The Detroit times., 1908-08-28


the deposits Of each. the STOCKHOLDERS
viii insist upon the enactment OF law
making IL a criminal offense for bank
Official 10 loan more than the prescribed
amount TO one Individual
- present we have "A law prohibit
ing the loanlug Of more than tenth
of the capital and surplus to one person
or corporation. bat the law Is only di-
reCtory OF course, the comptroller can
suspend bank If IL violates the law.
but the law is not enforC ed. because
the enforcement Of such law would
throw tho punishment upon innocent
stockholders and disturb the business
OF the city OF town Ina which the bank
is located
The law should make It a criminal
offcnse Ia loan more than the pre-
scribed amount 70 one person and we
would probably be able 10 secure the
passage of law prohibiting market
speculation by bank officials.
The Oklqhopa plan Is better. bank
recently failed In Oklahoma; within ~
minutes after the notice OF suspension
the officer I'm charge had authority To
pay all depositors, and then the bank
Ing board proceeded To collect the as
sets uf the bank and TO prosecute the
officials criminally When the business
was closed up. the stockholders passed
Z resolution tfraUtyfrg ttrr- stutr- bee. -
for it's prompt action. the action OF the
board being a protection to the stock
holders. well as TO the sdepositors
and to the public generally.
An objection Answered.
IN objection Is sometimes made TO
the guaranty law that new bank
would start up across the street. ana,
being able TO promise it's depositors
absolute security through the guaranty
law, could draw the deposits away
-fEnn- CNnSGcAa1iXelX- managed banks by
offering higher rate OF interest than
the latter could pay. This objection ~
urged as II IL were an unanswerable
one. But let US see how easily IL can
be met Since the law makes all or
LII ftg...a N
each bank the law should prohibit any
abuse OF this security by any bank and
I'm Oklahoma the banking board has
already fixed the rate OF interest that
can be paid To depositors. According
10 the rules Of the banking board, no
bank is permitted to pay more than 8
per cent on short time deposits or more
than per cent on time deposits run
ming for six months or more.
1T has also been urged as an ob1ec-
ton that under the guaranty system a
big bank would have no advantage over
a little bank Even. III this argument
were sound. It could not weigh against
the advantages of the system for
banks are made for the people, not the
peonle for the banks. While there are
adv cntages in having big banks the
advantages are not sufficient 10 justify
me JE0pardiZtng or the deposftor or or
the business interests OF community.
Bat matter af fact the hig bank
would still have several advantages
over the small one. In the first place,
II could make larger loans than the
small hank.-For instance, bank with
900, 600 capital and surplus could as
at present. loan 100000 20 one person,
while a bank with 100000 capital and
surplus could only loan $40. 600 to one
person This advantage would in it.
self draw 10 the large bank the large
deposits ana the men doing business
upon large scale for deposits follow
accommodations.
An Aid To business.
ft.l N a
advantage In depositins with big
bank 1t is worth something TO be able
to refer To q big bank when ones imam
Cial standing IL being investigated and
worth still more To have the advice OF
q man of large business experience
when business enterprises are being
considered
Besides these there is a social advap-
tagc I'm being on good terms with the
men who are prominent In the banking
world. surely the big banks prestige
guaranty system: 1t should not be-
grudgt the smaller banks the advan-
tage which the guaranty OF deposits
viii bring TO them.
| cannot pass upon this subject with
out referring TO the fact that the big
bank needs the guaranty well as the
little one, for big banks fail as well as
small banks, and the bigger the bank
munity when IL fails. No bank is so
big as TO he absolutely beyond danger.
and community needs protection
against the big banks failure even
more than against the failure OF the
small bank
To Justify law guaranteeing deposit
tors, II is not necessary TO show that
the advantage TO the bankers would
amount TO more than the YAK. The
examination OF the banks would con-
tinue to be made at the expense OF the
banks even If IL were certain that the
examination was of no pecuniary ad
vantage to the banks. The law would
continue to require "A certain amount OF
reserve to be kept on hand, even IL IL
no pecunfary gain TO the bank: and 30
the banks ought to be compelled to i'm
sure their dopositors against loss, even
IL II could not be shown that such In
surance would bring compensating
advantage Co the bank. The bank char
ter has a value; IL II were not valuable
the bank would not be organized. The
bank charter is Il gift from the people
through the law. and the people who
authorize the establishment OF a bank
have "A right 70 demand, Ia return, that
the bank shall Keep the pledge which
II gives wien IL invites deposits. ana
make good it's promises OF security TO
those who deal with II.
Gain More From Law.
But as matter of fact. the banks
Will. as rule, gain more from the law
than they VIII lose by the tax imposed
by the law The experience or the Okla
homa banks shows this. The interest
collected upon the increased deposits
will far more than pay the losses occa o.
stoned rs insolvency. But two banks
have failed and the assets have In both
eases been sufficient to reimburse the
fund
Then. TOO. the banks must remember
that tho question ~ not merely whether
dcpOsit0rs shall be- made secure. but
whether the security shall be given 10y
the banks themselves or by. the gov
ernmont through a postal savings bank
The refusal OF the banks to permit
the passa 90 Of a law granting security
TO dtpoaitors is responsible for the
growth col the sentiment In favor OF tho
government sayings bank. and the sen
timent VIII continue to grow unless
sompthing is dozen To- satisfy the de-
mands OF tho people upon this subject
A. 10 Postal savings banks.
The Republican party proposes the
establishment of a postal savings bank
system. tho Democratic party prefers
the guaranteed bank because II Is bet
ter for the depositors and better FOR the
banker gives the dopOsitor the Sc
Curity which hr needs and yet leaves
the banking business in the hands OF
the banks But the Democratic plaet.
7 FORM deCIiTcB Tor postal savings bank
" the guaranteed bank cannot be se-
4 cured, and tu November more than 90
per cent OF thc voters VIII bv their bal
lots demand either the guaranteed bank
or the postal savings bank. Can the
financiefs prevent the Carrying out OF
ihis demand
flights Of Uepositors.
7 would rather see the banks attend
10 the hauking buslness than 10 have il
transferred 90 thr gOVtfHWeUr, nm Dc
cause prefer 10 have the banking
lr-r-frrr-~--rf-r-r--t i1rr-ttrar
by the government. urge the guaranty
OF deposits As the easiest solution OF
our difiiculties.
There are only 10000 banks, while
there are 10000. 000 depositors.. and
40 not hesitate To- declare hat in a con.
/ hot betwccH tnc mo ne depositors
have prior claim to cOnsidefa lions