Mexico weekly ledger., 1908-10-01

The United states government requires
the deposit OF specific security when II
e~ntrusts money to a national bank. al
though 1t can examine the bank at any
/ time; the state requires security when
. ii deposits money in a bank; the county
requires security and the CITY reqoires
ity from the officials who handle money
Why should the depositor be left 10 take
his chancesf
} Not only is the depositor without pro-
lection, but the security given to nation,
state, county and city lessons his Sc
curity. They are preferred creditors
they have a mortgage on the gilt edged
assets and the depositor must get along
as best he can with what remains. Why
are the interests Of depositors thus neg
A bank asks deposits on the theory that
the depositor Is sure of the return of his
money, and the laws ought to make me
facts conform to the theory. The de-
positor, the community and the banker
himself will be benefited by Legislation
which will give to every depOsitor the as
surance that hat which is committed TO
the keeping OF the nj will be available
TO meet his needs at any time. Such Is
not the case today, for while all banks
are reasonably secure, they are not alb
solutely so. This statement can be verb
fed In several ways.
First: The President has advocated a
postal aving bank. and his postmaster
general, In presenting an argument in its
favor, pointed out that many millions are
sent TO European savings n every
prefer to trust the state institutions of
the nations beyond the sea rather than
the private banking Institutions here.
Second: It is known that a considerable
amount OF money Is in hiding, the
amount increasing with the approach Of
a panic or business depression. This
money Is not only withdrawn from ac-
tive use, but is likely to be Withdrawn
I 49, - 49, kl-.- --AA- 80. l. w.,af
needed and when the withdrawal will In
crease the financial disturbance. Ii Is
impossible to reason with fear IL Is futile
to tell men that they will probably get
their money. The moment the depositors
suspect a bank, they hasten to destroy
its solyency. Distrust, and distrust
alone. can explain the hiding of money.
Third: The increase in the issue OF
money orders, payable to the order OF
the purchaser. II another evidence that
people are seeking greater security for
their money. The banks will pay an In
terest upon deposits, and yet those who
buy money orders prefer to lose the In
terest and. in addition to that, pay the
price OF the money order 70 secure the
governments guaranty.
Fourth National banks confess that
their banks are not secure when they
oppose the guaranty Of state banks on
the ground that II would lessen the de-
posits In national banks and state bank
ers confess that their banks are not Sc
cure when they oppose a national guar
anty system on the ground that Il will
draw deposits away from state banks.
II you want to find whether banks are
absolutely secure. ask the directors to
give you their personal note to secure
your deposit, and you will learn that
they will not bear the risk which they
ask you to bear.
Fifth: The experience Of Oklahoma
furnishes conclusive proof that deposit
tors do not feel that their money is safe
I r. - ~ ~ EEL - ~
cember, 1907, the Oklahoma legislature
enacted a depositors' guaranty law, which
became operative February 4th, 1908. By
the provisions of This law, all state
banks, and as many national banks as
desire to avail themselves Of the law,
are taxed one per cent on their deposits,
and the money thus collected is put into
a guaranty fund. II banking board. Is
authorized to make additional assess
ments from time to time to keep the fund
up to this amount, and is directed to
take possession of any insolvent bank,
pay the depositors In full. and reim-
burse the fund by collecting the assets
of the failed bank. Five hundred and
ffty-hve banks, including hfty-four ma
tional banks, had come under the pro-
visions of this law on the 18th of last
May, leaving but 255 unsecured bank
(all nationally in the state. Statements
are made by the banks in December and
/ May. Between these periods the secured
banks gained In deposits "a, 237, 1922,
while the unsecured banks, all national,
showed a decrease In deposits of 81, 10l,-
S0T.S6. A large part of this increase rep
resented money brought from hiding or
from without the state, but the decrease
In the unsecured banks can only be ex-
planned in one way. A large number of
depositors withdrew their money from
the unsecured banks, and deposited II in
the secured banks, and this. too, in spite
OF the fact that in order to prevent with
dinwalf. the unsecured banks, in some
I tnnt0AAAn AHARn1 n kI-AA- q -
terest than the secured banks were per-
mitted to pay and 1t must be remembered
also that the banks which suffered a loss
Of deposits were all national banks. And
to make 1t certain that the difference was
caused by the guaranty law, the secured
national banks gained, while the unse-
cured banks lost. While the deposits
were increasing in the guaranteed banks
o. oklahoma, they We're falling in the
state n and trust companies of Kan
sas-the decrease being 81, 15s. O26.Z7 be-
tween March s1st and June 18th.
No amount Of criticism Of the timid de-
positor can change the facts: the people |
who deposit money want more security
than the avs at present give them.
They will change banks to get more se-
unrlty, and, II necessary, they will send
their money to another state,
For many years efforts nave been made
In Congress and In the various states to
| secure a Law guaranteeing deposits, but
the Influence of tho great banking insti-
tutiOns mas Deen sunteient to prevent &C
tion. Last fall. however, when the
banks, by a concerted action, suspended
payments on checks, the depositors were
| everywhere brought to a realization OF
the fact that their deposits are. In fact,
loans, payable on demand under ordinary
circumstances but payable at the viii
Of the bank in emergencies. The deposit
tors suffered a considerable loss during
the suspension of payments, and they
have not forgotten the lesson which they
then learned. The Democratic party. be-
Ing more free than the Republican party
to respond to the needs OF the messes
OF the people, inserted the following
plank in Its national platform:
we pledge ourselves to legislation by
which the national banks shall be re-
quired to establish a guaranty fund for
the prompt payment OF the depositors of
any insolvent national bank. under an
| equitable system which shall be avail
able to all state banking institutions
wishing to use L."
This principle has been applied in Ok
lahoma and the results have been very
satisfactory. The average annual loss to
depositors in national anks during the
last forty years has been less than one-
tenth of one per cent Of the deposits, and
the loss to the fur in Oklahoma, under
better regulations and restrictions, has
been absolutely nothing during the six
months In which the law has been in
operation.
The Republican platform Is silent on
the subject, and the Republican candi-