions Discusses Practical
Bearings of Proposed Guar
antee Plan.
(By George E. Roberts, former Di-
rector of the Mint


The proposal to require the banks of
the country to guarantee each others
deposits owes its present strength to
the financial disturbance of last fall.
1t is urged as a means of preventing
Danics, and there is no disagreement
about the dosirability of accomplish
ing that purpose. Most of us agree
that a repetition of the conditions
which existed last fall should be made
impossible, but this is by no means the
only way to do it, or the best way
For years the advocates of cOmpre-
hensive currency reform have pointed
out that with $4,000, of bank
deposits in the country and only about
$3,0O0,000,0O0 of money all told in the
| country, both in the banks and out.
! There should be some method provided
by which, on the basis of good assets.
the supply Of lawful currency could be
! readily increased to meet exceptional
/
due to seasons of unusual business nc
| tivity or to alarm among depOsitOrs.
Their foresight and arguments did not
avail, but they are hardly to be swept
off their feet now by impatient zeal for
this new, and, as they regard it, i'll
considered scheme. They stand for a
complete and scientific trea tment of
the subject.
The guaranty Of deposits is a crude
and imperfect remedy at best. 1t does
! not recognize or attempt to cure the
| defects in our banking and currency
| systems, but aims only at persuading
depositors not to draw their deposits
The losses to depositors by the failure
of national banks has become an insig
! n1f1cant percentage, and is growing less
every year, as result Of nat1ral, evO-
| lutionary progress in banking. The
standards are being constantly raised,
: and the efficiency of official inspection
and supervision constantly improved.
! The true line of development is not by
any revolutionary policy, but by hold
! ing individual bankers to yet
stricter account, and at the same time
| enabling every properly conducted
bank to readily obtain a supply of cur
rency to meet all demands upon it.
The fundamental weakness in our
! currency system is in the fact that it is
| not readily responsive to the needs of
| the country. The legitimate demand
| for money varies from year to year,
| and from season to season in the same
| year. 1t is familiar fact that there
| is a great deal more business to be
| handled from September 1st to Decem-
| Der 31st each year than in any other
| four months of the year, but there is
10 more money in the country unless
| gold is imported for the purpose
Would Lead to Reckless Banking.
As a remedial measure the guaranty
Gf bank deposits is not only inadequate,
but it is worse than inadequate, for it
proposes to Overturn the principle Of
individual responsibility by means of
which the banking business has been
raised to it's present high standards
and upon which all individual and So
cial progress is based.
The proposal contemplates that the
public shall be relieved entirely from
the exercise of judgment and dis
crimina tion in the choice of banks. and
while it is highly desirable that all
banks shall be made safe, to the end
that even the most ignorant and con
fiding may be protected, it is still true
that an alert public opinion has great
influence in maintaining proper bank
ing standards. We cannot afford to do
without that influence.
Under present conditions the invest
ments, the personal habits, the general
character and abilities of the banker
are under the constant scrutiny Of the
community, and a matter of public in
terest Notwithstanding occasional in
stances in which the public has been
deceived, it may be stated as a general
proposition that an unbIemished char
acter and reputation for good busi-
ness ability and conservative judgment
have been necessary to success in the
banking business. Inc puDlc looks
over the individual who is to receive,
and invest and be responsible for its
money with some discrimination, and
the elimination of the unfit by the
scrutiny and composite judgment of the
community is a factor of the highest
value in maintaining the standards Of
the banking business. 1t is, however,
factor entirely overlooked by the ad-
vocates of this scheme.
They calculate the insignificant per-
centage of loss to total deposits under
present conditions and assume that no
greater losses would occur after char
acter ceased to be a factor IL the busi-
ness. and all deposits were given blind
ly to whoever would bid highest for
them To the objection that this elm
ination of character as a factor in the
acquisition of deposits must tend to
promote reckless banking. reply is
made that bankers will be deferred
from recklessness by fear of losiug
their own money. The repig misses the
Point. All men are not deferred from
reckIessness by fear Of losing their