The Irish standard., 1908-10-17

the prevalent belief that government
al regulation and control is more to be
sought than governmental ownership
and operation"
Briefly stated the plan is this: The
federal government shall levy small
tax on all national banks in propor-
tion to their deposits. This fund shall
be placed at the disposal of the comp
troller of the treasury. and upon the
failure of any bank shall be used by
him to pay off all depositors in full.
Efforts will then be made and every
legal process used for the purpose of
realizing upon the assets of the defunct
bank and collecting from those who
are liable. for the reimbursement of
the fund. This same fund would also
provide for a strict system of exami-
nation and inspection with view to
lessening. il possible. the average num-
ber of failures. Estimates made by
those who have given the plan careful
average losses from failures in past
years. indicate that a fund sufficient
for these purposes could be raised by
the small tax of one-tenth of one per
cent of the average deposit per annum
in the national banks. This embotlies
the idea of federal guarantee of ma
tional bank deposits. 1t is clear. how
ever. that If such action were once
taken with reference to national banks
establish a similar system of guarantee.
for deposits in banks operating under
a state charter. The alternative would
he the annililation of state banks.
This plan recommends itself by sew
eral advantages which render it far
more feasible than the scheme Of the
Postal Savings Bank. If the people
were absolutely secure. as they would
be under governmental guarantee
bank failures resultant upon sudden
withdrawals or run on the bank,
would be no longer possible The sud
den withdrawal of money creates a
scarcity, and prices consequently soal
The return of confidence, which is
merely the inevitable reaction. rem
ders money less scarce and prices
drop. This is one of the reasons for
fluctuating prices. 1t is obvious, there
fore, that any system which, as this
apparently does. prevents the. sudden
Withdrawals and reaction, would tend
TO introduce an element of stability
into business which would benefit al
most every class of industry. A paral-
ysis of business Is occasioned ordinar-
lily by withdrawal Of money from activ-
ity. II also is. directly or Indirectly,
the result of lack of confidence. The
firm establishment of confidence,
therefore. eliminates this possibility
Thus while the depositor's money
would be safe, the banker would feel
more secure in loaning money on rea.
sonable security and for a longer pe-
riod, in the knowledge that no unfore-
seen condition Of public. confidence
would demand It's sudden withdrawal.
The result would be a direct benefit
TO the farmer who must raise his
crops, to the merchant who must Dor.
row to increase or replenish his stock,
to the producer who must buy his r4w
material. etc, and. Indirectly, to the
toiler who would. in the general pros
perity and diminution of the "army of
unemployed" find himself with more
steady employment and higher wages.
Above all, the plan possesses this de.
cided advantage over the Postal Saw
ings Bank-that the money remains in
the locality where deposited, favors
the local industry and farm, and
avoids the tendency to drift to the al
ready too-congested money centers.
This plan, however. is not without
it's critics. and any discussion of it
would be most incomplete without
some reference to the objections urged
against it by Mr.. James Forgan. Mr..
Forgan is a member of the National
Bankers association. He speaks there.
fore with considerable authority, when
he states that the plan Is unfair to the
long-established. conservative and
honest bank. in so far as 1t clothes the
smaller and less conservative bank
with the same credit, and would nat
urally tend to increase the deposits. in
smaller banks at the expense of the
larger. In word. by destroying the
necessity for discrimination. Mr.. For
gan believes the, larger banks would
suffer a great wrong. His objection
is not, however. we'll taken. and Mr.
Bryan. in an answer to him. states
that laws are made for the people not
for the bankers, and maintains that if
the advantage that the large bank
possesses over the smaller bank de-