Evening star. [volume] (Washington, D.C.) 1854-1972, 1908-10-05
Opposes Proposed Guarantee
of Bank Deposits.
SAYS 1T DISCRIMINATEs
Declares That Shareholders Are
Equally Entitled to Insurance.
HOW STOCK IS DISTRIBUTED
Declares Representations by Political
Speakers Are Simply Ingenious
Devices to Catch Votes.

Taking the ground that the stockholders
of A bank are as much entitled to pro-
lection as the depositors. T. P. Kane.
deputy controller of the Treasury. has
replied to Mr.. Bryan's arguments in ia
of the guarantee of bank deposits.
I'm negatively discussing the subject of
bank guarantee of deposits in an article
published several weeks ago. / made the
statement that the stakeholder is as much
entitled to protection in his or her invest
ment as the depostor. if banks are to be
required to guarantee each others liza
bilities the government is going into
the insurance business says Mr. Kane
in a public statement.
Exception has been taken to this posi-
ton" he continues. Ion the ground that
the stockholders are virtually the bank,
and therefore are not on the same footing
with the depositors. 1t is claimed that
as they elect the directors and the di-
rectors select the managing officers. If the
bank is mismanaged they have it within
their power to change the board. and
through the board effect a change in the
management. and thus protect their own
interests. This is true in theory, but not
in practice.
Distribution of Stock.
The impression seems to prevail that
the capital stock of banks is owned large
-ly by the directors and officers and few
shareholders Any one who has inspected
the lists of stockholders in national banks
knows that in a large majority of cases
the stock is very widely distributed. and
tina: the board of directors and managing
officers own but a small proportion of
the total shares. In many instances the
directors own only the minimum number
of shares that the law requires them to
hold. which, in national banks, is five or
ten shares each. according to the amount
of the banks capital.
THE annual report of the controller
of the currency for 1904 shows that
July 4, 1904. the number Of sharehold-
ers in the national banks then in opera
ton was 31S.735. OF this number, 1O4,- |
1874 were women. The number Of shares |
held was S.S34,4O4 Of which amount l. |
35S.44S shares were owned by women |
The average par value Of these shares |
was SS7.23. |
July 4, 1904. the date Of these re-
turns. there were 5,3SS national banks
In active operation. Today there are /
$3.50, and 1t may be safely assumed |
that the number of stockholders and the |
number of shares held by each have in
creased in the same ratio
Who Are the Shareholders
These stockholders. as rule. care |
people OF limited means, who have ac-
cumulated few hundred dollars each by |
dint Of economy and self-denial Wild
ows. orphans and estates are very large
ly represented. While such investments |
represent part of banks working CAPT.
tai. so far as the stakeholder is con-
cerned they really partake Of the ma
ture of savings The depositor may
draw out his funds at any time The |
stakeholder cannot always find ready |
Co. Ii
dispose Of 1t. Shareholders Of this class |
have no voice In the management Of the |
bank and know nothing more Of its con-
dition than the depositor. At annual
by proxy. and depend entirely upon the
directors and managing officers to so con-
duct the banks affairs as to yield a |
small profit on their investment. II the
capital OF the bank becomes impaired |
by losses. or insolvency ensues, they are |
liable for an assessment to the par value |
of their stock holdings.
IF we are going into the business of in
surfing Investments, why not protect the |
stakeholder of this class as well as the |
depositor? Why discriminate between /
them?
THE losses to stockholders in such OF |
the failed national banks as have been
finally liquidated since the beginning of |
the national system amount to about $780, |
6OzMH; or over 40 per cent of the total
capitalization of such banks. This does
not include losses resulting In impair |
ment of capital of solvent associations
which the stockholders were required to
make good by assessment on their stock
Notwithstanding this fact the deposit
guarantees scheme proposes to further i'm
pair the investment of the minority stock
holder by making him liable not only for
the losses in his own bank. but also for
his propOrtionate share of the deposit liza
bilities of every other bank i'm the system
OF which his association forms a part.
For this liability must be deducted from
the surplus and profits of the contributing
bank. and whatever tends to diminish this
fund reduces the interest of the stock
holder on his investment
This proposition, therefore, vitallv con-
Germs the numerous minority stocksold-
ers In the banks throughout the country.
ard should arouse their interest and oppo-
sition.
What Guarantee Will Not Do.
Guaranteeing deposits will not make
banks any more safe or sound, nor pre-
vent or lessen the number of failures. II
will not make bank examinations any
more thorough or official SUPERVISION any
more effective. 1t will not insure better
Judgment on the part of bank officers nor
make their loans and investments anv
more secure. 1t will not convert an fntu-
diclous or speculative banker into a pru-
dent or conservative officer
ME competition between banks for
ueposits through che inducement of high
rates or interest may be regulated and
controlled by legislation limiting the rate
lhat may be paid, as has been done nv
the state banking board of OkIahoma.
sucn statute would not prevent an in
1udicious. incompetent or speculative
banker from receiving deposits to be risk
cd or lost in his hazardous ventures
which would not have been intrusted tn
him but for the security of the puarantv
or his reputable and conservative neigh
borS.
device to Catch Votes"
I'm the numerous discussions of this
widely debated subject many word pic-
lures have been extravagantly drawn nv
the advocates of this financial heresy. nor
trayins aged depositors facing the poor
house and widows and orphans left In
restitution as a result of the failures of
banks in which their life. savings and pit
tances were deposited Such representa-
lions when made by political speakers are
simply ingenious devices with which to
catch votes for their party candidates, but
when made by bankers cannot be regard
q