Monroe City Democrat., 1908-10-08

n.
full cause of disaster, and it has been
/ impossible to secure legislation protect
ing banks from their own officials and
directors. Why? Because there has
been no mutal responsibility. When all
banks become liable for the deposits of
each, the stockholders will insist upon
the enactment of law making It
criminal offense for a bank official to
loan more than the prescribed amount
to one individual. At present we have
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 comp
| troller can suspend a bank IL it violates
| the law, but the law is not enforced,
because the enforcement of such a law
would throw the punishment upon in
| nocent stockholders and upon the COM
| munity, since the suspension of a bank
intiicts great loss upon stockholders
and disturbs the business of the city or
| town in which the bank Is located
The law should make 1t a criminal Of
tense to loan more than the prescribed
, amount to one person, and we would
of law prohibiting market speculation
| by bank officials.
The Oklahoma plan Is working satis-
factorily. A bank recently failed in Ok
lahoma; within forty-eight minutes af-
ter the notice of suspension, the officer
/ in charge had authority to pay all de-
positors, and then the banking board
proceeded to collect the assets of the
Il
nally. When the business was closed up,
| the stockholders passed a resolution
thanking the state board for its prompt
action. the action of the board being a
to the depositors and to the public gen.
orally.
Compare this failure under the guaranty
! system with a failure where there Is no
guaranty. In Oklahoma the bank COM
missioner telephoned the farmers to
come in and get their money, and the
answer was: Il am busy today with my
crop; will be In in a day or two"
| In Cleveland, Ohio, a bank failed about
! the same time, and the papers announced
| twelve hundred infuriated Italians
| stormed the closed doors of the busted
banking house of Costan Liopea, on
Orange street, today. The police drove
| the crowd back"
An objection is sometimes made to the
| able to promise its depostors absolute
| security through the guaranty law, could
draw the deposits away from conserva-
higher rate OF interest than the latter
| could pay. This objection is urged as IL
1t were an unanswerable one. But let
US see how easily it can be met. Since
the law makes all of the banks liable for
| the obligations Of each bank, the law
| should prohibit any abuse of this Sc
| curity by any bank and in Oklahoma the
banking board has already fixed the rate
1
| According to the rules of the banking
board, no bank is permitted to pay more
| than three per cent on short-time de-
posits or more than four per cent on
| time deposits running for six months or
/ more.
1t has also been urged as an objection
that under the guaranty system a big
fte ba1R Baen Il ths GVsT
| sound, it could not weigh against the ad-
vantages of the system, for banks are
made for the people, not the people for
| In having big banks, the advantages are
not sufficient to justify the jeopardizing
Of the depositor or Of the business In
| terests of a community.
| But, as matter Of fact, the big bank
| would still have several advantages over
\ the small one. In the first place, it could
make larger loans than the small bank
tai and surplus could, as at present,
loan 800. 900 to one person, while a bank
| with 800, 900 capital and surplus could
only loan SO, 900 to one person. This ad-
bank the large deposits and the men do
| ing business upon a large scale, for de-
posits follow accommodations.
| fThen, too, there is a certain business
advantage in depositing with big bank.
It is worth something to be able to refer
| to a big bank when ones financial stand
| ing is being investigated, and worth still
| more to have the advice Of a man Of
large business experience when business
| enterprises are being considered.
Besides these, there is a social advan-
tage in being on good terms with the
world. Surely the big banks prestige
| will be worth enough to it under the
| guaranty system; 1t should not begrudge
| the guaranty of deposits will bring to
! them.
I can not pass from this subject with
| out referring to the fact that the big
hs,v, At,a
| little one, for big banks fail as well as
| small banks, and the bigger the bank the
greater. the calamity to the community
when. it fails. No bank is so big as to
be absolutely beyond danger. and a
| community needs protection against the
big banks failure even more than against
the failure Of the small banks.
| 1t has sometimes been objected that
| the guaranty system would bring into
! the banking business a lower class Of
\ men and reduce the average in character.
On the contrary the guaranty Of de-
| difference in this respect, bring into the
banking business a better class of men
and raise, If that Is possible, the aver
discredit that he Is not willing that one
| Of his fellow men should lose. money on
| his account. Is it not mark Of char
\ acter that a man should be careful Of
| his good name and considerate Of the
esteem Of his fellows? At present a sue
| cessful farmer or business man may be
| induced to take stock In a bank. 1t may
| be that his name Is desired to give
| standing and credit to the bank, but
| such a man Is constantly haunted by the
| fear that a bank official may be guilty
of criminal conduct which will bring the
bank into insolvency. It Is even possible
| that the banks assets may be entirely
dissipated, and that the honest citizen,
| who has become a stockholder, may
either be compelled to go beyond his
legal liability or meet the bitter criticism
| of the depositors who have suffered by
| the failure. Would it not be worth
| something to the stockholder, in peace
Of mind, to know that the maximum Of
| his loss would be the value Of his stock
| and the 100 per cent liability, and that
| no depositor could lose anything? I am
| convinced that the guaranty of deposits
| would not lead to degeneration in the
personnel Of the bankers.
| To justify a law guaranteeing deposit
| tors, 1t is not necessary to show that the
| advantage to the bankers would amount
| to more than the tax. The examination
| of the banks would continue to be made
at the expense of the banks, even If 1t
were certain that the examination was
of no pecuniary advantage to the banks.
| The law would continue to require a GER
| tain amount Of reserve to be kept on
| hand, even IL 1t were certain that such
a law brought no pecuniary gain to the
| bank; and so the banks ought to be
compelled to insure their depositors
against loss, even IL 1t could not be
| shown that such insurance would bring
compensating advantage to the bank
The bank charter has value; II it were