New-York tribune., 1908-09-22
yFW yORK-s EXPERIENCE,

Reference has been made more than once
during this campaign 10 an early experience
%exv York State had with the guaranteeing ot
hank denosits Mr.. Taft has referred 10 IT, MI
Brvar foo has been compelled to notice H.
5anvinr we believe that it was guarantee "I
deuosits and asserting it 10 be one OF panA-
notes only
The New York system was the so4'aIlru
safety fund" familiar to all students OF pallh-
ing history II was a guarantee both OF me
notes and the deposits of banks. II was suS-
gested in 1929 TO Governor Martin Van bureh
hz Judpe Joshua Forman. of Syracuse. who
,--o,a that the idea occurred to him from MS
aco1laiprapce with system Of mutual Suaran-
tees of credit in vogue among the Hong hohe
merchants After some discussion il was enacted
into Law with the provision that the fund shouia
b,. made up from tax OF one-halt per cent "i
their capital stock upon all banks Thereafter
chartered. to ba paid annually until the coli
1rfbutions should be equal 10 : per cent Inc
first failures of safety fund banks occurred III
1871. when three went under. The Legislature
then passed law making two-thirds OF the
fund available 10 nav the notes Of the suspended
hanks at once and the other third was reserved
10 meet the other liabilities Of the banks in
excess of their assets, when determined Their
elehts were thus paid and likewise those OF two
other hanks which collapsed soon afterward
The system met It's first severe test in 1S4O A.
during which years eleven safety fund banks
failed The debts Of the first three exhausted
the fund and three years later the annual tax
on the hanks had NOT been enough TO pay off
creditors. So that the state sold 100000 Of lis
own stocl, 10 meet claims under the guarantee,
As a result of the experiences Of bank crashes
in 1870 and the two years following. the law was
so amended as to give the note holders of failed
banks first lien upon the fund. The system
continued thus for several years without fur
ther serious troubles. With change in the
principles under which bank charters were
granted in this state however, and gradual
expiration of the safety fund charters ii finally
died out Such briefly. was the history of guar
auteed deposits and guaranteed notes in New
York.
Now II Is TO be observed of course. that New
Ycrk's earIy safety fund moi perfect
rar.,llel of Mr. Bryans scheme of guarantee
for oepositors Mr.. Bryan would probably OBJ
iccf that II was wrong because II guaranteed
notes as well as deposits. although the expert
epcp Of the people was that il was chiefly
yainablp rs n guarantee Of the notes. thus pre-
venting hardship among the so-called 'invonn-
tary creditors" of the banks. and they gladly
changed the system 80 10 give the latter
arst lien on the fund. Then. too. ii would prop
ably be objected that the safety fund, being
based upon a tax on capital stock instead OF
deposits bore no due relation 10 the amount ot
a banks liabilities and that Mr. Bryan's gulr-
antee fund would have such a relation. These
objections would be serious If an attempt were
made Ia prove perfect parallel
But New York's experience is chiefly valuable
as sADglns that a guarantee fund viii not a.