Mexico weekly ledger., 1908-10-01

Ing hanks from their own Officials and
directors. Whyf Because there has
been no mutual responsibility. When
an banks become liable for the deposits
81 each. the stockholders viii insist upon
the enactment o. a law making i q
criminal offenae for a bank official 70
loan more than the prescribed amount
1 10 one individual. AT present we have
a law prohibiting thu loaning OF more
than one-tenth OF the capital and sur
plus 10 one person. or corporation. but
the law is only directory. OF course.
the comptroller can suspend a bank II
enforced, because the enforcement Of
such a law would throw the punishment
up0n Innocent stockholders and upon the
community, since the suspension Of a
bank indicts a great loss upon stock
holders and dIsturbs the business Of the
city or town In which the bank is To-
Gated.
The law should make II a criminal Of
amount TO one person. and we would
probably be able 10 secure the passage OF
a law prohibiting market speculation by
bank officials.
The Oklahoma plan is working salts
faetorily. A bank recently failed In Ok
lahoma; within forty-eight minutes after
the notice Of suspension, the officer in
charge had authority to pay all depos-
itors. and then the banking board pro-
ceeded TO collect the assets Of the bank
and to prosecute the officials criminally-
When the business was closed up. the
stock holders passed a resolution thank
ling the state board for its prompt ac-
ti0n, the action Of the board being q
protection 10 the stockholders, as well
as to the depositors and to the public
generally.
Compare this failure under the guar
anty system with a failure where there
is no guaranty. In Oklahoma the bank
commissioner teiephoned the farmers to
come IN and get their money, and the
answer was; II am busy today with
my crop; ! will be In In a day or two"
In Cleveland. Ohio, a bank failed about
the same time, and the papers an
nounced twelve hundred infuriated
Italians stormed the closed doors Of the
busted banking house Of Costan Liopea,
on Orange street, today. The police
drove the crowd back"
Al objection Is sometimes made to the
guaranty law that a new bank would
start up across the street." and, being
able to promise its depositors absolute
security through the guaranty law, could
draw the deposits away from conserva-
lively managed banks by Offering a
higher rate of interest than the latter
could pay. This objection Is urged as II
II were an unanswerable one But let
us see how asily 1t can be met. Since
the law makes all of the banks liable
for the obligation Of zach bank, the law
should prohibit any abuse OF this security
by any bank. and in Oklahoma the
banking board has already fixed the rate
Of interest that can be paid to deposIeore. !
According to the rules OF the banking
board, 10 bank is permitted to pay
more than three per cent on short-time
deposits or more thar -four per cent on
time deposits running for six months or
more.
II has also been urged as an objection
that under the guaranty system a big
bank would have no advantage over a
sound, 1t could not weigh against Inc
advantages Of the system. for banks
are made for the people, not the people
for the banks. While there are advan-
tages In having big banks. the advan-
tages are not sufficient TO Justify the
5eopardizing OF the depositor or OF the
business interests o. a community.
would still have several advantages over
thu small one. In the hrst place, II could
make larger loans than the small bank.
For Instance, a bank with $f,0 900, 900 capi-
800, 900 to one person. while a bank with
800, 600 capital and surplus could only
loan $40, 600 to one person. This advan- |
tage would In itself drdw 70 the large
pank the large deposits and the men do
ing business upon a large scale, for de-
posts follow accommodations,
Then, too. there Il a certain business
advantage In deposting with n big bank.
Il is worth something to be able TO re-
fer to a big bank when one's financial /
standing Is being Investigated, and worth
still more TO have the advice OF a man
OF large business experience when bust
ness enterprises are being considered.
Besides these, there is a social ndvan-
tage In being on good terms with the
men who are prominent In the banking
world. Surely the big banks prestige
viii be worth enough to it under the
guaranty system It should not begrudge
the smaller banks the advantage which
the guaranty OF deposits will bring to
them.
out referring to the fact that the big
ank needs the guaranty as well al the
little one, for big banks fail as we'll as
small banks, and the bigger the bank
the greater the calamity to the COM
munity when 1t fails. No bank Is so big
as to be absolutely beyond danger, and
a community needs protection against
the big banks failure even more than
against the failure of the small banks.
1t has sometimes been objected that
the banking business a lower class of
men and reduce the average in character.
On the contrary, the guaranty of deposits.
l submit, would, If it made any differ
ence in this respect bring into he hank
ing business a better class of men and
raise, IL tina is possible, the average Of
character. Il Is not to a mans dIseredit
that he is not willing that one of his
fellow men should lose money on his
account. Is IL not a mark of character
that a man should be careful of his good
name and conslderate Of the esteem NJ
his feIlows7 At present n s,ceessfnI FAR
mer or business man NAV be Induced "a
take stock in a bank. II NAV be that
his name is desired to give standing and