Evening star. [volume] (Washington, D.C.) 1854-1972, 1908-03-12
PUNCTURES HIS PLAN
EX-GOV. HERRICK REPLIES TO
BRYAN'S BANK SCHEME.

COLUMBUS, Ohio. March 12.-Former
Gov. Myron T. Herrick of Cleveland to-
day addressed a joint session of the Ohio
legislature in answer to the speech which
William j. Bryan made some time ago
before the legislature on the financial
question.
Declaring that guaranteeing bank de-
posits is socialistic in that it weakens the
incentive for individual initiative along
proper lines; that it is an unconstitutional
proposition and unjust, former Gov. My
ron 7. Herrick appealed to his hearers not
to jeopardise the best interests of the
state of Ohio by the passage of such a
law
The regular recurrence of panics is a
psychological phenomenon,c said the
speaker. Men capitalize their hope. They
are swept along on wave of optimism.
ever discounting the future: credit be-
comes more and more expanded. 1t Is
when the strain becomes too great that
the weakest link in the chain breaks and
panics and disaster ensue. If all bank de-
posits were guaranteed by the govern
ment. would that have prevented the ais
aster? No. 1t would have exaggerated the
confusion and loss many fold
would no more prevent a panic than fire
insurance a conf1agration. One of the
striking revelations of the recent panic
in New York was the fact that one man
by buying control of one bank, using the
stock thus acquired as collateral for loan
at another bank and with the proceeds
of the loan securing control of the second
bank, etc, gathered together under MS
single direction string of banks whose
resources he used to further his OWE un-
wise. If not improper scheme.
What would have prevented this man
from extending his system indefinitely,
provided depositors. feeling secure by
reason of the governments guarantee
had not called him to account by the
withdrawal of their deposits.
Guarantee of Bank Deposits.
"Mr. Bryan says that the guarantee OF
bank deposits would revive the business
Of the country. do not agree with him.
, The period Of depression following panic
is a natural economic phenomenon be-
| yond the power of legislation to alter. l
agree with Mr.. Bryan that the situation
is not what it was in 1888 Then the con-
| slant agitation for free coinage Of silver
drove capital from the country and
| caused violent liquidation. At that time
Mr.. Bryan advocated free coinage OF
silver at Is to l as a panacea for all
| financial ills with the same insistency
and certainty that he now contends for
| the guarantee of bank deposits.
Bank failures are due to three causes.
First, acts criminal in intent and in law;
second, acts morally wrong but within
the law; third. poor judgment. Wha1
would be the effect of a law guaranteeing
bank deposits on each of these divisions
Longer life for the institution and greater
loss to the community when the end final
ly came. Mr.. Bryan says the guarantee
of bank deposits would make all the
banks equally good. I contend that such
law would make all the banks equally
bad. Is there any better reason why a
depositor should be guaranteed against
the failure of a bank in which he has
placed his funds than that the farmer
should be insured against failure Of his
crop or the manufacturer against his
failure to dispose of the output of his
factory? So far as / can learn, the plan
of guaranteeing deposits has had but a
single trial The safety fund law passed
by the New York state legislature in 1879
proved an absolute failure"