The Honesdale citizen. [volume] (Honesdale, Pa.) 1873-1908, 1908-09-03
The Guaranty Of Bank Deposits.

In Col. Bryan's Denver platform, his
attitude on bis new issue Of the oompul-
sorry guaranty OF bank deposits 10 thus
Get forth:
"We pledge ourselves to legislation by
which the national banks shall be re-
Quired to establish u guaranty fund for
the prompt payment OF the depositors OF
any insolvent national bank, under an
equitable system which shall be avail
able to all State banking Institutions
wishing to use it,"
The only method by which such guar
anty fund oan be established is that OF
taxation. Col. Bryan's pledge does not
60 into the detail Of specifying whether
the tax 10 to be laid on the ckholders
or the depositore. But In his address on
the subject at Topeka, last week, he pre-.
sented, as an example, the guaranty sys.
tenn enacted In Oklahoma, which is the
only one yet established. Under that
system. as described by him (Which went
into effeot February 4 1s0s)-
"All State banks, and as many national
banks as desire to avail themselves OF the
Law, are taxed one per cent. on their de.
poeits, and the money thus collected put
Into etguarauty fund. The Banking
Board is authorized to make additional
assessments from time to time to keep the
fuud up to this amount, and is directed
TO take possession OF any insolvent bank,
pay the deposltors In full, and reimburse
the fund BY collecting the assets OF the
failed bank"
According to Col. Bryan, only two
Oklahoma banks have failed since last
February, and In both the assets proved
sufficient to reimburse the fund.
As to the source Of the guaranty fund,
II 1t lie equitable to compel all banks to
contribute to 1t, regardless Of their pref
erences In the matter, the plan Is fair
enough. 1t Is merely compulsory self
protection by the depositors, at their own
expense 1t will result, OF course, In a
EeductloRfOf the interest paid on savings
accounts, and will take something from
the principal OF other accounts. 1t has
not been iu operation long enough for an
adequate test OF its advantages and dis
advantages. Statistics given by Col.
Bryan show that the deposits In the
banks embraced In this system have in
creased nearly four and u quarter million,
while those In the national banks, which
are not within 1t, have decreased more
than a million. This, however, proves
nothing except that depositors prefer the
security given by the guaranty fund to
that given by the national banking sys-
tem,-a preference entirely natural
How far the feeling that depositors are
fully secured may tempt bank mana gers
Into wild cat banking" or Into danger.
GUS speculations, or actual embezzlement,
oan be determined only by experience.
Under the conditions heretofore prevail
ing, Pennsylvania banking institutions
have within few years lost, from these
oAussq, about $6,0O0,O0O. Under the pro-
posed guaranty system, the deposltors 10
institutions managed prudently and hon
estly would be taxed to make good these
losses.
As further argument In favor Of his
plan, CoEBryan says:
The Dnited States government re-
Quires ~1he deposit OF specific security
when tntrusts money to a national
bank, although 1t eau examine the bank
At any time the State requires security
when 1t deposits money in a bank the
county requires security and the city re.
qulreg security; even the banks require
reounty from the officials who handle
monsy. Why should the depositor be
lefkto take his chances ~
There is wide difference between
these cases and the guaranty fund sys-
ten. In these, there is no tsxatlon OF
one bank to make good the default OF
another, bat each furnishes its own Z, =
ourity, and that without even taxing it,
self. II it is practicable to have each
bank Dc this for all deposltors, there
could b no objection to it. But this is
not the Bryan plan, in which all must be
taxed for the failure of any.