Willmar tribune., 1908-10-07

Edi
NELSON ON GUARANTY OF BANK
DEPOSITS.
"Out Of their mouths shall they be
condemned"
Presidential Candidate Taft has
come and gone and during his flying
trip through the state he did not lose
an opportunity to attempt to prove the
fallacy Of the bank deposit guaranty
plan OF the Democratic platform. AS
the guaranteeing of bank deposits is
receiving much attention at the pres
ent time, as it is being fiercely at
tackled by the Republicans and as
stoutly defended by the Democrats, it
might not come amiss to look over the
field and see who is most conspicuous
In assailing this principle and who
most active in it's defense.
The principal opposition to the idea
comes from the big banks, which
claim that it's general adoption will
result in placing all banks on the
same plane; that the large institu-
lions will be compelled to support the
weak ones in times of stress and that
1t will also encourage reckless meth
DDS. as the crooked or reckless fnan-
cier will take advantage of the situ-
alton created by the guarantee and
use 1t to his selfish advantage. It is
also condemned by the general Repub-
l1can politician, not because he knows
anything about it, or because he
doubts its souudness, but because the
Democrats "saw 1t first," and it there
fore became a Democratic measure,
and for that reason it must be op-
posed.
On the other hand it is supported
by many small bankers and by the
general run of depositors, who feel
that they are entitled to security of
some kind when they put their money
In the hands of another man. They
argue that when the banker entrusts
them with money from his institution
he exacts security, and they believe it
is right and proper that he do so, but
they are personally as honest as he:
why then should he be placed in a
class by himself and be permitted to
handle millions of other peoples
money without guarantee that it shall
ever be returned?
The supporters of this contention
are not confined to any walk in life.
nor to any political party. When Mr..
Taft was ridiculing the idea in his
Minnesota speeches he was perhaps
unaware that he was verbally lashing
member of his own party-a man
whose sound Judgment the people of
Minnesota, regardless of political afil-
1attons, have every confidence But
that was just what he was doing.
1t will perhaps surprise many of his
Minnesota constituents to learn that
Senator Nelson introduced an amend
ment to the Vreeland-Aldrich currency
bill In the senate, on March 27 last,
which provided for the guaranteeing
of deposits in national banks. In sub.
stance this amendment provided:
That one-half of all taxes paid on
national bank currency by banking as
eoc!attons be set apart in the United
states treasury as depositors' fund,
to be used in paying all depositors, ex-
cept the United States, upon the in
solvency of any bank; that said de-
positors' fund shall not exceed s20,.
000, 1000.
On the Introduction of the amend.
ment Senator Nelson argued in sup.
port of the measure that a money
panic was distinguishable from
money stringency. That a money
stringency arises because of a tenn
porary scarcity of currency, while a
panic, such as that of the fall of 1907,
always originates in a run by deposit.
dfs as to the safety Of their funds. In
1907 the banks, to protect themselves,
practically closed their doors. In fact
they suspended cash payments to all
practical purposes.
This condition was brought about,
net because Of stringency of curren-
oy. but because the public became
panic stricken in its disbelief in the
soundness Of the banks. A large
emount Of the capital and surplus of
national banks is held in the shape of
longtime securities Of various
kinds and approved stocks-so that
their available money for loaning pur-
poses is actually the money of the de-
positors.
When q panic sets in and a run
starts on the bank money becomes
scarce because dspositors withdraw
their money, and also because people
who heretofore were content to get
their pay In drafts and checks now
demand cash. Thus the supply in
cash is depleted, while the demand
for actual money increases.
The banks are therefore compelled
to call in loans from customers and
must refuse further accommodation. All
this Is caused on account of q panic
stricken public.
Continuing, Mr.. Nelson said: "Now
II you can by legislation, as is here
proposed, provide fund for the pro.
lection of depositors. SO that they will
teel easy and confident and will not
become panic stricken, you to large
extent cure such evils as we had last
fall. TO my mind those evils arose
from two sources. First, from the
want Of confidence on tho part of the
dcpositors. In consequence of that
there was run on the banks, and in
the next place because the banks
themselves were even more cowardly
thAa the depositors; because the big