The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1908-08-28

difficult to frame a law under which state
banks can avail themselves OF the advan-
tageS or a federal law guaranteeing the
deposits OF national banks. just as II was
easy in Oklahoma to frame law which
permitted national banks to take advan-
tage or the state guaranty system. 1t will
also be easy to enact federal law which
1 Will permit national banks TO avail them
| selves OF state guaranty systems until
| national system can be secured. Attor-
ney General Bonaparte's ruling whether
1t correctly interpretS the law or not,
would not bring such CONSERVATION as il
| does if the Republican candidate favored
a law allowing national banks to take ad-
| vantage of state systems for the protec-
ton OF depositors. but Mr.. Taft's hostil-
lty TO all guaranty systems is shown in
! the objection which he offers:
Taft Predicts Disaster.
! THE proposition is to tax the honest and
, prudent banker to make up for the dis
| honesty and imprudence of others. No
one can foresee the burden which under
/ TINS system would be imosed upon the
sound and conservative bankers of the
country by this obligation TO make good
the losses caused by the reckless, specu-
latlVe and dishonest men who would be
enabled to secure deposits under such a
system on the faith of the proposed in
surance; as in its present shape the pro-
poSal would remove all safeguards against
Irecklessness in banking, and the chief, and
| IN The end, probably the only. benefit
would accrue to the Spectator, who would
| be delighted to enter the banking bust
ness when it was certain that he could
| enjoy any profit that would accrue, while
the risk would have to be assumed by his
| honest and Woodworking fellow"
| He even pictures dire disaster and de
! clares that If the proposal were adopted
exactly as the Democratic platform sug-
gests it would bring the whole banking
system of the country down in ruin
As an afterthought he suggests that
voluntary system might be tolerated, but
as his objections TO a compulsory system
apply just as well to a voluntary sys-
item We may fairly count him against all
legislation which has for tbs object the
guaranty of depositors-
AS Mr.. Tafts argument is that presented
by The big banks which put their own
selfish interests above the welfare of the
depOSitOrs and the safety of the commun-
ity. il is worth while TO answer the sew
eral propositions which he advances.
Let us take the first sentence, that the
honest and prudent banker would be taxed
to make up for the dishonesty and impru-
dence of others" Is not this true of all
restrictions on banking? Does not the
honest and prudent banker under existing
laws suffer in order that the depOsitor
may be protected from the dishonest and
imprudent? If we had no banking laws
at all, and banking was done by private
individuals. the honest and prudent bank
er would save the money that he now pays
for enforced examinations of his bank, and
he could at times make interest on part
of the money which he is now required
to keep In his vault as a rigid reserve.
But because some bankers are not pru-
dent, these laws place a burden upon the
good as well as upon the bad II being diff
ficult to distinguish the prudent banker
from the imprudent one until bank &C
tually fails.
In like manner it might be said that if
all people were careful about fire, fire
insurance rates need not be high as
they are. but the careful have to pay
higher rates than they should because
some are not careful. Life insurance rates
are higher than would be necessary to
cover the actual risk if everybody took
care Of his health, and here, too the eau
tious are burdened because some are
careless of their health All insurance is
open to the same objection. and yet in
Surance of all forms is growing, and the
insurance of depositors is growing In pop
ularity more rapidly than any other form
of insurance-and, ! may add. it yields the
largest return on the investment.
The Record of Mr.. Taft.
Mr. Taft complains that mo one can
foresee the burden which under this sys-
tenn would be imposed upon the sound and
conservative bankers of the country by
this obligation to make good the losses
caused by the reckless, speculative and
dishonest men, etc. We have the past
to guide us, and we have reason TO be-
lieVe that the loss will be less in the fu-
ture than in the past, because when banks
become mutually responsible for each 9TH
er's deposits they will be sufficiently in
terested in each other to favor better reg
ulation and greater restrictions.
y What has Mr.. Taft done to protect y
y depositors from recklessness and \
+ speculation? While he refuses to pro- \
= tect depositors, he praises the Aid \
y rich-Nreeland law, which invites y
y speculation and stock jobbing. In de- \
= claring that the system proposed by y
+ the Democrats would remove all \
y safeguards against recklessness in \
y banking" Mr.. Taft betrays an ignO- \
Y rance of the subject, for the plan =
y safeguards. In fact. II contemplates \
\ stricter regulations OF the banks. and y
y Oklahoma has already made the =
\ banking regulations stricter. y
He declares that 1.-The only benefit would
accrue 10 the speculator. who would be
delighted to enter the banking business |
any profit that would accrue. while the !
risk would have TO be assumed by his !
honest and hard-working fellow" The !
present banking law requires that a GER
tain amount of capital shall be invested |
in the business, and that law would still |
stand. To enter the banking business, |
therefore, a man would either have to |
have the capital himself or secure the |
confidence of men who had the capital |
And this capital together with the 100 per /
cent liability, would be a guaranty that |
select careless officials. Why would a |
''specuatOr'' be delighted TO enter the /
banking business under the guaranty /
system? He is not relieved from pecu- /
MARY obligation, nor is he relieved from /
criminal liability. He would have Moth /
ing 10 gain by carelessness. nor would the /
stockholders have anything to gain by in I
The chief cause of bank failures is the /
making of excessive loans to directors or /
officials of the bank. This is the fruitful /
cause Of disaster and ii has been impos- /
sible to secure legislation protecting banks /
from their own officials and directors. /
Why? Because there has been no mutual !
When all banks become I
liable for the deposits of each. the stock /
holders will insist upon the enactment OF /
a law making II a criminal offense for a /
bank official to loan more than the pre- /
scribed amount to one individual At pres
ent We have a law prohibiting the loaning |
of more than one-tenth of the capital and |
surplus TO one person or corporation, but /
the law is only directory. OF course, the |
can suspend a bank if it vio- |
lates the law but the law is not enforced. |
because the enforcement OF such a law |
would throw the punishment upon inno- /
cent stockholders and upon the COM
munity. since the suspension of bank in