The Birmingham age-herald., 1908-09-16
Congressman Gaines Shows
 How System Is Operated
SAFEGUARD IS PROVIDED
MT. Gaines Gives the History of Banks That Have Been Conducted On Guarantee Plan and the Result
 to the Depositors.

The policy, practicability and wisdom of guaranteeing the payment of bank de- posits are well demonstrated in the won derfully successful operation of the State Bank of Indiana and it's successor. the Bank of the State of Indiana and their several branches, authorized by the leg fslature of that state in 1854 The char ter, in part, provided: That said bank and each and every branch thereof, shall mutually be responsible for all debts, notes and engagements of each other. The said bank shall not at any time sus- pend, or refuse payment in gold or in silver of any of its notes, bills or obliga- tions due or payable, nor of any moneys received upon deposit; and if said bank at any time refuse or neglect to pay any bill, note, or obligation issued by such bank, if demanded within the usual banking hours, at the proper branch where the same is payable according to the contract, promise or understanding therein expressed or shall neglect or re- fuse to pay on demand as aforesaid any moneys received on deposits, to the per son or persons entitled to receive the same, and in every such case the holder of any such bill note or obligation or the person or persons entitled to demand or receive such moneys as afore- said shall respectively be entitled to receive and recover interest on their said demands, until the same shall be fully paid and satisfied at the rate of 12 per centum per annum from the time of such demand as aforesaid and any branch so failing to meet it's engagements may be closed as in case of insolvency.
 Every Safeguard. It provided every sane safeguard to avoid any probable evil overriding the bank, it's branches. the depositors and the people of the state.
 Hugh McCullouch was a branch of- ficer, and later president of this bank or its successor. the BanH of the State of Indiana. He was afterwards comp troller of the currency under Secretary Chase, and later Secretary of the Treas ury.
 In his book, Men and Measures he speaks of this charter thus:
 Tn nothing was the wisdom, the prac l tical good sense, of the representatives 1 of the people of the State of Indiana, in legislative assembly more strikingly 1 exhibited. tkan in the charter of this l bank"
 l John Jay Knox, former comptroller of l the treasury, in his book, History of Banking speaks of the remarkable sue cess of this bank
 "The State Bank of Indiana, and it's successor, stood all the test of financial panics from 1884 until the banks were all absorbed by the national banking sys- tenn by not closing their doors for minute or losing a dollar to bill-holders, depositors or stock holders. It is the proud distinction for Indiana that it's state bank was long the model bank of the country So well was it's affairs managed that in a period of 22 years of actual business, the prifit to the state on it's $SOO,- GOO to stock amounted to $S,5Oo,Oo0.
 McCulloch gave the reasons for the success of this bank, some of which were:
 "The stockholders of each bank was liable for the debts of the other branch to an amount equal to the par value of their shares and each bank, although inde- pendent in respect to its profits was liable for the debt of every other branch. This responsibility of the branches created a
 
 of excellent results. No branch could make a wide departure from the line of prudent banking the other banks being responsible for its debts, without being subjected to a rigid overhauling and in curing the risk of being closed
 In 1863, when the branches of this bank were privileged to become national banks, it's president, in his report, stated:
 'There is no disposition on the part Of those who control 1t to abandon the char ter to embark in a new and as yet untried system"
 Sound to the Core.
 This bank was sound to the core" said McCulloch. In 1861, it issued this statement:
 Under no circumstances would this bank suspend specie payment. We have frequently given the people of the state the pledge that our notes should all ways be convertible into coin. This pledge we shall in good faith, full fill"
 If A state bank, with such a char ter, can make such a splendid record as this, protecting the state. the de- positor and the people from all loss, promptly paying its obligation, deposits and all on demand, should 1t be ser iously contended that the United States, this great government, with one na- tional bank system, cannot, or should not, enact a law guaranteeing the prompt pay ment of deposits. If to protect the gov ernment and the people against losses from national bank issues and keep them going it is necessary for these banks to put up government bonds in the treas ury, why should not the depositors also be made safe and all business proceed straight along. The depositors, in part. at least, pay the interest on these bonds which the banks own and also pay in- terest to the banks when they borrow their national bank notes or other moneys If the nation and the states and their b-divisions demand and get security for their deposits, why should the helpless depositor be given no spe- cial guaranty?
 State Rank.
 In 1845 the legislature of Ohio passed an act authorizing a state bank and forty or fifty branch banks. It has splen- did record, similar to the state bank of Indiana. The Ohio law imposed tax of 10 per cent on the circulation, care fully limited and guarded. of each branch. This tax was paid before the circulation was delivered, by the 'board of control" It was paid in money. or Ohio, or United States stocks and created a safety these notes and their redemption, in case a branch became insolvent In writing on this subject, MT. Knox said; "The banks authorized under the law of 1S45 Safety fund law), and 1851 Gree banking law), were uniformly successful and furnished a currency for the peo- II L. .f-t~