Omaha daily bee., 1908-10-29
Delusion of Deposits Guaranty

only be accomplished by ownership or
consolidation.
No system OF inspection or examination
by the government can be perfect. Ex-
animation is a mere form, wnen applied
to honest and we'll managed banks-such
banks do not need watching, but a very
different proposition is presented when It
has to do with speculative and dishonest
ones. In the packing houses the govern
ment maintains inspectors, who examine
every carcass to see that 1t Is sound and
not diseased.
A government inspector may be put into
every bank to approve every transaction
and pass upon every piece of paper dis
counted and yet he may fail to detect
everything that may be going on, and he
could not insure the goodness of the paper.
Bank officers themselves are frequently
misled and deceived and It is not conceiv-
able that a government Inspector could do
better than experienced bankers.
Besides this, human nature has been
shown by experience TO be sadly weak
when exposed to temptation; some men
will resist. but others cannot, and who
is to watch the inspector?
The greatest help for sound and honest
banking comes from the depositors them
selves.
1t is their decision which draws the line
between safe and reliable men and those
who are unsafe and untrustworthy, and
keep the latter out of the business.
The experience of the past in the ma
tional system. where supervision, Joined
with the deposltors selection Of banks, has
produced such satisfactory results, proves
the efficiency of the present arrangement.
We may expect stlll better results in the
future.
Trust In a guaranty fund would take
from honest and conservative banking the
strength 1t now receives from the trust
OF deposltors in character and capital and
the ratio or losses must then be based
upon an entirely different situation.
But aside from all this is the fact thai
the guaranty fund would be a delusion anC
a snare for trusting and unwary depos.
itors- These for whom the plan is especi
ally devised would in the end be the great.
est sufferers.
One theory Of the guarantee idea IL
wholly based upon the belief that all banks
would be forced to submit to the law anC
, would contribute their quota to the fund
no matter what the emergency might be
and that II the first assessment was no.
sufficient to meet the demand upon It
others would follow until It was made suf
ficient.
|, In a time OF financial stress and panic
such as we have had in the past and may
= expect in the future, many banks would
refuse to pay the tax and would avail
such action as the governments might think
best 10 take. and a decision in which by
' reason Of the NUMBER embraced might b,
formidable. Others might elect to go into
[ liquidation.
No sound and solvent Institution woul,
D be willing to have its securities and tn,
4 Interests Of its stockholders and deposltori
4 imperiled by the claims which might b,
made upon them under the taxing poweI
Of the government.
You may bring a horse to water. but yol
cannot always make him drink.
II Is asserted. however, that emerRencie,
cannot occur under this system. That pan
les viii cease because deposltors will hav,
confidence In the security OF the guarant,
fund and will not get frightened.
II will be noticed that those who max
these assertions have had little to do will
financial affairs-that in what financia
matters they nave been concerned the,
have done nothing TO constitute them wis
augers and prophets. to say nothing of In
falible guides. II such confidence had ex
istence Il would be misplaced and this woul
be soon demonstrated
Another theory OF the guarantee idea /
that the fund would be available for tn
immediate payment Of depositors whe
banks were closed.
To do this It would be necessary TO kee
intact the money In the fund. Just as IN
reserve for national bank notes is no,
3 maintained IN the national treasury.
Nv HfNrhCoCE IN his urrTrnnarf as-g-t-
that Il would be perfectly safe in tn