Los Angeles herald. [microfilm reel] (Los Angeles [Calif.]) 1900-1911, 1908-08-28

bankers confess that their banks are
/ not secure when they oppose national
| guaranty system on the ground that
it will draw deposits away from state
banks. If you want to find whether
banks are absolutely secure ask the
directors to give you their personal
note TO secure your deposit and you
will learn that they win not bear the
risk which they ask you to bear.
5. The experience of Oklahoma fur
nishes conclusive proof that deposltors
do not feel that their money Is safe IN
unsecured banks. on December II, 1907.
the Oklahoma legislature enacted de-
positors' guaranty law. which became
operative February 1, 1908.
BY the provisions of this law all state
1 banks, and as many national banks as
desire to avail themselves Of the law,
are taxed / per cent on their deposits,
and the money thus collected is put into
a guaranty fund. The banking board Is
authorized to make additional assess
ments from time to time TO keep the
fund up to this amount, and is directed
to take possession OF any insolVeni
reimburse the fund by collecting the
assets Of the failed bank. Five hundred
and hfty-fiye banks, including fifty
four national banks, had come under
the provisions of this law on May IA
last, leaving but 255 unsecured banks
| fHll ndLlOHdlJ al lAlC SlcAeCs AShotN~iAANA
are made by the banks in December
and May.
Between these periods the secured
banks gained in deposits $4,23I, l6o.z2,
while the unsecured banks, all national
showed a decrease in deposits of $l,l0l,-
S07S6. A large part of this increase
represented money brought from MD
ing or from without the state, but the
decrease in the unsecured banks can
only be explained in one way.
! A large number of depositors with
drew their money from the unsecured
banks, and deposited 1t in the secured
banks, and this, too, in spite OF the fact
THAT in order to prevent Withdrawals
the unsecured banks in some instances
offered a higher rate Of interest than
the secured banks were permitted 10
/ pay; and II must be remembered also
that the banks which suffered loss OF
deposits were all national banks. fAnd
| to make it certain that the difference
was caused by the guaranty law, the
secured national banks gained, While
the unsecured banks lost. While the
deposits were increasing In the guar
anteed banks of Oklahoma, they We're
falling in the state banks and trust
companies of Kansas--the decrease be-
ing s1,163,026.27 between March 81 and
June IS.
No amount of criticism of the timid
| depositor can change the facts; the
people who deposit money want more
security than the laws at present give
them. They win change banks to get
more security, and if necessary they
will send their money to another state.
| For many years efforts have been
made In congress and in the various
states to secure a law guaranteeing de-
posits, but the influence OF the great
banking institutions has been sufhclent
! qnf IN
when the banks by concerted ACTON
suspended payments on checks, the de-
/ positors were everywhere brought to
realization of the fact that their de-
posits are in fact loans, payable on de-
mand under ordinary circumstances
but payable at will of the bank IN
emergencies. The depositors suffered
a considerable loss during the suspen-
sion of payments, and they have not
| forgotten the lesson which they then
| learned The Democratic party, be-
ing more free than the Republican par
ty to respond to the needs of the masses
Of the people, inserted the following
plank in its national platform:
I'VE pledge ourselves to legislation
by which the national banks shall be
required to establish a guaranty fund
for the prompt payment of the depos-
itors of any insolyent national bank,
under an equitable system which shall
buttons wishing to use it."
This principle has been applied in
i Oklahoma and the results have been
very satisfactory. The average annual
loss to depositors in national banks
during the last forty years has been
less than one-tenth of 1 per cent of the
deposits, and the loss to the fund in
Oklahoma under better regulations and
restrictions has been absolutely nothing
during the six months in which the law
has been in operation.
The Republican platform is silent on
the subject, and the Republican candi-
date not only does not advocate COM
pulsory system but specifically and
emphatically opposes it.
The chief cause of bank failures is the
making of excessive loans to directors
or officials of the bank. This is the
fruitful cause of disaster and IL has
been impossible TO SECURE legislation
protecting banks from their own eoffi-
Gals and directors. Why Because
there has been no mutual responsible
ity When all banks become liable for
!, the deposits of each, the stockholders
will insist upon the enactment or law
making ii a criminal offense for bank
, official TO loan more than the prescribed
! amount to one individual. At present
we have a law prohibiting the loaning
of more than one-tenth of the capital
} and surplus to one person or corpora
} ton, but the law is only directory.
Law Not Enforced
OF course the comptroller can sus-
pend a bank If it violates the law, but
the law is not enforced, because the
enforcement of such a law would throw
the punishment upon innocent stock
holders and upon the community, since
the suspension of bank infiicts q
} great loss upon stockholders and dis