The Sauk Centre herald., 1908-10-15
BANK GUARANTEE
U. S. Senator Knute Nelson In
trOduCed an Amendment on
the Question Last March

| Minnesota constituents to learn that
| Senator Nelson introduced an amend
ment to the Vreeland Aldrich currency
bill in the senate, on March 27 last,
which provided for the guaranteeing
of deposits in national banks. In sub.
stance this amendment provided:
That one-half of all taxes paid on
national bank currency by banking as
sociations be set apart in the United
States treasury as depositors' fund,
to be used in paying all depositors, ex-
cept the United States, upon the in
solvency of any bank; that said de-
positors' fund shall not exceed $780,
100000.
On the Introduction of the amend
ment Senator Nelson argued in sup,
port of the measure that a money
panic was distinguishable from a
money stringency. That a money
stringency arises because of a tenn
porary scarcity of currency, while a
panic, such as that of the fall of 1907,
always originates in run by deposit
ors as to the safety of their funds In
1907 the banks, to protect themselves,
practically closed their DOORS In fact
they suspended cash payments to all
practical purposes.
This condition was brought about,
not because of a stringency of curren-
cy, but because the public became
panic stricken in its disbelief in the
soundness Of the banks. A large
amount of the capital and surplus of
national banks is held in the shape of
longtime securities-bonds of various
kinds and approved stocks-so that
their available money for loaning pur-
poses is actually the money of the de-
positors.
When a panic sets in and a run
starts on the bank money becomes
scarce because depositors withdraw
their money, and also because people
who heretofore were content to get
their pay in drafts and checks now
demand cash. Thus the supply In
cash is depleted, while the demand
for actual money increases.
The banks are therefore compelled
to call in loans from customers and
must refuse further accommodation. All
this is caused on account of a panic
stricken public.
Continuing, Mr.. Nelson said: :Now
if you can by legislation, as is here
propos ed, provide a fund for the pro
lection of depositors, so that they will
feel easy and confident and will not
become panic stricken. you to large
extent cure such evils as we had last
fall. To my mind those evils arose
from two sources. First, from the
want of confidence on the part of the
dCpositors. In consequence of that
there was run on the banks, and in
the next place because the banks
Themselves were even more cowardly
than the depositors; because the big
banks throughout the country practi.
cally suspended payment, that is the
one way in which they stopped the
panic. The amendment does
not levy any additional burden upon
the banks. 1t does not require them
to pay an additional tax. 1t proposes
Co take one-half of the tax they now
Gay and set it apart as fund for the
benefit of the depositors. The federal
government was authorized to pre-
scribe rules for the regulation of one
as well as for the other; that the gov.
ernment demanded security for it's
note issues and could as we'll provide
for the security of the depositor. That
when national banks are organized and
incorporated they are. held out to the
public as species of governmental
agencies. In this way they acquire
regulations 70 With hoy are scarcely
entitled. That The Crdin .ry small de-
positor, the laborins nan and the
farmer. are often not able to distin-
guish between the good bank and the
bad bank. A bank is a bank to him.
1t is sufficient for him to know that 1t
is a government institution, organized
under federal law, and in it he depos-
| Its his money.
You may think l am cranky upon
this subject, but in my younger days
had little experience the memory
of which has been with me ever since.
When / was a law student in the city
of Madison, Wis, in 1867, was very
poor, but / finally succeeded in &C
cumulating the great fund of $500. 1t
was practically all of my possessions.
| There was in the city of Madison a
bank known as the Farmers bank.
did not know the difference; l sup
| posed one bank was as good as an
other. deposited my little money in
that bank In a very short time the
bank failed"
| Mr. Nelson argued further that the
| establishment of the fund of $20,000,-
t0C in question would create conf
dence in the minds of depositors and
would in this way eliminate panics
and runs upon banking institutions.
| AS was stated in this article hereto
| fore the people of Minnesota have the
utmost confidence in the soundness of
Senator Nelson's Judgment on all ques-
tions of financial nature. 1t is ques-
tionable, therefore, if Judge Taft, in
his speeches throughout the state con-
verted many of his hearers to the be
lief that the man who runs the bank
is entitled to unlimited confidence.
This is question which must be
settled by the voters of the country.
Senator Nelson Is authority for the
4 statement that the bankers are as
much subject to control by the people
I as are the railroads. In our opinion