The new era. (Walden, Colo.) 1906-19??, 1908-10-08
'.'IENs OF AN EXPERT.
shall Banks Be Made Liable for
One Another's Debts?
Recognized Authority on Financial
Questions Discusses Practical
Bearings of Proposed Guar
antee Plan.

The proposal to require the banks OF
the country to guarantee each others
deposits owes its present strength to
he financial disturbance of last fall.
is urged as a means of preventing
,anics, and there is no disagreement
bout the desirablity of accomplish
~ that purpose. Most of us agree
hat repetition of the conditions
-hlch existed last fall should be made
impossible, but this is by no means the
My way to do it, or the best way
For years the advocates of compre-
scnsive currency reform have pointed
ut that with $14,OOO.0Oo,O00 of bank
eposits in the country and only about
.,CC0.C00.0OO of money all told in the
ountry. both in the banks and ont
here should be some method provided
which, on the basis of good assets
lie supply of lawful currency could b,
adily increased to meet exceptional
cmands, whether such demands were
WITTY or to alarm among depositors.
heir foresight and arguments did moi
vail. but they are hardly to be swept
i their feet ROW by impatient zeal for
ais new. and as they regard it. ILL
onsidered scheme. They stand for n
,ompicle and scientific trea tment of
the subject.
The guaranty of deposits is a crude
and imperfect remedy at best. 1t does
not recognize or attempt to cure the
iefects in our banking and currency
.iystcms. but aims only Mt persuading
lepositors not to draw their deposits.
The losses to depositors by the failure
Of national banks has become an insig
nificant percentage. and is growing less
every year. as a result of natural cvo-
lutionary progress in banking. The
standards are being constantly raised.
and the efficiency of official inspection
and supervision constantly improved
The true line of development is not by
any revolutionary policy. but by hold
ing individual bankers to yet
stricter account and at the same tim
enabling every properly conducted
bank to readily obtain n supply OF cur
rency to meet all demands upon 1t.
The fundamental weakness in our
currency system is in the fact that it is
not readily responsive to the needs of
the country. The legitimate demand
for money varies from wear to year.
and from season to season in the same
tear. 1t is a familinr fact that there
is great deal mora business tn lt
handled from Scptemj,er LIST ia Dce.u,
Der 3ist ench year than in any niiic
four months of the year. but there Is
no more money in the country unless
gold is imported for the purpose.
""'" 'e"" ~ ',ecH'eSs ""hAhE'
AS a remedial measure the guaranty
of bapk deposits Is not only Inadequate
but it is worse than Inadequate, for ii
proposes TO overturn the principle of
individual responsibility by means of
which the banking business has been
raised to its present high standards
and upon which all individual and So
.ial progress is based
The proposal coniemplates that the
public shall be relieved entirely from
the exercise of Judgment and dis
criminal ton in the choice of banks. ana
while it is highly desirable that ali,
banks shall be made safe. to the end
that even the most ignorant and con
fiding may he protected. ii is still true
that an alert public opinion has great