The Columbus journal., 1908-09-30
INHERENT WEAKNESS.

-
the presidential campaign Is . bank
guaranty deposit Law. Both the Re.
publican and Democratic state plat.
forms contain such a-plank, and the
most Of the papers and politicians
over the state favor it. Still, like all
other paramount issues" there are
two sides to it, and the defects in the
Oklahoma law, and any such law,
have been pointed out by Thomas p.
Kane, deputy comptroller Of the cur
rency. Mr.. Kane says the idea did
not originate with the depositors, nor
with the conservative, conscientious
end reliable bankers, but With those
bankers who are too keen for business.
He draws attention to the fact that the
first guarantee deposit law originated
in . new state where . high rate Of
interest is collected on loans, and
where high rate of interest is paid on
deposits. Here is his statement Of
Oklahoma banking conditions:
"The legal rate of interest in the
state Of Oklahoma is z per cent. The
contract rate is IL 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 passage
Of the act of congress of March IA,
1900, providing for banke with q
minimum capital Of $4,000. There
are in Oklahoma at this writing 3O7
national banks, 217 of which have .
capital each of less than $4,000.
Competition among this class of hanks
is keen. A rare number of these
banks pay 6 per cent on deposit, and
receive IL per cent per annum on some
loans, and from 2 to 5 per cent per
month on others"
With the other banks of the state
for his deposits the inju.
dicious banker can offer a high rate
Of interest to depositors, and will then
have to take doubtful loans to get his
money out. If he fails, the reliable
banks will foot his bills. "The logical
effect Of such . system Is the Okla. |
homa guaranty law" says Mr.. Kane,
lis to require the strong bank to stand
sponsor for the weak; the conservative
y managed for the speculative insti
tuition. Personal equation, an import
ant factor to be considered in the
banking business, is eliminated entire
y, and so far as the depositor is con-
,erned, inexperience, incompetency
md recklessness count for as much As
conservatism and reputation. The
,elative strength and stability Of a
,ank would not concern the average
lepositor. He would regard his funds
y safe in the wildcat bank as in the
ound and sanely managed institution,
,ecause banks of the latter class under
compulsory guaranty law would be
to the extent of their un-
,nown liability for any deficiency in
ssets in excess of the deposit liabili-
les of the former concern. In add.
ion thereto, the selfreliant banks
vould suffer the loss of business di.
'erted to the speculative or iDoom-
'etently managed institution, which it
vould not have obtained but for the
on6dence inspired by the security of
he guaranty.
at is not the function of the gov
state or national, to guaran.
= deposits in the banks any more 4,
han it IL to insure the business ven.
lres Of the individual, company or
in any other investment
: risk. Neither is it the legitimate 8
motion Of banks to insure or guaran- !:
: the deposits Of each other. !
ut il claimed by some Of the advo- .
ties Of this policy that because the ;
ate and national government exact 3
; banks security for public funds,
ut the depositor should be likewise e
cured. An individual has the same &
ght - the government to require e
curly for his deposit, but neither the Z
'vernment nor the depositor has any u
yht to require one bank to guarantee :
deposit in other banks. A hank 9
~ lawfully and legitimately guar
ty its own obligations, but it hes no q
,ral right from IN economic point Of q
~ to guarantee the obligations of 81
other party, hank or individual. =
oh . policy based, it would be, upoa z