New Ulm review. (New Ulm, Brown County, Minn.) 1892-1961, 1908-02-26
sCHAEFER'S NOVEL SCHEME
Public Examiner Favors Establish.
ment of Central State Bank.
Such a Bank, He Claims, Would
Work Wonders in Inspiring
Public Confidence.
Would Also Serve to Prevent Con
ditiOns Such as Prevailed
in Recent Panic.

State Bank Examiner Anton Schae-
fer is in favor of the establishment OF
a central state bank, in which a fund
will be accumulated to guarantee the
payment of the deposits in all state
banks. He believes that the establish
ment of such d bank and such fund
would do much to remedy the present
svils in the financial scheme and pre-
vent the recurrence Of such crisis as
that of the last few months.
sit would be the state bankers own
bank" said Mr. Schaefer, land
would give the people implicit conf
aence in the stability of all of the state
banks connected with it. The central
institution would act as reserve
bank, from which the others could get
money when needed, and would pre-
vent the storage of unnecess arily large
sums in the banks throughout thestate,
as it would remove the cause for such
storing, as it exists at present.
"The people in the northern part of
she state are borrowers. The country
is comparatively new, and the people
there must draw on the people Of the
rest of the state for funds. In the
southern part of the state the people
have more money than they need, and
the establishment of such central
bank would bring these two parts OF
the state together and be beneficial to
the people of both sections.
"In the central bank the excess Of
earnings, after the payment of the run
ming expenses, should go to create a
fund to insure the payment of the de-
posts in the state banks. The saluta-
ry effects which would be produced
among the people by the knowledge of
the existence of such a fund are too
apparent to require explanation, as
the removal of all fear of losing their
deposits would remove the cause for
their withdrawal in times of financial
stress. !.-..H
''Such bank would prevent a re-
surrence of the conditions which pre-
vailed in October, when the depositor-
les of the country banks refused to
furnish the latter with currency. If
such a condition should arise again;
and the people should be as badly
scared as the bankers were, most
serious condition would arise if the
present system were maintained. With
central bank in operation at such a
time the state banks could be brought
together and if necessary 800, 100000
or more of collateral could be taken
to the treasury officials at Washington
and $40, 900, 900 Or 10000, 900 secured
which would be sufficient to tide the
banks over any crisis. For money
advanced in this way the government
might charge small rate of Interest
the treasury as soon as the need for il
has passed.
1.-The proposal to have the fedora
government charge interest on the
money deposited in it's designated de-
positories [ believe to be radically
wrong. In the first place, the govern
ment should not withdraw from circu
latiOn such large amount of money
as it represents an excess of taxation
over that required to meet the demands
Of the government, economically ad
ministered. It certainly would not bt
right for the government to charge thu
people interest for the use of thei]
own money taken from them by mean!
of excessive taxation.
1.-The central bank would also be o
great convenience to the country bank!
during the early fall, when they de
considerable rediscounting. During
those months the country banks art
under a heavy demand for money, ant
they must hypothecate some of the Sc
eurities which they have been holding
in order to meet this demand. Thi!
business could be readily and profit
ably handled by the central bank. "
Under Mr.. Schaefer's plan all the
stock in the central bank would bt
held by the various state banks of the
state. This would necessitate ar
amendment Of the state law, which nov
prohibits banks from owning stock il
other corporations.