The Norfolk weekly news-journal., 1908-07-03
the big Harvard. Yale boat race, lie not
without great value.
THE BANK GUARANTEE PLANK.

THE BANK GUARANTEE PLANK.
That Colonel Bryan will dictate a
conservative platform for the Denver
convention in the hope OF winning
the eastern vote, and that the chief
plank OF that platform will be one de-
claring for government guarantee OF
deposits in national banks, is reported
by some OF the newspaper correspond
ents who are already on the ground
at Denver. And that MIR. Bryan's
government guarantee Of deposits will
find opposition is evidenced by the
fact that already flaws in the scheme
are being picked out and held up to
the public gaze. For instance, in dis
cussing this prospective plank, Ray
mond, writing to the Chicago Tribune,
says:
The chief plank of the democratic
platform Is to be that which will de-
clare for government guarantee of de-
posts in national banks. This is a
pet idea Of Bryans and It is as super
fetal and attractive to the people as
was the sixteen to one theory.
This scheme proposes in the rough
that tax be laid on deposits in ma
tional banks, the proceeds of which
will form a guarantee fund out Of
which the government will pay the de-
positors of failed banks at once. 1t
is attractive at first sight and man
like Bryan might easily get a large
following on such an issue.
Official figures show the percentage
of losses to depositors in national
banks is surprisingly small, and yet
every one knows great distress Is
| always caused by the slow method Of
realizing on the assets of broken
banks during the time of liquidation
1t often takes years to pay back
every dollar Of the liabilities and small
business men frequently are embar-
raised, although they have a perfectly
good claim against the bank in the
hands of receiver. The idea of pay
ing depositors at once out of govern
ment guarantee fund is likely, there
fore, to prove popular among that
class of people who do not study the
real situation in business affairs.
Unfortunately for the country, Bryan
never would have taken up with the
free coinage idea, nor would he have
held so tenaciously to his 16 to 1 fall
acy after all the world had seen it's
folly. The same absurd process Of
thought will impel democratic leaders
to insert plank in their platform for
government insurance of bank de-
| posits.
/ Nd l. L. ell III I 80
see or pretend not to see that such a
plan would be the destruction of safe
banking. They must know deposits are
received by banks and Immediately
converted into loans. A wise banker
makes his loans only on such security
as will enable him to pay back the
money Of his depositors.
His reputation depends on the skill
with which he invests the money Of
depositors. If he makes loans on
poor security he is likely to make
losses and the depositor, feeling
alarmed for the safety of his money,
draws out his deposit.
The necessity for prudence in max
ing loans arises wholly from the know
ledge that money thus invested is a
trust fund belonging to the depositors
and certain to be called for if they fell
insecure.
If the depositors are made safe
through a guarantee fund provided by
tax paid by the depositors them
selves the whole incentive for making
prudent loans disappears.
This is the browning fallacy of
Bryan's latest financial vagary, and
yet the democrats are certain to go
before the people with this idea as
the chief issue of the campaign. In
surance deposits by an association Of
banks, acting for themselves, is a
reasonable scheme, but the Denver
platform will declare for an actual
government guarantee.