Little Falls herald. [volume] (Little Falls, Morrison County, Minn.) 1889-1950, 1908-09-04

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GUARANTY 4 81 BANK DEPOSITS
The following is clipped from the
Springfield Republican, . supporter Of
'SMr. Bryan devoted yesterday $
ment in defense of the democratic pro-
posal Of government guaranty Of bank
deposits. It is a strong presentation
of that side of the question and will
prove to be convincing to a great
many people. This part of the dem
ocratic platform is made more attrac-
tive by it's presentation as substitute
for the republican plan of postal saw
ings banks. The difference between
the two parties at this point is that
the republicans would to an extent
put the government directly into the
banking business; the democrats
would develop further that measure of
government regulation of banks
established by the republican party
under the national banking system.
1T is necessary to remember, in
considering this question, that the
government already undertakes to
protect depositors in national banks.
Its requirements as to reserves,
capital, double stockholders liability,
limitation upon Individual loans all
are imposed for the protection of
deposltors, and for the same purpose
frequent government examinations of
banks are made. One effect Of this
measure Of regulation Is to create an
appearance Of security which does
not exist and sense of security on
the part OF depositors which IS not
altogether justified. Nor can the
situation be otherwise as matters
stand. Each bank pursues it's own
course and IS under pretty constant
pressure to act against the govern
ment's restrictions. Instead of work
ing together the banks and the govern
ment are too often in relation of the
spied upon and the spy. Certain and
effective administration of the restric'
tive laws becomes, under these
circumstances, largely impossible.
The examinations develop trouble or
rottenness only after it has reached an
acute stage; they close the barn door
only after the horse has been stolen.
Therefore, the chief point to be
made on behalf Of a government
guaranty Of deposits is that it would
bring all the banks under given
government control into common
interest on behalf of safe banking and
observance by all of the government s
restrictive laws. It is called a govern
1nent guaranty of deposits. It
should rather be called JOINT bank
insurance Of deposits under govern
ment supervision and enforcement
The government does not provide the
insurance fund it Is provided by the
banks, and every bank in the system
thereby becomes concerned in the safe
and conservative conduct of every
other bank Instead Of as now stand
ing off and bidding tn, government
enforce its restrictions as best it may,
they each become an interested agent
in assisting the public supervision on
behalf of general banking security.
Accordingly when it is urged that this
plan would place high premium on
wild cat banking, the fact is to be
considered that on the contrary it
enlists every decent and conservative
bank in suppresslng such banking.
THE deposit guaranty plan thus
presents itself as no more than a
logical development Of the present
national banking system. 1t embodles
and applies an idea which is com
ing more and more to be recognized
among the banks themselves-a COM
munity of interest on their part and
that of the whole business public
against reckless and speculative bank
ing and so strong is the recognition
that we have frequent instances OF
united action by the sounder banks,
above and beyond the law, I'm applica
ton of restrictive or suppressive
measures of their own. But such
action is naturally taken only when
the mischief has reached the breaking
point, as in the case of the dominant
clearing house banks Of New York
last October, when they preceded to
run the spectators out Of the Morse
chain of banks. Would it be going to
a dangerous extreme if the same
principle were applied with system
and public order, and all the time
instead of only when crisis has
developed and it is too late to avert
the consequences OF the mischief that
has been done?
eve present this merely as a ques-
tion but a question not to be disposed
of as Mr.. Taft is dlsposing of 1t. The
deposit guaranty idea found place in
the Fowler currency reform bill of
the last congress session, and was
Endorsed by such conservative financial
authorities as ex. Secretary Gage,
Horace White, the New York Journal
of Commerce and others. 1t is
neither startling nor revolutionary.
1t is not financial cure-all, and is
not even to be regarded as certain
preventive of panics. But it does
contain the possibility of so interest:
ing the stronger and more influential
banks against speculative banking,
and equipping them with the means
through the government OF enforcing
their conservatism, as to render far