Charlevoix county herald., 1908-10-10
Shall Banks Be Made Liable for
One Another's Debtsp
Recognized Authority on Financial
Questions Discusses Practical
Bearings of Proposed Guar
antee Plan.
(By George f. Roberts, former Di'
rector of the Mint

Iue pTOpOSdi 10 Ttquiic thc p"hN" va
the country to guarantee each others
deposits owes its present strength to
the financial disturbance Of last fall.
u is urged as a means Of preventing
panics, and there is no disagreement
about the desirability Of accomplish
ing that purpose Most Of us agree
that a repetition Of the conditions
which existed last fall should be made
impossible, but this is by no means the
only way to do it, or the best way.
For years the advocates Of compre-
hensive currency reform have pointed
out that with $14,OOO,OOO,O00 Of bank
deposits in the country and only about
1900, 600, 900 of money all told in the
country, both in the banks and out,
there should be some method provided
by which. ON the basis of good assets,
the supply Of lawful currency could be
readily increased to meet exceptional
demands, whether such demands were
tivity or to alarm among depositors.
Their foresight and arguments did not
avail, but they are hardly to be swept
off their feet now by impatient zeal for
this new, and, as they regard it, ill
considered scheme. They stand for a
complete and scientific treatment Of
the subject
The guaranty OF deposits is crude
and imperfect remedy at best. 1t does
not recognize or attempt to cure the
defects in our banking and currency
systems, but aims only at persuading
depositors not to draw their deposits.
The losses to depositors by the failure
Of national banks has become an insig-
nificant percentage, and Is growing less
every year, as n result of natural, evO-
lutionary progress in banking. The
standards are being constantly raised,
and the efficiency of official inspection
and supervision constantly improved
The true line of development is not by
any revolutionary policy, but by hold
ing individual bankers to yet
stricter account, and at the same time
enabling every properly conducted
bank to readily obtain n supply of cur
rency to meet all demands upon it.
The fundamental weakness in our
currency system is in the fact that it is
not readily responsive to the needs Of
the country. The legitimate demand
for money varies from year to year,
| and from season to season In the same
year 1t Is a familiar fact that there
is a great deal more business to be
handled from September 1st to Deem
Der 31st each year than in any other
four months Of the year, but there Is
no more money in the country unless
gold is imported for the purpose.
Would Lead to Reckless Banking.
AS remedial measure the guaranty
OF bank deposits is not only inadequa tie,
! but 1t is worse than inadequate, for 1t
| proposes to overturn the principle of
individual responsibility by means Of
which the banking business has been
raised to its present high standards.
and upon which all individual and So
cial progress is based.
The proposal contemplates that the
public shall be relieved entirely from
the exercise Of judgment and dis
elimination In the choice Of banks, and
while 1t is highly desirable that all
banks shall be made safe, to the end
that even the most ignorant and con-
filling may be protected. 1t is still true
that an alert public opinion has great
influence in maintaining proper bank
ing standards. We cannot afford to do
without that influence.
Under present conditions the invest
| ments, the personal habits, the general
character and abilities of the banker
are under the constant scrutiny Of the
community. and matter of public in
terest Notwithstanding occasional in
stances In which the public has been
deceived, 1t may be stated as a general
proposition that an unblemished char
acter and a reputation for good bust
ness ability and conservative Judgment
have been necessary to success In the
oyer the individual who is to receive,
and invest and be responsible for its
money with some discrimination, and
the elimination of the unfit by the
scrutiny and composite judgment Of tie
community Is factor of the highest
value In maintaining the standards Of
the banking business. 1t is, however,
q factor entirely overlooked by the adj
yocates Of this scheme.
They calculate the insignificant per-
centage of loss TO total deposits under
present conditions. and assume that no
greater losses would occur after char
acter ceased TO be a factor In the bust
ness, and all deposits were given blind
ly TO whoever would bid highest for
them. To the objection that this elm
ination of character as a factor I'm the
ocouisition of deDosits must tend IN