Omaha daily bee., 1908-09-27
IN TWIN CITIES
CONTINUED from First Page.

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equitable feature Of this system and come
to the question whether it will really help
matters. 1t is permissible under the ma
tional banking act for banks to organize
with a capital of SOS, 200. The security
which banks offer the depositors depends
upon the amount OF capital. the amount Of
surplus and public confidence in the Off
GERS of the institution. Under the proposed
system the depositors in a bank with a
capital of s25, 900 and no surplus, and with
officers of little experience and Indifferent
regulations can offer the public exactly
the same security for the payment of de-
posts as a bank with a capital Of $500. 900, a
surplus of $3.50 900 and with officers known
to be honest and able. Depositors there
fore insofar as security of deposits is con-
cerned are as likely to make their deposits
In the $4,000 bank as in the bank with the
capital of 100000.
Limitation of Interest.
1T is proposed to introduce into the law
a limitation as to the amount of interest
which under the system can be offered
and paid on deposits. This it is said will
prevent banks from offering excessive rates
Of interest to obtain deposits. A Limitation
Of this sort is difficult to fix. because con-
ditions vary so much in different parts of
the country. That which would be high
interest in one part of the country would
be low in another. and that which would
be high interest at one season and under
certain conditions would be low at anothe;
time. Hence whatever Limitation is i'm.
posed except when the normal interest is
highest, there must always be an oppor-
tunity for those inviting deposits TO pay
a higher rate than that which conserva-
tive bankers would pay.
IF the losses were limited to one-twenty-
sixth OF l per cent the amount OF the tax
on the deposit Of course would be small,
ana each bank could readily pay 1t, al
though the principal would be an entire
departure from equity; but the effect of a
guaranty system on the character OF bank
ing would be such that the losses arisins
from recklessness would greatly increase
and the tax must Increase to meet the
losses on every bank in proportion. In.
stead OF loss equal to one-twenty-slxth OF
l per cent annually 1t would rapidly in.
crease in every financial stringency. TIVE
objections are made to the conclusion tina
an enforced guaranty system would lead tC
recklessness and disaster in banking. On,
NAaiilllldAiOlih MOulN
prevent, and the other is that It is an in.
suit to the banking community TO assum,
that the national bankers of this country
In view of their present high character
would yield to the temptation to reckless
ness presented by the system. l answer t,
the first objection that the government ex
aminations do not now prevent banks from
Falling; that 1t Is difficult for a bank ex
aminer to discover the unwise recklessnesi
and speculative loans, and then the evi
Is done and cannot be remedied by stric
supervision. Second, while fully conced,
the general high character of the banker
throughout the country, my point is tina
the opportunity to obtain deposits and in
vest them on very little capital afforde,
by the guaranty security will attract int,
the banking business men OF no experieno,
and Of speculative tendencies ana will dis
tinotly lower the tone Of the banking bust
ness.
Bank Guaranty In KanAas.
IT has been said by Mr.. Bryan that tn
republicans Of Kansas by adopting a PLAN
In favor OF guaranty OF deposits, rebuke m