The Birmingham age-herald., 1908-08-28

propose the removal of any safeguards. In fact, it contemplates stricter regula- tions of the banks, and Oklahoma has al- ready made the banking regulations stricter.
 He declares that the only benefit would accrue to the speculator, who would be delighted to enter the banking business when it was certain that he could enjoy any profit that would accrue, while the risk would have to be assumed by his honest and hardworking fellow" The present banking law requires that a cer- tain amount of capital shall be invested in the business, and that law would still stand. To enter the banking business, therefore a man would either have to have the capital himself or secure the | confidence of men who had the capital And this capital together with the 100 per cent liability, would be a guaranty 1 that the stockholders would not inten- tionally select careless officials. Why would 'speculator' be delighted to en- ter the banking business under the guar anty system? He Is not relieved from pe- cuniary obligation, nor Is he relieved from criminal liability. He would have nothing to gain by carelessness. nor would the stockholders have anything to gain by indifference.
 Cause of Failures.
 The chief cause of bank failures is the i making of excessive loans to directors or l officials of the bank. This is the fruitful l cause of disaster and it has been impos- sible to secure legislation protecting banks i from their own officials and directors l Why? Because there has been no mutual responsibility. When all banks become liable for the deposits of each, the stock holders will insist upon the enactment of law making it a criminal offense for a l bank official to loan more than the pre- ] scribed amount to one individual. At present we have a law prohibiting the l loaning of more than one-tenth of the capital and surplus to one person or cor i poration but the law is only directory. 1 Of course, the comptroller can suspend 1 bank if 1t violates the law, but the law is not enforced, because the enforcement of such a law would throw the punishment upon innocent stockholders and upon tbe l community, since the suspension of a l bank infiicts a great loss upon stockhold- CTS and disturbs the business of the city 1 or town in which the bank is located The law should make 1t a criminal of l fense to loan more than the prescribed amount to one person and we would probably be able to secure the passage l of a law prohibiting market speculation l by bank officials.
 i The Oklahoma plan is better. bank recently failed in Oklahoma; within 4S l minutes after the notice of suspension the officer in charge had authority to pay | all deposits, and then the banking board 1 proceeded to collect the assets of the bank | and to prosecute the officials crimnally | When the business was closed up. the stockholders passed resolution thanking | the state board for its prompt action, the action of the board being protection to the stockholders as well as to the depos- D nd In ha 11a1t
 Comparison Plans.
 Compare this failure under the guaranty system with failure where there is no guaranty. In Oklahoma the bank com missioner telephoned the farmers to come in and get their money, and the answer was T am busy today with my crop; 1 will be in in a day or two"
 In Cleveland, Ohio, bank failed about the same time and, the papers announced
 Twelve hundred infuriated Italians stormed the closed doors of the busted
 banking house of Costan Lopea on Orange street, today. The police drove the crowd back"
 An objection is sometimes made to the
 guaranty law that a new bank would start up across the street." and. being
 able to promise it's depositors absolute security through the guaranty law, could draw the deposits away from conserva- 1 lively managed banks, by offering a ] higher rate of interest than the latter
 could pay. This objection is urged as if
 it were unanswerable one. But let
 us see how easily it can be met Since
 the law makes all of the banks liable
 for the obligations of each bank the law
 should prohibit any abuse of this securi- , ty by any bank, and in Oklahoma the
 banking board has already fixed the rate of interest that can be Daid tO depOsi- tors. According to the rules of the bank
 Ing board, no bank is permitted to pay
 more than three per cent. on short time
 deposits or more than four per cent on
 time deposits running for six months ol
 more.
 Banks for the People.
 It has also been urged as an objection
 that under the guaranty system big
 bank would have no advantage over lit
 tletle bank. Even If this agrgument were
 sound, 1t could not weigh against the ad
 vantages of the system, for banks art
 made for the people, not the people fol the banks. While there are advantages
 in having big banks. the advantages art
 not sufficient to justify the jeopardizint of the depositor or the business inter l ests of a community.
 But, as a matter of fact. the big banl
 would still have several advantages owe the small one Tn the first place, it coult
 make larger loans than the small bank
 For instance, a bank with s1000,000 capi
 tai and surplus could as at present, ioal $l00,00O to one person, while bank witl $1OO,O00 capital and surplus could onl. loan $10,OOO to one person This advant | age would in itself draw to the larg , l bank the large deposits and the men do t ing business upon . large scale. for de