Audubon Republican. [volume] (Audubon, Iowa) 1894-1925, 1908-10-01
items before depositor can lose .

items before depositor can lose .
cent.
For all the GIFTS national banks, ac-
cording to the accounts of May IA, 1908,
this guaranty fund amounted to ST..
934,470,5S2.
As things now stand, the self-interest
of the bank is enlisted to do its business
honestly, and thus insure the deposit
wrong. What more can be done for the
depositor? To this the depositor may
say: I'VE don't wish to wait until the
bank pays off its depositors." But if it
wishes the privileges Of commercial
bank, it must share the delays Of liqui-
dalton.
If deposltors wish the privileges Of .
commercial bank, and yet do not wish
to wait until assets Of failed bank
are liquidated, then they can resort to
legitimate insurance, and obtain i'm
mediate redemption of deposits.
Anything can be insured if the pre-
MUM is large enough to cover the risk.
Since the guaranty of deposits, obtain
ed by making all the banks contribute
proportionally, is manifestly unfair
because it holds bank responsible, for
losses over which it had no control
then let the depositor go to a company
that insures such a risk. That is a vol
untary act, and perfectly fair.
The insurance company will charge a
premium based on the character of the
banks management. If a man ignor-
antly deposits in a speculative bank,
up goes the premium a.d thus the
public will be driven by business rules
to deposit in banks which insurance
companies will accept at a lower pre-
MUM. In such way badly managed
banks would be driven from business.
1t may be said, however that the
bank borrows from depostor when it
receives deposits and, as the bank ex-
acts collateral and security from bor-
rowers, so the bank should give the
same security to- the depositor as the
borrower gives the bank.
IL lHS Il
anty law, are expected to guarantee all
depositors, then the parallel scheme
would propose that all borrowers
should guarantee the banks. That sort
Of guaranty by borrowers would never
be accepted for moment by business
men, because good business men would
be held liable for the notes given to
I>,, MI Nv,
manifestly unjust. 1t would be equal
ly unjust that sound banks should guar
antee bad banks.
But the real answer to the demand
that the individual bank-not all banks,
good and bad together-should give its
own depositor security by a guaranty
fund is that the bank does now furnish
large fund in its capital, surplus, ETC.,
and that provides a working arrange
ment between an individual bank and
the depositor to whom it is directly
responsible, without bringing in a
also manifestly unjust
To put the funds of the country into
the hands Of less careful men than now
certainly would increase wild banking,
promotions of speculative enterprises
and intensity all financial crises. 1t is
just the opposite of what should be en-
phasized in our banking In order to get
greater safety.
In truth, the safety of the depositors
under any and all legislation primarily
depends upon what the bank does with
the deposits. In Oklahoma under the
new law there will be good and bad
banking, just as there will be without
guaranty system. 1t would be well
not to set the seal of approval on the
Oklahoma law until the Oklahoma
banks have successfully met a CONNER
cal crisis.
If the banks, which rely on the in
surance Of deposits to secure business,
unduly expand, then no guaranty fund
Of l per cent of deposits will be more
than leaf before a cyclone when the
real crisis comes. There is certain to
be some bad banking in Oklahoma. If
not, why was the act passed? Solely
to make the good pay for the bad
Those who are unwilling or unable
to hold their own in the competitive
struggle wish to be helped out by the
State; so that the wise and careful
shall pay for the foolish and rash.