Aberdeen herald. [volume] (Aberdeen, Chehalis County, W.T.) 1886-1917, 1908-03-09
DEPOSIT INSURANCE THE TlDEL AND fiji
BANK DEPOSITORS MUST have
ASSURANCE OF SAFETY.
The Plan for Government Guarantee
of Bank DepOsitOrS Outlined d..
paEiCs Would be Avoided by Maxi
ing DepOsiforS Perfectly Sure of
Their Money.

There being as yet no organization be.
hind the movement Tor bank-deposit in
surance, no specific plan has been put
forward with any show of authority.
While the principle s simple enough,
there is naturally considerable diversity
OF view as to the best method for its APP
plication and as to the safeguards which
should be provided by legislation. Re-
ferring now exclusively to national banks,
prevalent opinion is fairly we'll agreed
upon the following outline of a measure
designed to create a system of compu! sorry
mutual deposit insurance by national
banks under government control.
1t is proposed that congress shall by
suitable legislation, to be administered
by the comptroller OF the currency. ad-
visel by the secretary of the treasury,
provide for an initial assessment to be
levied and collected upon the capital
stock of all rational banks, equal to a
specified percentage upon the average
deposits OF each bank for the preceding
year. This assessment will be collected
annually for live years, at the expiration
OF which time the insurance or guaranty
feature of the law will be in operation.
The proceeds of the assessments re-
ferred to will constitute a national bank
deposit guaranty fund. to be held in the
custody of the treasurer of the United
States and used for the purposes of the
law. From this fund, whenever a ma
tional bank fails, it's depositors will be
paid in full as soon as their claims can
he duly verified. The comptroller OF the
currency, as now, will take over the
estate OF the failed bank, licuidate its
affairs, enforcing ii necessary the stock
holders liability; the proceeds of the
liquidation will be devoted. first, to pay.
ing the cost Of settlement, and, second
to making good the guaranty fund fol
the draft made upon it to pay depositors
the surplus, if any, to be paid over te
stockholders. In case the bank assets
should fail to recoup the guaranty fund
the resulting deficit in the fund will be
covered from future assessments TO be
levied when the fund falls below a speci.
fed level.
Under such plan the government
evidently incurs no pecuniary liability
whatever, and only such outlay fol
clerical service as may incidentally at.
tend the custody of the guaranty fund
On the other hand, the integrity and
sufficiency Of the guaranty fund is at all
times assured by the power and duty ol
the comptroller Of the currency to keeE
that fund intact by any required number
OF successive assessments on all solvent
national banks. In this way the guaran'
ty fund is rendered adjustable to any
aggregate of bank losses, whether greater
or less than anticipated.
One conclusive check the government
would have on improper banking would
be its power publicly to withdraw from
any unfit bank the insurance privilege,
after due and unheeded warning and
admonition.
The present system is scourge to the
banks themselves. Every panic reduces
their net earnings by large percentage
for period Of years. No one has more
reason to dreah a money panic than has
the bank manager. To him at least it is
purgatory.
The present impracticable banking
system, especially since the panic OF
1907, stimulates and tends to compel and
render universal and permanent the evil
habit of private boarding, with it's dam
ger to property and life through robbery,
its withdrawal of vast sums from the
banks and the channels OF business, and
its disbursement OF thrift by savings.
Deposit insurance would remedy all this.
1t would bring out many millions of dol
lars from places OF hiding and thus swell
bank deposits and benefit the whole com.
munity. This gain alone would more
than compensate the banks for their
trifling contribution to the annual cost oi
deposit insurance.-From "Shall Bank
Deposits Be Guaranteed?" by General A.
B Nettleton, in the American Review OF
Reviews for March.