The state herald., 1908-10-09
Guaranteeing
Deposits
NOTHING BUT A DEMOCRATIC
voTE-cATcHlNG DEVICE.

The unanimity with which the
members Of the American Bankers
Association at their Denver meeting
jumped on the Oklahoma plan OF
guaranteeing bank deposits was almost
amusing. Practically the unanimous
agreement of the members was that II
the plan had not been seriously pro
/ posed by a national party and advo
Gated by Its candidate for President II
would not be worthy of discussion by
body of sane and intelligent men,
These bankers are the leaders OF
the banking world in this country
They know what they are talking
! about in a case like this. When they
agree that the plan would be dan
gerous and its working disastrous they
may be presumed to be able to fore
see its probabilities better than the
| average citizen.
Some of the objections to the guar,
antee plan are:
1t violates the freedom of contract
That is. it undertakes to compel ev'
cry banker to make contract
whether he wants 1t or not. Every
lawyer knows that no contract is
valid without the voluntary assent OF
all the parties.
The contract it contemplates is a
one-sided contract-the banker puts
up his money, and. whatever happens
he loses it-he cant win. There is no
possibility of profit. only an assur.
ance of eventual loss.
The plan would encourage wholesale
borrowing by banks which get large
rate OF interest. and would tend con.
stantly to raise the interest rate to
borrowers.
Depositors would not care to inquire
into the soundness of bank or the
integrity and standing OF its officers,
If they thought they would get their
money back anyhow. The bank would
most attract depositors which would
offer the highest rate of interest on
deposits: to pay this interest II would
have to get large rates for its loans
and, in the long run. that would inev.
itably mean unsafe loans. failure and
an eventual enormous increase OF the
guaranty fund
The collection OF a guaranty fund
would remove that much money from
circulation-several millions in the
aggregate.
Where would the guaranty fund be
kept? II In n bank. the bank might
fail; II locked up In vault in Wash.
ington. 1t would simply lie idle. The
worst feature OF all is the attempt to
compel the prudent. honest. careful
banker to pay the debts OF the reck.
less or dishonest banker. whether he
Is willing to do 80 or not
Suppose A is a banker In Oklahoma.
b banker In New York and c n
banker In Colorado. A borrows 800.
900 from d at 5L and lends II out at
lOE. There comes bad year: grass.
hoppers. perhaps. or drouth. The Dor.
rowers cannot pay A. A cannot nay d.
shuts down. Here comes In c who
Is compelled by federal law TO helm
pay part OF AS debt to u, What jus.
'ice or fairness Is there In that7
The deposItor could not get his
money as soon as the bank failed. no
matter how large the guaranty fund.
The banks assets would have to be
realized on first, before the amount
was known which the guaranty fund
would have to supply; and we In Colo.
RADIO know how long II takes to clear
up the assets OF failed bank. In one
case. for example. that OF the German
National Bank OF Denver. II took over
n dozen years TO clear up and pay the
final dividend.
These are n few OF the objections,
stated briefly. to the Oklahoma Idea,
ns applied to the nation. Mr.. Bryan
likes the notion because he thinks II
will be taking with the masses" lie
believes the majority OF Americans do
not stop to think and that any clap.
trap device may galn some votes for
him. In fact. he believes that the
voters do not need to think-all that
is necessary for them Is To listen to
him talk.
This Oklahoma plank Is about ms
rotten as the rot,cnest In the whole
Democratic platform.
One of the humOrH of tho nastsit