The state herald., 1908-10-16
GUARANTEE OF DEPOSITS
Bryan's Scheme Does Not Meet De.
mands.
Inherent Weakness of the Demo-
cratic Plan Pointed Out.
(From Gov. Hughes Youngstown
SPECIFY

'The plan proposed by the Demo-
catic platform to provide for a guar
antee Of bank deposits is open to seri-
Gus objection. Mr.. Taft promptly
pointed out Its weakness, and Mr..
Bryan, despite his skill. has been un-
able effectively to answer his criticisms.
The plan proposes to make the honest
and prudent banks meet losses for
which they are in no way responsible.
Mr.. Bryan replies that all banking re-
strlctions operate to curtail the free
dom of the prudent because Of the
dangers arising from the abuses Of
others. But 1t is one thing to put n
business under needed restrictions op-
Grating impartlally and quite another
to compel banks TO make good specific
losses not attributable in any way to
their neglect or default.
''lf this plan is a good one for the
banks, why should it not be applied to
Insurance companies? They are
chartered by the state and are subject
to Its close supervision. Life insur-
ance, for example, is one of the es-
sential safeguards of the home, and the
interests Of the policyholders cannot be
too surely protected. But what would
be thought of n proposition to compel
the well managed and conservative life
Insurance company to make good the
losses which would be sustained by those
insured In other companies that be-
come insolvent? This would largely
deprive the former OF the Just benefit
OF its own conservatism and well earn
ed reputation and make easy the efforts
OF the inscriptions.
The business of banking and insur-
ance must be transacted under strict
supervision; but those institutions
which operate fairly and prudently
within the law should not suffer either
from laxity Of governmental supervls-
Ion with regard to others or from I'm
prudences and frauds with which they
have no concern.
"Mr. Bryan tries in vain to meet the
criticisms that the plan proposed
would encourage reckless and dishon-
est men. who would seek deposits on
the faith Of such an assurance. II
must not be forgotten that they do not
conduct their enterprises with the ex-
pectation OF failure, nor do they con.
template loss to the depositors; but
deposits are the slnews Of banking en-
terprise. and to the extent that such
guarantee would facilitate them In OBJ
tanning deposits the opportunity for the
play Of illegitimate purposes and the
temptation to indulge such purposes
would obviously be increased. Mr..
Bryan asks would 1t not be worth
something to the stockholder In pea ee
OF mind to know that the ma aximun OF
his loss would be the value OF his stock
and the 100 per cent liability. and that
no deposition could lose nnythingY' II
may be supposed that there would be-
an added peace OF mind" on the part
OF managing officials And this dImlnu.
tion OF anxiety and of the sense Of
moral responsibility with regard to de.
poslts could not full TO have Its effect
upon the prudent conduct OF the busl-
ness and place servercr strain upon
governmental supervision. The condl.
tions under such n plan would newt
ably tend to Increase banking losses.
however they might be made up. II
may be added that the guarantee fund
II II were established on n scale suiilc-
iently large to insure the required pro.
lection. would furnish difficulties both
with regard to Its investment and Its
availability In emergencies.
This proposed plan does not meet
tho demand for nm elastic currency
system through which the monetary
wants OF the country may be supplied.
To supply such system is an urgent
necessity, ana its provision would obvi.
ate many OF tho dangers which have
hitherto existed; but to make banks
pay for losses they have not caused Is
to depart from proper principles and
TO encourage imDroper prncfires"