Los Angeles herald., 1908-10-29
HONEST BANKERS
WELCOME PLANK
PHELAN EXPLAINS DEPOSIT
ORS' GUARANTEE LAW
GIVES SECURITY AND CoNFI-
DENcE TO PEOPLE
San Francisco Mayor-Banker Tells
Wigwam Audience California Could
Have Saved Millions Under
the Oklahoma Plan

of San francisco DOWeu III TecoS hiCloil
OF the Introductory words spoken by
Chairman w. Harris of the campaign
committee.
Speaking as a banker as well as a
Democrat, Mr.. Phelan's words indors-
ing the bank guarantee plank OF the
platform adopted at Denver carried
great weight with the audience.
In explaining the law as adopted in
Oklahoma and proposed by Mr. Bryan
he said that such practice would not
initiate against honest banks out
would be a boon to depositors and well
coined by business men.
Had such a law been in effect in
California the looting of the California
Safe Deposit g. Trust company would
not have been possible.
Mr.. Phelan said:
Answers Objections
1.-TWO objections have been made to the
depositors guarantee fund proposed by
the Democratic platform, based on the
Oklahoma law.
POSTMASTER General Meyer, pro-
moment of the postal savings bank, says
that the bank Offering the highest rate
of interest would receive the largest
deposits
"The Oklahoma rule answers this by
providing that not more than per cent
shall be paid 10 QeDOSllOio Oil bSA Ia ~
posits, and not more than per ceh1
on demand deposits.
"The postal savings bank plan is de-
fective in that it takes the money out
of the community where 1t Is earned
and the amounts which may be de-
posted are generally limited ana small
at would give the government large
cash balances of which POSSIBLY the
banks would be deprived, and, there
fore, should not be preferably 1aVoreo
bv the banks nor by the community
which depends upon the abundance and
circulation of money for the encourage
ment of it's enterprises and the regula-
ton of the rates of interest.
"Mr. Taft objects on the ground tnal
a good banker with a million dollars OF
assets In his institution would be neld
RESPONSIBLE for bad banker with $lOO,-
900 of assets. -
''The general answer to this IS, tnat
the object of the law is in particular
way 70 protect the depositors and in the
language of Mr.. Bryan the Banks are
made for the people and the people are
not made for the banks
"This idea should be kept well IN
mind by the voter; that this Is a pan
not to crafty the bankers pride in his
personal integrity or the amount OF
his resources, but to give to the people
a safe depositary for their savings.
"Mr. Taft seems to be more con-
cerned about the banker than anout
the people. But now Wouiu II 'iI0S'
the banker? . :,
.'First. under the proposed law, 1t is
left optional with the banks whether
they shall come under the system or
not.
ar they come under the system, they
have to pay sum once, not ahnddily,
equal to a certain percentage OF their
deposits into the guarantee fund, ana
the guarantee fund becomes the protec-
ton of the depositor.
"When the guarantee fund becomes
exhausted, and only then, are the
banks in the system called on Tor an
other payment; so it ts true that tne
hanks which have voluntarily come into
the system are liable for the losses
to depositors in other banks.
"The protection Of the banker Is the
greater care, scrutiny and vigilance
which will be exercised by the pahks
in the system over one another.
No Direct Incentive Now
''There is no direct incentive now, Tor
instance, in San Francisco f.r rigid IN
spection, and yet the banks IN the
clearing house have voluntarily creaeeo
an elaborate inspection and exam1na-
ton bureau at very considerable an
nual cost. That is only partial pro-
lection for the public and the banker.
'If, under the present system, BANK
fails. the depositor has no recourse out
side the assets of the bank and the per-
sonal liability of the shareholders.
Under the new system the banks nave
that recourse.
"'The present annual cost of this in
spection would, in all probability,
amount to more than the contribution
to a guarantee fund, because II the
banks guarantee one another they VIII
protect one another, and by precau-
tionary measures, stop irregularities
which lead to failures.
1.-THE bankers of San Francisco nave
known for a great many years of the
irregular practices of the California
Safe Deposit and Trust company,
which failed for $10,000,000 and involved
$4,000 depositors.
s'If the official bank examiners did
their duty they would have closed the
bank long ago, but for one reason or
another they refused to see the irregu-
1arities.
sIf the banks had to make up the
discrepancy between the assets and the
amounts due to depositors they would
also have closed the bank long ago by
bringing the facts of which they were
cognizant to the attention of the gov
ernor or the bank commissioners.
$50, it is safe to say that under the
guaranty plan, the banks would, by
forestalling bad failures. save them
selves from any considerable loss.
Even the good banker may be
robbed by his employees and should per-
sonally feel a new sense of security In
having the guarantee of all the other
banks in the system
"It is no hardship to the good banker
to pay for protection.
"In life and fire insurance we pay for
the hazards of others.
'The risks are widely distributed.
"Such a system would create abso-
lutte confidence among the people and
bring into circulation and into the
banks money which is now secreted or
hidden away in safe deposit boxes or
elsewhere.
''The good banks would participate
in the advantages which would accrue
from the establishment of that con-
fidence which will prevent runs and
consequent failures at critical times.
"The average depositor has no means
of knowing the good bank from the bad
bank, and when the state allows such
a bank as the California Safe Deposit
and Trust company, known by bankers
to have been rotten for eight years, to
remain open without any protection
for the depositors, 1t may be said to
a yeritable trap to catch the unknow-
ing and the unwary.
''The national, state, county and city
governments deposit moneys in banks
but require the security of gilt-edged
bonds from the banks.
Nov the Democratic party asks that
the depositors also receive the security