The Detroit times., 1908-04-04
DETROIT u BANKERS
KNOCK OKLAHOMA
SYSTEM
SAY, PLAN OF STATE cuARAn-
TEEiNo DEPOSITS is UNFAIR
AND WOULD TEND TOWARD UN-
WISE BANKING METHODS.


with some interest the Oklahoma plan
Of bank insurance. This measure bids
fair to attract as much attention as
any OF the radical laws adopted BIZ
| the new state.
| II Is probable that the discussion
will take form In a dozen states In at
tempts to pass similar banking laws.
Indications are that the bankers OF
this city would oppose such action by
the lawmakers In Lansing.
The Oklahoma plan In brief consists
| of these IDEAS
The state absolutely guarantees the
depositors in every bank which Is in
corporated or acts under the state
laws.
For this protective fund, the state
levies an assessment OF one per cent
OF the average. daily deposits. AS
any demand Is made on this fund, 1t
Ii replenished by further assessment.
The banks are forbidden to pay more
than three per cent ON deposits or
to receive more than ten times the
amount of their capftaf IN deposits.
In other respects the banking In
spection Is similar TO that OF other
states.
Leland Opposes Plan.
Col. Frank B. Leland, president OF
the Detroit United bank. has recently
been in Oklahoma and has had an
opportunity to look into the workings
of the new system, which he found
to be opposed by the officers of the
strong national banks Here Is what
Mr.. Leland has to say Of the system:
81 do not believe the so-called Okla
homa plan Of guaranteeing bank de-
posits Is either practicable or fair.
1t Is not practicable because, when
a guaranty OF deposits is most likely
to be needed, that is, in times OF
stringency, 1t is also most likely to
be found wanting and may be very
dangerous thing for the whole finan-
cial fabric of community In none
tary crisis. The Oklahoma law re-
quires each bank to pay into a guar
anty fund one per cent OF Its average
deposits for the proceeding year.
Should this fu | OF one per cent be
exhausted, another levy of one per
cent Is made and these levies must
be continued to any extent necessary
TO make up deficiencies to depositors
In banks which have failed. A run on
one bank always precipitates more or
less uneasiness In the depositors OF
other banks In the same community,
and sudden demand OF bank deposit
tors for their money might very soon
exhaust the available funds of every
one OF the guaranteeing banks. even
though this list should INCLUDE every
bank In the state.
Scheme Isn't Fair.
1T is not fair, because the plan
from every necessity strengthens the
weaker banks at the expense of the
stronger. Ii is like a plan of life
insurance which would require an
able-bodied man of 80 to pay the same
rate required Of man OF go. What
mean by this illustration is that all
banks are required to pay into the guar
anty fund an amount proportioned ac-
cording to their deposits. A bank
with paid up capital OF $4,000. and
deposits of $3.50, 900, would be required
TO pay no more into the guaranty fund
for the protection of its depositors
than would bank with paid UP
capital of $250,000 and having the
same amount of deposits. The great
er investment of capital OF the latter
bank and its consequent greater
strength do not count at all In Its
rate OF insurance. This seems to me
a very unfair business proposition.
"The statement has been made that
the Oklahoma banks doing business
under this law have received large
deposits from neighboring states be-
cause OF this guaranty. 1t is fact that
the combined deposits OF the banks
In Oklahoma which are operating un-
der this law have increased several
hundred thousand dollars since the
law went into effect. However. no
proof has been presented that these
Oklahoma banks have drawn more
deposits from neighboring states than
these states have drawn fFena Okla
bona. Bankers in Oklahoma not oper-
ating under this law and many OF
the strongest national banks doing
business In that state have declined
to 20 under It's operation---assert that
their deposits have increased as rap
idly as those of the banks operating
under this law. In fact, deposits In
banks throughout the country very
probably have. increased In ratio
equally as great as that OF the Okla.
homa banks operating under the law
guaranteeing deposits"
More Opposition.
"The Oklahoma plan has not found
favor here because Ii Is abhorfent to
the ideas Of Detroit bankers" said
President J. III. Johnson, of the Pen
insular Saving bank. THE character
of bank IL what 1t depends upon.
That Is the strongest guarantee to the
public. II Is aimed to attract great
amount Of deposits These must be
probably disposed Of by the bank.
When certain line OF conservative
banking Is passed In seeking profit
able investment. there is danger. This
plan, which seeks to put banks on
level without regard to the-char-
acter they have built up by good man.
agement. Is liable to lead to Insecure
methods"