The Montgomery advertiser., 1908-08-28

the past. because when banks become deposits they win be sufficiently in- | regulation and greater restrictions. i What has MT. Taft done to protect depositors from rscklessness and spe. | culation? While he refuses to protect 9epositors. he praises the Aidrich- Vreeiand law, which invites speculs- ton and stock jobbing. In declaring that the system proposed by the Dem | ocrats would remove all safeguards | against recklessness in banking" MT. | Taft betrays an ignorance of the suo-
 as of any D fae | 1t contemplates stricter regulation of the banks. and Oklahoma has already made the banking regulation strict- | CT.
 He declares that 'the only benefit would accrue to the speculator, who | would be delighted to enter the bank ing businesss when it was certain that 1 he could enjoy any profit that would | accrue. while the risk would have to be assumed by his honest and hard ing law law requires that certain fsin amount noun l of capital shall be invested in the busi- ness, and that law would still stand. | To enter the banking business. there | tore. man would either have to have l the capital himself or secure the con l fdence of men who had the capital. And this capital. together with the 100 per cent liability. | wopid o,a be a guar, | Intentionally select careless officials. | Why would a ''speculator' be "de- lighted to enter the banking business' | under the guaranty system? He Is not | relieved from pecuniary obligation, nor | is he relieved from criminal liability. He would have nothing to gain by I carelessness. nor would the stockh olds | CTS have anything to gain by indif- I ference.
 The chief cause of bank failures is the. making of excessive loans to di- 1 rectors or officials of the bank. This is the fruitful cause of disaster and 1t has been impossible to secure legisla- I ton protecting banks from heir own officials and directors. Why? Be- l sponsibility. When all banks become | liable for the deposits of each, the l stockh o1ders will Insist upon the en- spss os for law eanh makoS oSca # to 1oan | more than the prescribed amount to one individual. At present we have a law prohibiting the loaning of more | plus to one person or corporation. but l the law is only directory. Of course, the comptroller can suspend bank If it violates the law. but the law IS not enforced, because the enforcement of such a law would throw the pun
 ishment upon innocent stockholders and upon the community. since the
 loss upon stockholders and disturbs the business of the city or town in
 which the bank is located.
 The law should make 1t a criminal | offense to loan more than the pre-
 scribed amount to one person, and we | would probably be able to secure the
 passage of a law prohibiting market 1 speculation by bank officials.
 The Oklahoma plan is better. A
 bank recently failed in Oklahoma; ; l within forty-eight minutes after the
 charge had authority to pay all de.
 positors. and then the banking board proceeded to collect the assts of the bank and to prosecute the officials
 closed up. the stockholders passed & | resolution thanking the State Board I for it's prompt action. the action of the Board being a protection to the itors and to the public generally z
 Compare this failure under the guar
 anty system with a failure where
 the Bank Commissioner telephoned
 the farmers to come in and get their
 money, and the. answer was T am
 busy today with my crop; I will be in 1 Tn Cleveland O.. a bank failed about
 the same time. and the papers an- nounced. sTwelve hundred fnfuriated
 the busted banking house of costan I Liopea on Orange Street today. The
 police drove the crowd back
 An objection is sometimes made to the guaranty law that a new bank
 would start up across the street." and,
 being able to promise its deposftors ab-
 law. could draw the deposits away, from
 eonservatiySly managed banks. by of-
 fering higher rate of interest than the
 assss Iss soua F Ray Were This os5sSti9n s
 ane. But let us5see how easily it can
 be met. Since the law makes all or the banks liable for the obligatio of each bank, and in Oklahoma the bank ing board has already fixed the rate of interest that can be paid to depositors
 According to the rules of the Banking more than three per cent on short time deposits or more than four per cent on time deposits running for SIX months | or more.
 It has also been urged as an object. 4 ton that under the guaranty system Q big bank would have no advantage over little bank. Even if this argu- ment were sound, it could not weigh against the advantages of the system. for banks are made for the people. not the people for the banks. While there n not Sayng Sg to Sa1k s tify the jeopardizing of the depositor
 or of the business interests of a conn
 munity.
 would still have several advantages
 over the small one. In the first place,
 it could make larger loans than tls
 S1,000,000 capital and surplus could as
 at present. loan $100,000 to one person,
 while bank with $1oo.000 capital and
 surplus could only loan $10,000 to one
 person. This advantage would in It.
 self draw to the large bank the large
 deposits and the men doing business
 upon a large scale flor deposits follow
 accommodations
 Then, too there is a certain business
 advantage in depositing with a big
 bank. It is worth something to be able to refer to. big bank when ones finan. cial standing is being investigated. and worth still more to have the advice of man of large business experience
 when business enterprises are being | considered.
 Besides these there is a social ad- vantage in being on good terms with the men who are prominent in the banking world. Surely, the big banks prestige will be worth enough to 1t un- der the guaranty system; it should not begrudge the smaller banks the advant- age which the guaranty of deposits will 1 bring to them.
 l cannot pass from this subject with out referring to the fact that the big