Alma record. (Alma, Mich.) 1878-1928, 1908-09-24


Under present conditions there are
compensations In favor OF careful and
conservative banking. There are peo-
pie who are not Influenced In their Sc
lection OF a bank by the highest rate Of
interest offered on deposits. and who
have their suspicious aroused by the
tender OF exceptional inducements.
They know that such offers put a
strain upon the business, and they de-
liberately prefer to place their money
with banker who will not subject
himself to such strain. These deposit
ors esteem safety above all other con-
siderations. and they are numerous
enough to exercise very wholesome
restraint upon reckless tendencies in
the business. A banker now prizes the
reputation of doing safe business
and cannot afford TO have a reputation
for imprudence and speculative in
clinations. And yet, although held I'm
check by these powerful considerations
the pressure of competition carries the
business near the danger line even
now There is too much competition
for deposits. and the ambitions Of the
more venturesome members of the fra
ternity. and the pace they set, puts the
whole system under strain.
But what are likely to be the con-
ditions In the business when the public
is no longer concerned about the man
agement of a bank, and all the RI
wards for conservatism and restraints
upon reclSlessness are removed? The
considerations which In the past have
tended to safeguard the business and
advance its standards would be gone
The public would care nothing for the
personality OF the banker. Instead Of
looking to the institution which receiv
ed the deposits, the depositor would re-
ly on an outside fund. A banker
might bet all the deposits on horse
races without the fact becoming a
matter OF any concern to his custom
ers.
And how would the conservative
prudent banker fare under these con
ditions? The legitimate reward for
maintaining that character would be
lost TO him. He would get no deposits
unless he bid as high for them as his
rivals. for the government would stand
behind the latter. and assure the pub
lie that they were just as safe as he
and tax him to make them so. In
short the reckless and incompetent PEG
pie, who are now either excluded from
the banking business. or held in check
by the distrust which a discriminating
public feels towards them. would make
the pace TO which everybody else in
the banking business would be Obliged
to conform or get out of the business
Would DemornIize Business.
The hardest competitor in any line
OF business is the incompetent or dis
honest man who does anything to get
business. Such people get into the
banking business even now, but their
number and influence for mischief
would be greatly increased If they
were backed up by Unlimited credit In
other lines there may be some question
as to the quality or service offered by
rivals, but all bankers deal in the same
kind of money, and If deposits were
made a joint liability, there is no rea-
son why they should not go to the
bankers who offer the greatest induce
ments to attract them. The careful
banker would have no offset or protec-
ton against demoralizing competition,
and he would be placed In the strange
position of being liable for his com
petitor's obligations.
All efforts to make ii appear that the
interests Of bankers are on one side OF
this question and the interests OF de
positors on the other are untrue to the
facts Nothing that in the long run is
harmful to the banking business, that
puts it under strain and tends to low
er its standards, can be beneficial to
depositors or the public. 1t cannot be
advantageous TO the community TO have
its savings and working capital pass
into the hands of the venturesome
class of bankers who will bid most for
them. The actual waste and loss
through unwise investments would in
evitably increase 1t would fall at first
on the conservative bankers and penal
lie them. Instead of an elimination Of
the unfit, which is the true process of
evolution, the tendency would be to an
elimination Of the best. Eventually the
burden Of increasing waste would have
to be borne by all deposltors and the
whole community.
OLIahoma Trial Inconciusfvs.
The fact that the first bank failure
In Oklahoma after the law went into
effect, was followed by immediate re-
endorsement Of the depositors, proves
nothing as to the practicabllity OF the
system in the long run. The fact that
the State banks OF Oklahoma have
gained deposits since the system went
into operation, while national banks
within the State have lost, IL true,
proves nothing as to the merits OF the
system. The law itself requires that
all public deposits must be kept In
banks that belong to the system, and
this provision alone would cause a con
siderable transfer of deposits and in
duence some banks to join the system.
The real test of the policy will come
in its influence upon the banking bust
ness in the long run. VIII it tend to