The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1908-08-28

their health. All insurance is open
| to the same objection, and yet insur-
ance OF all forms is growing. and the
insurance of depositors is growing in
popularity more rapidly than any 9TH
er form of insurance-and, 1 may
add, it yields the largest return on the
investment
Mr.. Taft complains that mo one
can foresee the burden which under
this system would be imposed upon
the sound and conservative bankers
of the country by this obligation to
make good the losses caused by the
reckless, speculative and dishonest
men," etc. We have the past to guide
the loss will be less in the future than
in the past, because when banks be-
come mutually interested in each 9TH
er's deposits they will be sufficiently
interested in each other to favor bet
ter regulation and greater restrictions.
What has Mr.. Taft done to protect
depositors from recklessness and
speculation? While he refuses to pro-
tect depositors, he praises the Aldrich-
Vreeland law, which invites specula-
ton and stock jobbing. In declaring
that the system proposed by the Dem
ocrats would remove all safeguards
against recklessness in banking. Mr..
Taft betrays an ignorance OF the sub
ject, for the plan does not propose the
removal of any safeguards In fact,
it contemplates stricter regulations or
the banks, and Oklahoma has already
made the banking regulations stricter.
He declares that 1.-The only benefit
would accrue to the speculator. who
would be delighted to enter the bank
ing business when 1t was certain that
he could enjoy any profit that would
accrue, while the risk would have to
be assumed by his honest and hard
working fellow" The present banking
law requires that a certain amount OF
capital shall be invested in the bust
ness, and that law would still stand.
To enter the banking business, there
fore, a man would either nave to have
the capital himself or secure the con-
fidence Of men who had the capital.
And this capital, together with the 100
that the stockholders would not inten-
tionally select careless officials Why
would "speculator" be delighted to
enter the banking business under the
guaranty system? He is not relieved
from pecuniary obligation. nor Is he
relieved from criminal liability. He
would have nothing to gain by care
lessness, nor would the stockholders
have anything to gain by Indifference.
Loans to Bank Omcials.
The chief cause Of bank failures is
the making of excessive loans to d.
rectors or officials of the bank. This
is the fruitful cause of disaster and 1t
has been impossible to secure legisia-
ton protecting banks from their own
officials and directors. Why? Because
there has been no mutual respon-
sibility. When all banks become lia-
Bile for the deposits of each, the stock
holders will insist upon the enactment
of law making it a criminal offense
for a bank official to loan more than
the prescribed amount to one indi-
vidual. At present we have a law pro-
hibiting the Ioaning of more than one
tenth Of the capital and surplus to one
person or corporation, but the law is
only directory. OF course, the comp
troller can suspend a bank IL 1t vio-
lates the law, but the law Is not en-
such a law would throw the punish
ment upon innocent stockholders and
upon the community. since the suspen-
sion of a bank inflicts great loss upon
stockholders and disturbs the business
of the city or town in which the bank
is located
The law should make It criminal
offense to loan more than the pre-
scribed amount to one person and we
would probably be able to secure the
passage of a law prohibiting market
peculation by bank officials.
The Oklahoma plan is better. A bank
recently failed In Oklahoma; within 4S
minutes after the notice of suspension
the officer in charge had authority to
pay all depositors, and then the bank
ing board proceeded to collect the as
sets of the bank and to prosecute the
officials criminally. When the business
was closed up, the stockholders passed
a resolution thanking the state board
for It's prompt action. the action of the
board being protection to the stock
holders. as well as to the depositors
and to the public generally.
Compare this failure under the guar
anty system with a failure where there
is no guaranty. In Oklahoma the bank
commissioner telephoned the farmers
to come in and get their money, and
the answer was, II am busy today with
my crop; I will be in in a day or two"
In Cleveland, Ohio. a bank failed
announced Twelve hundred Infatuated
Italians stormed the closed doors of
the busted banking house of Costan
Liopea on Orange street. today. The
police drove the crowd back"
Answers the Chief Objection.
An objection is sometimes made to
the guaranty law that a new bank
would start up across the street." and
being able to promise its depositors
absolute security through the guaranty
law, could draw the deposits away
from conservatively managed banks by
offering higher rate of interest than
the latter could pay. This objection is
urged as If it were an unanswerable
one. But let us see how easily 1t can
be met. Since the law makes all of the
banks liable for the obligations of each
bank, the law should prohibit any
abuse of this security by any bank,
and in Oklahoma the banking board
has already fixed the rate Of interest
that can be paid to depositors. Accord
ing to the rules of the banking board,
no bank is permitted to pay more than
per cent on short time deposits or
more than per cent on time deposits
running for six months or more.
1t has also been urged as an ob1ec-
ticn that under the guaranty system a
big bank would have no advantage over
little bank. Even If this argument
were sound, it could not weigh against
the advantages of the system, for banks
are made for the people, not the peo-