Little Falls herald. [volume] (Little Falls, Morrison County, Minn.) 1889-1950, 1908-10-16
NELSON ON GUARANTY OF BANK
DEPOSITS. s@s

ON GUARANTY Of 1ANh
DEPOSITS.
*out sf their mouths shall they b
Presidential Candidate Taft has
come and gene and during his flying
trip through the state he did not lose
m opportunity to attempt to prove the
fallacy Of the bank deposit guaranty
plan Of the Democratic platform. As
the guaranteeing of bank deposits Is
receiving much attention at the pres
ent time, as it lis being hercely At
tackled by the Republicans and rs
stoutly defended by the Democrats, 1t
might not come amiss to look over the
deld and see who is most conspicuous
IN assailing this principle and who
most active in its defense.
The principal opposition to the idea
comes from the big banks, which
Slain that its general adoption will
result In placing all banks on the
same plane; that the large institu-
lions will be compelled to, support the
weak ones in times Of stress and that
It will also encourage reckless meth
DDS, as the crooked or reckless fnan-
cier will take advantage Of the stu
alton created by the guarantee and
vse 1t to his selfish advantage. It IL
also condemned by the general Repub-
ucan politician, not because no knows
anything about It, or because he
doubts its soundnsss, but because the
Democrats saw it arst," and it there
fore became 4 Democratic measure,
and for that reason It must b op-
Dessa. ....:
On the other had II ID supported
By many small bankers and BY the
ttAeral run Of dsDesitors, who feel
that thoy are entitled to security Of
some kid vixen they put their money
Il the hands Of another man. They
arDQo that when the banker eatrusts
them With money frsR his institution
10 sxaots security, and they believe it
IL right and proper that hs do 10. but
they are personally 90 honest a. he:
why then should he b placed In 4
class by himself and be permitted to
handle millions Of other peoples
money without guarantee that It shall
ever b returned?
The supporters Of this contention
are not confined to any walk in life,
nor to any political party. Whom Mr..
Taft was ridiculing the idea In his
Minnesota speeches he was perhaps
unaware that he was verbally lashing
q member OF his own party-a man
whose sound judgment the people Of
Minnesota, regardless of political afal-
iattons, have every confidence. But
that was just what he was doing.
It will perhaps surprise many of his
Minnesota constituents to learn that
Senator Nelson introduced an amend
unent to the Vreeland-Aldrichc currency
hill in the senate, on March ~ last,
which provided for the guaranteeing
Of deposits in national banks. In sub.
stance this amendment provided:
That one-half of all taxes paid on
national bank currency by banking as.
sociations be set apart in the United
States treasury az depositors' fund
to be used in paying all depositors, ex-
cept the United States, upon the in
solvency of any baak; that said de-
positors' fund shall not exceed $780,.
100000.
On tho introduction of the amend
ment Senator Nelson argued in sup
port Of the measure that a money
panic was distinguishable from a
money stringenoy. That q money
stringency arises because Of a tenn
porary scarcity of currency, while a
panic, such az that Of the fall of 1907,
always originates in a run by deposit
ors a. to the safety of their funds. In
1907 tho banks, to protect themselves,
practically closed their doors. In fact
they suspended cash payments to all
practical purposes.
This condition was brought about.
not because Of stringency of curren-
cy. but because the public became
panic stricken in its disbelief In the
sOundness Of the banks. A large
smount Of the capital and surplus of
national banks IL held in the shape of
longtime securities-bonds Of various
kinds and approved stocks-so that
their available money for loaning pur-
poses 10 actually tho money Of the de-
poeitors.
When . panic sets In and q run
starts on the bank money becomes
scarce because depositors withdraw
their money, and also because people
Who heretofore were content to get
their pay In drafts and checks now
demand cash. Thus the supply in
cash 10 depleted, while the demand
for actual money increases.
The banks are therefore compelled
- call in loans from customers and
must refuse further accommodation. All
this Is caused on account of 4 panic
stricken public.
Continuing. Mr.. Nelson said: "Now
II you can by legislation, as is here
proposed. provide a fund for the pro-
lection Of deposttors, 50 that they will
feel easy and conhdsnt and will not
become panic stricken. you to large
oxtsnt cure such evils as We had last
fall To nv mind those ovila aroso