The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1908-09-06

mand for bank to make up the loss
Four men were found printing bank
notes in a New York garnet and were
set free by the police when they de
clared that they were a bank In
short time institutions were formed
with an aggregate capital of 100000,
coo. a sum all out of proportion to any
real banking needs of the community
of that day.
There was also the most harmful
speculation in bank stock. Under
the guaranty plan these stocks were
most readily marketable with the pub
lie and stock certificates were turned
out in an overwhelming supply, the
promoters reaping a handsome profit
on the sales.
| 1.-The safety fund itself went along
swimmingly as long as times were
prosperous, but in the hard times of
1897 the guaranty banks refused pay
ment in body and the state was help
| less. The guaranty scheme was
shown to be utterly unable to cope
with such a condition and the legisla-
ture was forced to pass an act author
izing suspension of payment for one
year.
at was not until 1871, however, that
the real weakness of the guaranty
fund was wholly exposed. In that
year came the first actual failure of a
safety fund bank, when the Wayne
| County bank of Palmyra closed its
doors. The president of the institu-
| ton was short in his accounts, and the
| associated banks were compelled to
shoulder an Indebtedness of $132 900.
| This failure started others, and in a
short time ten banks had closed their
doors. It was seen at once that the
guaranty was going to be inadequate,
and there was general fear for the SOL
vency of almost every bank in the
state.
Under the ruling by the state
comptroller it also became more clear
ly apparent that the safety fund was to
be used to pay all debts of the banks.
This fictitious credit was at once abus-
ed by some bank officials in recklessly
contracting debts for the benefit Of
themselves. leaving the state to pay
the piper. The comptroller officially
declared that the good banks had been
| great losers by the swindling opera
| tions of some of their associates, and
urged the issuance of bonds to stave
off the whole system from bankrupt
| Cy. The legislature passed an act
making the guaranty apply only to
| note circulation and the deposit guar
| anty system came to an unwept end.
The safety fund was not formally abol-
ished however, until 1910"
In connection with this proposition
Albert Gallatin (who was secretary of
| the treasury under no less a democrat
than Thomas Jeffeson,) said:
''The annual tax Of l per cent. i'm
posed under the name of safety fund,
is unjust toward the banks which are
well administered and injurious to the
community at large. To make one
bank responsible for the conduct of an
other, sometimes very distant and
over which it has no control, is pre-
MUM given to neglect of duty, and to
mismanagement at the expense of the
banks which have performed their du-
ty and been cautiously administered -
The Chicago Evening Post has inter-
viewed leading bankers of that town
and they tell the same story:
Il cannot see how it could be consid-
cred fair to compel one man to guaran-
tee another mans business William
A. Tilden president of the FIT Dearborn
National Bank.
ANY man who cared to open bank
would receive the same guaranty as
would the banker who had worked
years in building up his institution
D. R. Forgan, President National City
Bank.
i ct would give the careless or negli
gent bank president the same guaran.
ty as would be extended to the more
scrupulous financier. Thus an incent-
i've would be held out to irresponsible
persons to enter the banking bust
ness. IF. L. Wagner, President of the
National Produce Bank.
Il should think it very unfair if my
J stockholders should be subjected to 6
tax to pay the losses of banks in the
management of which they have nc
voice" E. S. Lacey, President of the
Bankers National Bank
Under system of federal guaranty
} the rewards of conservative banking
and the restraints and recklessness