The Paducah evening sun. [volume] (Paducah, Ky.) 1906-1929, 1908-09-21
CIRCULATION, ONLY
GUARDED BY FUND
Trial in n. Y. Shows Deposits
Cannot be Included in Scheme.
Raymond Says Bryan's Plan WIN
Lead To Reckless Handling of
Peoples Money.
USE FOR IDEA Is ENDED

USE FOR IDEA Is ENDED
New York. Sept. 2l.-I already
have given history of the early
stages of New York's experience with
the safety fund idea as applied to the
lloca, banks. says Raymond. OF the
Chicago Tribune. As previously ex-
planned. the safety fund worked all
, right so long as the people under
stood Il was to be applied to the pro-
lection of circulation only. When 1t
was discovered the law was so word
ed as to make the fund applicable TO
the payment of all the debts of a
bank the crash came rapidly. because
Il was evident there could be no such
supervision of general debts as of
circulation and no fund ever devised
would stand the strain OF being made
liable TO pay the speculative debts OF
reckless or Illegal banking
All the authorities agree that II the
fund had been drawn upon only for
the redemption of circulation Il would
have been amply sufficient for that
purpose As soon as IL was found
the fund could be used to pay on de-
poslts and floating debts q fictitious
credit was conferred upon the banks
which had been chartered by the state
in this way. Interruptions men were
quick 10 see this fact and many bank
ers contracted debts for their own
profit. secure in the understanding
that the general fund would have to
make good.
Harm Done; Cure Advanced.
BY 1S42 the sate found 20 neces-
sary TO pass law deyotng the
safety fund exclusively TO the re-
ldemption of circulating notes. but
the mischief already had been done.
Within SIX months previous to the
passage OF this law SIX banks had
failed with a circulation Of Sl.40S,-
b GOO. The fund was good for that
but the creditors Of these banks inn
mediately secured iniunctlons fsom
the courts preventing any payment
from the fund 10 redeem the circu-
Ration Of banks which subsequently
/ became insolvent until an the debts
of a. the banks which had failed up
/, 10 that time had been paid.
IN many Of the failures il devel-
loped that there had been issues OF
notes largely in excess Of the amount
fixed by law. and OF course the gen.
eral liabilities were even more bur
ldensome
In 1885 Controller Flag showed
I that the amount required 10 pay the
debts % the insolvent banks was
ISl.ol7.00O. There was az that time
in the fund only S179.1sS. leaving
the amount 10 be provided for 1891 =
SG7. There already had been paid
from the safety fund s1.502,170. and
this, with the further amount OF ST.
017.0O0 estimated TO be due. made a
total charge on the fund by the fail
ure OF ten banks OF s2.51s.170.
Could Guaid Only Circulation.
Up TO September 80. 1S45. the
total contributions to the fund were
s1,SS5.536 and the redemption Of
notes were $l.76s.922. showing the
fund to have been ample security for
[, the circulation OF the insolvent banks
~ IL had not been made 10 bear the
burden OF providing for their de-
posts also.
In that same year It became necas-
sery for the state to issue It's own Sc
curities to the amount OF nearly a
million dollars for the purpose n
paying off the debts OF the insolvent
banks The issue OF state bonds was
made a lient upon the safety fund
itself and il so continued until the
whole thing was swept out OF exist
ence at the time Of the war.
After the law had been passed lin
iting the liability OF the fund to cir
cu;ation only and after that circu,a-
tlen had been put into the hands OF
state officials. who could regulate its
issue. most of the evils of the safety
fund disappeared. thus showing con-
clusively that It was the attempt TO
guarantee deposits which caused all
the trouble.
As all of the future contributions
TO the safety fund were mortgaged TO
meet the state stock issued in pay
ment of the debts Of the banks which
had failed before the crash in 1912,
in case of additional failure there
could be no resort to the fund. and II
finally came about that the circlla-
ton of the safety fund banks. amount
ing TO s1G.926.91S. rested solely on
the solvency Of the bank making the
issue.
Failures Wine Out Fund.
Willard fillmore. who was con-
troller In 1913, said the safety fund
Itself had long before been exhaust
ed and future contributions to II
mortgaged by the issue under the act
OF 1S45 of S90O.S2S of 6 Der cent