The Fargo forum and daily republican., 1908-09-29
TAKES ISSUE WITH
kANE'S LETTER
HENRY HEAToN or BELFIELD,
N. o, ANSWERS ARGUMENTS
OF DEPUTY COMPTROLLER OF
CURRENCY AGAINST THE BANK
DEPOSITS GUARANTEE.

Belfield, N. D., Sept 25,--To The
4 Forum: / have read with consider
able interest the discussion of the
bank guarantee by Hon. T. p. Kane
of Washington, d. G.
AS humble member OF that large
class he designates as the "unwary"
and the "unthinking" I would like
space in your columns to review some
OF his statements and arguments
Il would suggest in the outset that
calling those who disagree with him
unWary' and "unthinking" is not ar
1 gument
\ That all who favor the guaranty
are not unwary and unthinking is
| evidenced by the fact that some of the
leading financiers of the United States
have declared in it's favor
4 have contended from the first that
the large bankers who are doing
everything they can to prevent the
adoption Of the plan were not giving
their real reasons for so doing.
Mr.. Kane in his article gives one of
their real reasons 1t is that it would
cause a flow of money away from the
large money centers to those points
1
pie can afford to pay exorbitant rates
of interest. *eE
This might be a reason why the
general government should refuse to
establish the guaranty, but 1t is only
an added onegwhy the states in which
interest rates are high should do so.
1t is foolish to claim that the high
rates Of interest in the new states are
indications of recklessness. It is a
fact that can not be controverted that
a man can better afford to pay 20
per cent for money where good land
sells for SO per acre than to pay 5
per cent where such land sells for
800 per acre. 1t is no dishonor to
Oklahoma that interest rates are
much higher than they are In Con-
necticut.
| Mr.. Kane and all others OF his be-
lief have a beautiful theory that de-
positors have some mysterious meth
cd Of distinguishing the honest and
competent banker from the dishonest
and incompetent one.
They advance this theory again and
again while at the same time they
protest that it is impossible for them
or for expert examiners to find out
anything about unsafe banks.
You would suppose from their ar
guments or sophistry as you please
to call 1t, that under our present sys-
tenn honest and capable bankers are
rewarded by getting much larger
business than do these competitors
who are less honest and capable. ..eI
This is a fine theory but does it
agree with the facts? Every. man can
answer this question for himself.
III people could distinguis'l the
sound from the unsound banks there
would be no unsound ones. They
could live a day. Neither would there
be rush to the banks to withdraw
deposits every time. there are evil re-
ports sent out over the country.
The payment Of high rates of in
terest under our present system may
attract deposits that the bank would
not otherwise get; but it also makes
the bank an object of suspicion and
probably drive away fully as much
business as it attracts so that a
banker who understands the conf
dence game thoroughly now keeps the
rate, of interest on deposits as low as
the lowest. 4
Under the guaranty system the
banker who would offer more than his
fellows would also become the object
Of suspicion and such action would
surely demand frequent and thorough
examinations by the officers whose
business it is to do this work.
1t seems more than likely that most
states that adopt the guaranty will
make an excessive rate on deposits, a
reason for withdrawal Of the guar
anty.
If a state in establishing guaranty
should fix a maximum rate of inter-
est and fix it sufficiently low all these
representations OF evil SO coming
from high rates to be offered would
prove groundless
But now we come to the point on
which the whole thing hinges. He
says that guaranty of deposits
scheme would undoubtedly increase
rather than diminish the number of
bank failures.
Every man who opposes the scheme
makes this statement and every man
who favors 1t believes that under
properly guarded system the oppo-
site would be true.
We can all see, or think we can see,
that the confidence that the guaranty
would give the depositor would abb
solutely prevent all danger of a run
on a bank. We can also see. or
think we can see, that IL other bank
ers could be made to have an interest
IN seeing that proper precautions
were taken, that they would demand
and that they would get legislation
as would almost surely prevent all
danger OF bank failure.
| But just now too many of them are
working too hard to prevent the guar
anty to give the necessary safeguards
any thought. After they find that
the guaranty is inevitable we shall
expect them to expend the energy
they are now spending against the
scheme in efforts to make it more ef-
| fective
After all the real sound reason for
demanding action by the state is not
the protection of the individual de-
positor but the general welfare of
the people of the state which adopts
It.
II the guaranty will not add to the