The Kennewick courier. [volume] (Kennewick, Wash.) 1905-1914, 1908-09-11

S"HiPs1iSH Is The discovery
That the bank guarantee scheme
which Hon. William J. BRYAN and
the democratic party are industi.
ously exploiting originated in
China.
The scheme was tried in New
YORK as long ago as when Martin
Van Buren, was governor of that
state. The records at ALBANY show
that the proposition was presented
ny Joshua Forman of Syracuse, a
citizen of considerable influence in
that day, and who is credited by.
many as being the father of the Erie
canal. Mr.. Forman has left this
memoranda:
THE propriety of making the
banks li;ibl for each other was sup.
yested to me by the regulations of
the Hong merchants in Canton.
China. There a number of men, each
acting separately, have by a grant
o1 the government the exclusive right
OF trading with foreigners. and are
mace liable for the debts of each
other in case OF failure"
The Forn1an scheme was suggest
ed to Governor Martin Van Buren,
in 1929. At that time charters of
over forty banks were about to ex-
pre- and some means of providing
for their future was deemed neces-
sary. Accordingly the legislature
passed a law compelling each bank
to put into the hands of treasurer
one-half of per cent of
its capital stock until it had paid 8
per cent on its capital. After the
3 per cent fund was thus constitut-
ed the accumulations were distribut-
ed among the contributing banks,
unless the insolvency of some of
them drew the fund down from the
normal amount.
The following contribution from
the history of the period throws an
interesting light upon the bank
guarantee experiment:
"The invitation which the blanket
guaranty offered to entrance into
the banking business was not lost on
the general public. The public mind
was further excited by the general
belief that President Jackson was
about to abolish the national bank
of the United States, and that this
would give further opportunities for
banking. AS result a regular
mania for making banks set in.
"Tammany hall seriously .consid-
cred started one to pay it's debts
and Il big fire in New York led to a
wild demand for bank to make up
the lOss.' Four men were found
printing bank notes in New York
garret and were set free by the
police when they declared that they
were bank In short time insti-
buttons were formed with an aggre.
gate capital of $90, 0OO. 900. sum all
out OF proportion to any real bank
ing needs OF the community of that
day.
"There was also the most harm
ful speculation in bank stock. Un-
der the guaranty plan these stocks
were most readily marketable with
the public and stock certificates were
turned out In an overwhelming sup
ply, the promoters reaping hand
some profit on the sales.
"The safety fund itself went along !
swimmingly as long rs times were
but In the hard times of
1887 the guaranty banks refused pay
ment in n bod, and the state was
helpless. The guaranty scheme was
shown to be utterly unable to cope |
W tn such u condition and the legis
llture was forced to pass an act
suspension OF payment
for one year.
.'lt was not until 1871, however
that the real weakness Of the guar
anty fund was wholly exposed. In
that year came the tirst actual fall
ure OF Il safety fund bank, when the
Wayne County Bank CT Palmyra
closed it's doors. The president ii
the institution was short in his ac-
counts, and the associated banks
were compelled to shoulder an in
OF $l32.O0O. This failure
started others, In q short time
t n banks had closed their doors. 1t
was seen at once that the guaranty
was going to be inadequate, and
there was general fear for the SOL
v.ncy Of almost every bank In the
state.
ssrIrdor tho the ru1inQ bv the state |