The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1908-09-12
Deputy Comptroller of the Cur
rency T. p. Kane
Believes the Principle Ethicaily
and Fundamentally UnsOund.
BANKS STARTED IT.
Says Movement Did Not Origi-
nate With the Deposit0rs.
Believes Its Effect Would Be to
Increase Failures.


Washington. Sept. 12.-There is no
point less understood in the entire cam
paign situation than the bank guaran-
ty reform which has been adopted il
Oklahoma and which is being consid
cred in many other states, as well as
being a national issue.
There is no man better informed on
this subject than T. P. Kane Of Wash
ington, D. c., deputy comptroller of the
currency. He has made a careful
study of this question in connection
with his work and is thoroughly quail
fed to state the situation in an i'm
partial way. When seen at his office
in Washington he said: The opinion
recently rendered by the attorney gen
eral of the United States to the effec
that it is unlawful for any nationa
banking association to enter into such
an agreement as is contemplated by
the Oklahoma deposit guaranty law,
disposes of this question so far as the
local rights of national banks under ex-
listing laws to make a contract of this
nature is concerned" He continued:
This opinion. however, does not deal
with nor settle the basic principle in
which has been suddenly injected into
our complex banking system and into
state and national politics.
The question is in no sense a politi
cal one, in the common application of
that term, and cannot be correctly
solved by party politics. 1t is an eco
monte problem which appeals strongly
to a considerable number of our peo-
pie as we'll as to some we'll known
students of finance. and is attracting
enough attention to call for thoughtful
consideration and intelligent discus
sion by experienced bankers and finan-
cial scientists.
''Unsound in Principle"
1.-The principle itself is believed by
the writer to be ethically and funda-
mentally unsound, but its baneful
tendencies should be demonstrated
by impartial and logical reasoning,
devoid Of selfish considerations. and
not by passionate political strife.
This movement did not originate
with the bank depositor. 1t is the
natural sequence of a keen and more
or less selfish competition for bust
settled sections of our country. and
has been seized upon by the
politician as a popular tenet with
which to secure for their party can
didates the votes of the unwary and
unthinking. Unless its fallacy is in
diligently exposed it is likely to ex-
tend to other sections of the country
THE most persistent advocates of
this modern financial hereSy among
the banking fraternity will be found
where liberal or excessive rates of
interest are offered by banks as an
inducement to secure deposits and
high rates are charged for loans.
1.-The legal rate of interest in the
state of Oklahoma is per cent. The
contract rate is II per cent Next to
Texas, Oklahoma leads the states of
the Union in the number of national
banks of the small capital class that
have been chartered since the pas
90 of fba Of of
IA, 1900. providing for banks with
minimum capital of $4,000. There
are in Oklahoma at this writing 307
national banks. 217 of which have
capital each Of less than $4,000:
Competition among this class of
bonks is keen. A large number of
these banks pay per cent on de-
posts, and receive u per cent per
annum on some loans and from 2 to
per cent per month on others.
The payment of liberal or excess
sive rates of interest as an induce
ment to secure deposits attracts
funds to bank which would not
otherwise be received. The natural
tendency of such policy is toward
inJudicious and speculative banking.
Because. in order to find profitable
employment for such deposits at a
higher rate of interest than that
paid, the bank is compelled to
seek investments of such funds in
loans or securities of more or less
speculative or hazardous character.
- Means Much to Some Banks.
"Such a policy MAKES a hepositor's
guaranty law very essential to a bank
of this class as a means of maintain
ing Itself in the community in COM
petition with the conservatively man
aged institution which pays no inter-
ests on deposits subject to withdrawal
on demand. but relies principally
upon the reputation which a safe and
conservative management inspires to
secure its prOportionate share of the
banking business of the locality.
"Depositors who have any regard
for the safety of their funds should
consider we'll the relative strength