Gilpin observer., 1908-10-22


The important difference. however,
would be that dcpositors would not be
subject to the annoying. often disas-
trous. delays in getting their money
which now they experience when
banks fail.
But. that fewer failures would oc-
cur surely would be one of the re-
suits of such law. Everyone knows
that many runs are precpitated on
banks which are absolutely sound.
Many man. faithful. safe, conserva-
tive. conscientious in caring for the
money of his depostors, has suffered
runs caused by some rumor stared
through malice. Many an honest
banker has had his heart broken By
senSeless runs. and has groaned in
spirit as he realized that gross inius-
tice has been done as reward for ear
nest and able keeping of the trust re-
posed in him by his depositors.
The Barring Failure.
When dozen years ago, Barring
Brothers. of London, suspended, it was
due to that very espionage by other
bankers to which Mr.. Gage refers.
The Barings had embarked in many
South American enterprises, some of
which were manifestly unsafe.
The governors of the Bank of Eng
land, sensing the danger refused to
accept securities backed by them as
basis for the issuance of bank notes
under the custom of that country; that
action never has been adversely criti-
cized in any country, although it has
been discussed ever since the world
over.
Modern business is conducted on the
basis for the issuance of bank notes
tie actual money passes from hand to
hand.
Modern System of Credits.
You go to your bank with bundle
of checks and drafts and deposit them
to your credit. Against that account
thus opened. you draw checks. They
pass into the world of business. are
accepted at face value, and circu-
late virtually as does gold, silver and
currency. If you pay your bills in
checks. often you pass through weeks
at time when you have only trife
Of loose change in your pocket for
street car fare and the small things
you need from day to day costing too
little to bother to draw a check.
"A check cancelled is voucher"
has become maxim in the business
world.
Complications of the System.
This complexities business and forces
all banks to associate themselves in
clearing houses, and probably the pub
lie would be amazed were they to
know at times how sharply the clear
ing house committee looks into meth
DDS employed by its members.
In the panic that began last October,
funds were carried from bank to bank,
taken ostentatiously through the front
doors, that derositors might know that
other banks believed in the soundness
of the institution which had been at
tackled by Il run, and performed al
most every essential of the guarantee
system.
Why?
Simply because the modern business
system is so complicated and so little
bank must know that the others are
properly Safeguarding themselves and
also that they are permitting the car
rying of accounts by depositors whose
paper may always be depended ON as
worth face value.
Beneath the Surface.
SO beneath the surface, one could
witness the clearing house associa-
tions examining collateral, securities
and assets. and often serving notice
on given bank that the association
will require some change in methods
on penalty of refusal longer to clear
for that bank.
Banks Out OF the Association.
How about banks not in the associa-
ton? Many perfectly sound banks are
not directly in the clearing house.
They clear through another bank
which does belong.
Precisely the same rule applies to
them, for, when need arises, the asso-
citation serves notice on the memher.
bank which clears for the non-asso-
citation bank as to what will have to
be done: and 1t is done promptly, too,
in every instance.
Bank Book Should BE Worth Face.
The essence of the guarantee plan is
that bank book should be worth its
face always. An entry In a pass book
should not constitute tde assumption
of n risk by the depositor and tn Civ
ing of wide latitude to the banker.
Such entry should be recognized rs
Just as actual an asset as n bank note
Also, proper arrangements must lie
made for the continued espionage of
banks by other banks.
Lastly, and quite as important,
banking laws must be enforced: over
cCrtiticltiOu must be stoned. loanInp