The Paducah evening sun. [volume] (Paducah, Ky.) 1906-1929, 1908-10-20
FALLACY OF THE DEPOSIT
CUARANTY

prise, the national Democratic COM
miatee took pom OF 1000 country
banks, asking them II they did not
favor the bank guaranty as much as
he postal savings bank, and 1915
aid they favor the postal savings
bank and do not favor the guaranty
)f deposits. Most of the remainder
lid not reply at all. All that stun
rom Oklahoma, which recently in
lugurated the system. withdrew APP
)roximately s5,0OO,OOO government
money due the state and placed II in
guaranty banks, and wrecked one in
tftution to show how II succeeds,
loes not fool the country banker;
FOR does It fool the farmers who put
heir money in It.
The guaranty is nothing like the
method by which the government Sc
ures its funds In bank. The gov
rnment requires banks to put up
ollateral security. The guaranty
eally is insurance; but not graded
recording 10 the risk and the amount
# protection. Neither Is h like "a
nan insuring his loans. II A lends
} SIC and c IS and .nsurcs the
cans, he is protected and there Is
10 incentive to speculation; because
sach loan is separately insured. But
A and b and c deposit (lend)
money In bank and the bank in
lures the deposits. not separately,
nut In a lump in advance, II is an in
.ucement to A and b and and also
} and p, and so on. to deposit (loan)
heir money in that particular bank.
( all banks deposits are thus in
ured alike. there is no difference
between them from fhe depository
point of view, excepting that of the
interest on deposits. Now, which
will pay the highest rate of interest.
he conservative bank that is careful
ibout its risks. or the specializing
Dank, which Is anxious only to get
iold OF lots of money quickly with
which to take its big risks? Be
lonest, Won't the specializing bank?
Won't the depos.tors put their money
n the specializing bank? II the guar
,nty of deposits will do what its
sponsor declares IL will-absolutely
insure depositors against the loss of
deposits II banks fal--wouldn't you,
and all of us?
II we put our money In speculat-
ng banks because they pay the high
st rate of interest. what will the
other banks do? VIII they go out OF
business. or will they go to speculat-
ng and paying exorbitant interest
They have got to do one or the other
the moment you sdmit that the spec
ulators will pay the highest interest
and that the guaranty absolutely in
sures the depositors against loss in
any bank.
preventing spectators from going
nto the banking business. We can
not. Any man who conforms to the
egal requirements will be abe to
stablsh a bank. Oklahoma is just
row reaching the flush stage Of the
bank deposit law Her national
banks, which the government wisely
prohibits from adopting the state
guaranty scheme, will save the s.tua-
ton to some extent when the crash
comes.
IL all the banks in the United
States had been under the deposit
guaranty system, when those big con-
Germs mp east experienced the run
last spring. the whole deposit fund
would have been used up. Deposit
ors out this way would have thus
become directly interested in the sit
uation. ana, instead of waiting pa
tiently for the situation to ease up
would have started a run here to get
their share of the guaranty, before
4 was exhausted. In administering
the guaranty the government would
have assumed charge OF every one Of
them, and we would have had a gov
eminent actually running banks IN
stead Of just regulating them.
This bank guaranty Of Bryan's, in
the political equation. is to the farm
er with money in bank. as Bryan's
free silver scheme was to the farmer
with a mortgage on the home place. I
II Tammany does. as II Is intimat.