Albuquerque citizen. [volume] (Albuquerque, N.M.) 1907-1909, 1908-09-25


itors can secure their funds only when
the management is successful, cau-
tious and conservative. The SUBJ
stance OF the whole matter is to be
found in the character Of the man
agement.
"a question which arises is: Do the
banks recognize the fact OF their
quasl-publie function, and that they
must give security to depositors for
exercising good Judgment ia making
loans with the knowledge that the
stockholders will suffer a heavy loss
in case of error or fraud? / answer,
unequlvocally, they do. In fact, the
childish ignorance shown by the ad-
vocates of insurance of deposits in no
part of their argument appears mote
amazing than in not knowing that the
banks now put up very large fund
as security of depositors-
There are only two possible ways
of using guaranty fund; either for
ultimate or for immediate redemption
of deposits. Is it 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 de-
positor and loss. Only after the MIS-
judgment OF a bank has destroyed It's
| capital, surplus, profits and share
| holders liability can the depositor
suffer loss.
In view of the small loss to depos-
itors in over forty years of the ma
tional bank system. which is only one
! twenty-sixth of one per cent per an
mum, the advocates of guaranty
fund make the further exhibit of ig-
noranoe as to banking operations Sy
saying: If this loss is so small. why
not go further and give US absolute
security?
Absolute security, indeed! AS II
anything in human affairs Is capable
of absolute certainly. Men are not
yet perfect and bank does business
with falliole human beings. A boz
rover of a bank, when in the midst
of important operations, may die; a
house borrowing OF a bank may have
an embezzling official; a financial de-
preston may oblige banks to continue
loans rather than force failures, and
yet, in view of all these things, the
banks are asked to give absolute Sc
curity. Why not ask a clergyman IN
becoming pastor or church to give
absolute security that no one in MS
flock will ever tell lie, commit an
error in conduct or go to hell fire? :?
Why not make the doctors give a
guaranty that no patient shall ever
die?
Banks or any other business en-
terprise can no more promise abso-
lutte security than father can prom
ise the rIoon TO u spoiled baby. There
.nFsII lxnyaxy lNn ,t-lyC a
are fallible. That management is best
which makes the least mistakes. II
you require absolute security you re-
quire commercial banks to become
safety deposit vaults. There is no al
tentative. The man who demands alb
so.ute security writes himself down ~
foolish visionary, ignorant of prac-
teal business methods.
'The scheme TO insure deposits re-
quires all banks, good and bad. to
contribute to a fund to pay off de-
positors in Institutions that have failed
The more successful the bank the
more 1t must pay into the fund; the
less successful the bank the less II
pays into the fund. The successful
are TO pay for the mismanagement OF
the unsuccessful. If a burglar roos
another mans house, go to the mosl
honest man in the place and rob him
to pay for the loss of the other man;
ii Will increase the eagerness of al
, men to be honest and discourage
: burglars. The scheme is perfect; il
: would work perfectiy--in an insane
asylum. Mr.. Bryan has we'll said, and
: we must all agree with him: One oi
t the things L want to see adopted In
the form OF regulation of banks II
} the near future, is the law that Wi,
= put the penalty on the right man and
= not on the community If the Eng
e lish language conveys meaning clear
a ly those words mean that Mr.. Bryan
a favirs penaliZing the man who cheat
Y ed his depositors by bad loans anC
= not the man who protected his depos'
itor by safe loans. If that is the cas'
= ii is logical to suppose that Mr. Bryan
= is radically opposed to the guarant!
t Of deposits. Ine only way to contr
[ the initial act of each bank whei
e making a loan is by increasing the re
n wards to sound and conservative
d banking. 1t cannot be done by say
5 ing that il bad loans are MADE, n
Z, penalty for them shall fall, not on tn
: unwise banker who made them bu
+ ON the innocent ana wise bankers wh'
+ bad loans. That is dangerous politi
) cal, as wen as banking, morals. II
> suggest that sound banks should pa
= the customers of unsound banks T.
= cases Of failure puts the responsible
d and the penalty on the wrong pes
d sons and violates every principle o
: justice and fairness between men.
= The persistent failure to under
= stand the patent facts of banking
disclosed, also, in the contention tha
Il a guaranty system would discourag :
a reckless banking. Mr.. Bryan say
II Under this plan of secur ng the d.
y positor the stockholder loses all tn,
}; he has before any other bank loss
.e anything. Not only does he lose a
ID his stock, but he also loses the per
I. atty that the law fixes, and the los
g of the stock and the penalty al
r enough to make him exercise care
n 1t really amazes one to find anyon
so ignorant of our national system q