Omaha daily bee., 1908-09-26
HILL WRITES TO BANNERS


CONTINUED from First Page.)
change and the menace Of Increasing un-
rest without injury not only TO itself ana
whole country and the fortunes Of Its
every citizen.
LnuRhIin on Guaranty.
Professor t.aughlin spoke on THE Guar
anty of Bank Deposits and in opsnlnl
his address said;
The argument in favor Of insuring de
poslts is addressed to two class of PERSONS
first, the depositors; second, the bankers
and stockholders In banks.
In this country there are persons who
are willing to set class against class, to
stir up antagonism between interests which
are really bound together, provided they
can thereby create political issues on which
they can be voted into office. Now, an
attempt seems to be made to set the in
t~erests OF 10000 depositors Of our coun-
try against those OF the 100000 OF stock
holders In banks. In truth. their interests
are bound up together; the loss of one is
the loss OF the other. No antagonism ex-
lists between them, and the only eXplana-
tion OF an attempt to create such an an
tagohism must be due to the supposition
that there are Is, 100000 votes among the
depositors and only 100000 among the
bank stoekholders-e supposition so incon-
ceiYable to a loyal American that we must
dismiss 1t at once. The solvency of a bank
Is dependent on the s~olvency of the bust
hess men who are its customers and Dor
rowers, and the depositors whose funds
are loaned are no more interested in the
solvenCy Of these business men than the
a Itself. The passenger on a steamer
and the owners of the steamer are equally
Interested In not having the steamer sink.
So it is with the depositor and the bank.
II IL said that 1t is the depositor who
makes banking profitable. Here appears a
misconception as to the banking business.
In reality, the deposits are only the raw
materials for profits; they must be wisely
ana mENlNrNlIN nnnHh ~ nNnUAA1 ~
there would be not only no profits, but
even losses. To have a profitable result
we need skilled labor to work up the raw
materials not only In industry but In
banking. The mere existence of capital
does not insure profits; everything de-
ponds upon what is done with the capital.
In banking we shall see that practically
everything depends upon wise, honest and
capable management.
People deposit in banks voluntarily be-
cause they get privileges In return. The
banks provide the most convenient, least
expensive and most generally used me-
dunn of exchange ever devised, by which
land, and all the expense of this book
keeping is usually given free TO the de-
positor. All the monitary services Of the
general government, all the issues OF every
kind of paper money, do not begin to COM
pare with the work Of exchanging goods
done by the banks and clearing houses
through checks drawn by depositors on
their accounts. Take that way from the
p%ositors for twenty-four hours and the
whole trade of the country would be par
alyzed, and yet there are persons so ignor-
ant as to say that depositors are not
given anything in return by the banks.
The ignorance of commercial banking
shown by the advocates of a guaranty OF
deposits goes still further when they de-
mand such a guaranty on the ground Of
justice to .depositors; that they ought TO
have a place wherein they could leave
money and get it again whenever they
want IL. If a depositor wishes these things
without the privilege of a commercial bank
he can put his money In a safety vault.
In a commercial bank it is never pretended
that II all depositors wanted their money
they could get It. Why? Because a com
mercial bank could not exist If II did not
invest funds deposited with it. A solvent
bank can always meet cash demands II
given suitable notice of what is coming.
Yet the agitator, who does not seem to
know the difference between a safety
vault and a commercial bank, asks for
what Is humanely impossible, as a matter
of Justice. He asks that banks should re-
ceive the deposits, but in the same breath
he asks that they should never do any
thing with them. Justice is given when,
and only when, the banks invest in sound
assets, and all depositors can secure their
funds only when the management is sue
c~essful, cautious and conservative. The
substance of the whole matter is TO be
found in the character OF the management,
Give security w.
A question which, arises is do the banks
recognize the fact of ftneir quasi-public
function, ard that they Ifgltst, give security
to depositors for exercising good judgment
In making loans With the Knowledge that
the stockholders win suffer a heavy loss
in case Of error or fraud? I answer, un-
equivocally, they do. In fact the. childish
ignorance shown by the advocates OF in
surance of deposits In no part of their argu-
ment appears more amazing than in not
knowing that the banks now put up a very
large fund as a security for depositOrs.
There are only two possible ways OF
using a guaranty fund; either for ultimate
or for immediate redemption of deposits. Is
Ii conceivable that the political orators do
not know that there is already a guaranty
fund for the ultimate payment of deposits?
The capital, surplus and undivided profits
is today the buffer between the deposition
and loss. Only after the misiudgment of
a bank has destroyed its capital, surplus,
profits and shareholders liability can the
depositor suffer loss.
In view of the small loss to depositors