New-York tribune., 1908-10-05
REPLIES TO CRITICS
Deputy Controller of National Treas
ury ON Bank Guarantee.
From The Tribune Bureau.J

! Washington, Oct. At. P. Kane, Deputy Con
/ troler of the Treasury. replies to criticisms OF
/ the interview published in The Tribune on Sep
tember s. in which he dealt with the impractical
! hility of guaranteeing bank deposits The chief
criticism of Mr. kane's position was in regard 70
his statement that the stockholder is much en-
titled protection the depositor 'if banks are
to be required guarantee auothers liabilities
the government is going into the bust
ness" Mr.. Kane says:
Exception has been taken TO this position on the
ground that the stockholders are virtually the
bank and therefore are not on the same footing
with the deposttors. II is claimed that they
managing officers If the bank is nnisrnanaged they
have it within their power to change the board.
and through the board effect change in the man
agement and thus protect their own interests
This is true in theory, but not in practice.
The impression seems 70 prevail that the capital
stock of banks is owned largely by the directors
and officers and a few shareholders Any one who
has inspected the lists of stockholders in national
banks knows that IN large majority Of cases the
of directors and managing officers own only
small proportion Of the total shares. In many
number, Of shares that the law requires them to
hold, which in national banks is five or ten shares
each according 10 I1e amount OF the banks cap
The annual report of the Controller Of the Cur
Der Of shareholders in the national banks then in
operation was 31S.735 OF this number I04 534 were
women. The number of shares held was SSS4. 404
of which 1s5S.448 shares were owned by women
The average par value Of these shares was Ss7 %
On July t. 1904 the date of these returns. there
were 5SSs national banks IN active operation. To-
day there are $50. and IL may safely be assumed
that the number % stockholders and the number
of shares held by each have increased in the
These stockholders as a rule are people Of lin
dollars by dint of economy and self-deniaL Widows
orphans and estates very largely represented.
working capital. so far as the st0ckholder is con-
cerned they really partake Of the nature OF saw
ings The depostor may draw out his funds at
Teadv bUver for his stock when he wants ~ diens
n Shareholders IN
voice in the management OF the bank and know
nothing more Of its condition than the depositor
At annual elections Of directors they usually vote
by proxy. and depend entirely upon the directors
and managing officers TO so conduct the banks
affairs as TO yield a small profit their invest
ment. II the capital of the bank becomes i'm
paired by losses or insolvency ensues they
liable for an assessment to the par value ot their
If We are going into the business Of insur1ng in
vestmeuts. why not protect the stockholder Of this
between them? The losses TO stockh9Iders IN sJch
of the failed national banks have been finally
tenn amount to about SIS 6 0Sl or over 10 per cent
Of the total capitalization Of such banks This
capital of solvent associations which the stock
holders were required to make good by assessment
Notwithstanding this fact. the deposit guarantee
Of the minority stockh1lder by making aim liable
not onIv for the losses in his own bank. but also
for his propOrtonate share OF the deposit iiabil-
ties Of every other bank IN the system OF which
his association forms part For this liability
must be deducted from the surplus ana prohtS OF
the contributing bank. ana whatever tends 10 d.
minSh this tund reduces me interest OF the stock-
holder on his investment
This proposition. therefore. vitally concerns the
uftrnerous minority stockholders In the banks
throughout the country, and should arouse their
interest and opposition 'iuarantee1ng deposits VIII
moi ma ke banks more safe sound pre-
vent or lessen the number of failures II will not
make hank exsniuat tiuus any more thorough of
fetal supervision any more elective 1t viii not
insure better judgment on the part Of bank Off
rars nor make their loans and Investments auv
more secure II will not convert an inJudiciOus
speculative banker into a prudent or conservative
offcer. While composition between banks for de-
posts through the inducement Of high rates OF in
fe-est may Je regulated and controlled by eEisla-
rfon limiting the rate thai may fe paid, has
been done 10y the State Banking Board Of Okla
bons such statute would not prevent injudl-
cious incompetent or speculative banker from
reiv3ns deposits be rsKed or lest in his hazard
olIs ventures which would net have been intrusted
10 him bat for security OF the guarantee Of his
reputable and conservative neighboTs
II We going into the guarantee business why