The daily telegram. [volume] (Clarksburg, W. Va.) 1901-1926, 1908-09-29


come g he question whether 1 VII
realis help matters 7 s permissi
-pie nndef the national hankias a.
Tor banks % organize lth 1 capita
81 $4,000. N security which bank
orfer the deposifors epends upon III
amount pf capital, the amount 81 sur,
Plus and public conn ilefiee "a the 81,
Ulcers Of the Institution Under tit
proposed system the depnsitors ia 4
bank ~ $2b. 600 capifai ana NO s,ir.
plus and with officers Of hate cS-
perlence and indifferent. reputation
can offer the public exactly the same
security for the payment Of deposit,
! as q bank with capital OF $500.
600, q surplus Of $3.50, 900 and with
officers known 20 be honest and able
Depositors therefore, SO fag az IS.
curtty Is concerned, are as likely "a
make their deposits In the $4,000
bank as in the bank with the capital
OF $500. 900.
Is proposed to introduced Into
the law a Limitation as 10 the amount
OF Interest which under the system,
can be offered and paid on deposits,
This it ts said win prevent banks
from Offering excessive rates OF inter
est to obtain deposits. A Limitation
Of this sort Is difficult to Ak. because
conditions vary so much in different
parts OF the country. That which
would be high interest In one part OF
the country would be low in another,
and that which would be high inter-
est at one season and under certain
conditions would be low at another
time. Hence whatever Limitation is
imposed except when the normal i'm
terest ts, highest. there must always
be an opportunity for those inviting
deposits to pay higher rate than
that which conservative bankers
would pay.
Losses Would Increase.
If the losses were limited to one
twenty-sixth OF one per cent the
amount of the deposit would OF
course be small, and each bank could
readily pay 1t, although the prfnci-
pal would be an entire departure
from equity: but the effect OF a
guaranty system on the character of
banking would be such that the loss
es arising from recklessness would
greatly increase. and the tax must in
crease to meet the losses on every
bank In proportion. Instead of loss
equal to one-twenty-sixth of one per
cent annually It would rapidly in
crease in every financial stringency
"one of the great merits claimed
for the enforced guaranty of depos-
Its is that 1t will prevent panics. It
is sufficient to say that the plan pro-
posed cannot prevent panIcs. A PAN
ic is not stayed by the promise that
money will ultimately be forthcom-
ing. II can only be stayed by the pro-
duction of the money itself. When
financial strIngency Is on, 1t is the
cash the man needs. and to say that
he will get 1t next week certainly does
not assist him. No one who has heard
that his bank Is going to fail will de-
lay in Immediately applying for his
money merely because he Is assured
that some time in the future he win
get it. Therefore the system could
not stay the panics unless the fund
were lare enough to enable the
banks to pay all of their deposltors at
the time Of the run. The tax is pro-
portioned only to the loss sustained
after liquidation and payment, so
that the funds would be utterly in
adequate to meet the demand for
ready money which would prevent a
panic. The total deposits of the ma
tional banks are $5,000,00Q, 900. One
half of one per cent upon that and
this is a much larger percentage
than proposed, would make a fund
of S25,000,000. The amount OF mon
ey that was needed to stay the late
panic in New York banks alone was
many times this sum. In other words
the cash needed to stay panic II is
impossible to accumulate in. any other
way except by such emergency
measure as is provided in the AL
drich-vreeland bill in which banks
are given an opportunity upon prop
er security to issue $500, 900, 900 to
meet such an emergency, and are
prevented from evor-issuing by the
imposition of heavy tax Of FIVE per
cent.
Destructive Tendency.
II think that have shown that
the tendency OF the system proposed
would be to destroy the high charac-
ter of the present banking system.
This Is not, however, to be taken as
an argument that the security OF de-
posts Is not good thing. and is not
to be brought about as fully and per-
fectly as possible. 1t is only to show
that the method here suggested is a
plausible by sophistical method that
will not accomplish the purpose, but
will ultimately increase the losses
from bank failures.
The case of Oklahoma has been cited
as an instance to justify the Demo-
cratic platform. The system has
been in operation only since March
of this ,,hnr No manic or nthar