The Holly chieftain., 1908-10-09
Guaranteeing
Deposits
NOTHING BUT A DEMOCRATIC
vorE-cATcHINo DEVICE.

vOTECArCHlN0 DEVICE.
The unanimity with which the
members of the American Bankers
Association at their Denver meeting
jumped on the Oklahoma plan OF
guaranteeing bank deposits was almost
amusing. Practically the unanimous
agreement of the members was that IL
the plan had not been seriously pro-
posed by a national party and advo-
Gated by it's candidate for President 1t
would not be worthy of discussion by
. body of sane and intelligent men.
These bankers are the leaders OF
the banking world in this country.
They know what they are talking
about In a case like this. When they
agree that the plan would be dam
gerous and its working disastrous they
may be presumed to be able to fore
see its probabilities better than the
average citizen.
Some Of the objections to the guar
antee plan are:
It violates the freedom of contract
] That is, 1t undertakes to compel ev-
cry banker to make a contract
whether he wants 1t or not. Every
lawyer knows that no contract is
valid without the voluntary assent of
all the parties.
The contract it contemplates is a
one sided contract-the banker puts
up his money, and, whatever happens,
he loses it-he can't win. There is no
possibility of profit, only an assur-
ance of eventual loss.
The plan would encourage wholesale
borrowing by banks which get large
rate of interest, and would tend con-
stantly to raise the interest rate to
borrowers.
Depositors would not care to inquire
, into the soundness of a bank or the
) integrity and standing of its officers,
: II they thought they would get their
}. money back anyhow. The bank would
J. most attract depositors which would
offer the highest rate of interest on
: deposits; to pay this interest it would
have to get large rates for its loans
and. In the long run, that would iney.
itably mean unsafe loans, failure and
an eventual enormous increase of the
guaranty fund.
: The collection of guaranty fund
would remove that much money from
circulation-several millions in the
aggregate.
Where would the guaranty fund be
kept? II in bank, the bank might
r fail; II locked up in a vault in Wash.
g. ington. 1t would simply lie idle The
lie worst feature of all is the ATTEMPT to
8 compel the prudent, honest, careful
n banker to pay the debts of the reck.
a. less or dishonest banker, whether he
er is willing to do so or not
10 Suppose Is a banker in Oklahoma
~ banker in New York and C a
u banker In Colorado. borrows 500
~ 900 from at 81 and lends it ont at
is 1O%. There comes a bad year; grass
u hoppers, perhaps, or drouth. The bor
81 rowers cannot pay A. A cannot nav B
50 A shuts down. Here comes in c who
III Is compelled by federal law to helr
oi pay part of AS debt to B! What ius
ut tice or fairness is there in that?
d" The depositor could not get hi,
money as soon as the bank failed. n,
. matter how large the guaranty fund
The banks assets would have to b,
realized on first, before the amour
- - was known which the guaranty fun,
:. would have to supply; and we in Cole
- RADIO know how long it takes to clea
- up the assets of failed bank. In on
y. case, for example, that of the Germa
National Bank of Denver, it took owe
= dozen years to clear up and pay tn
~ final dividend.
n These are a few of the objection.
>, stated briefly, to the Oklahoma ide;
10 as applied to the nation. Mr.. Brya
II. likes the notion because he thinks
vs will be taking with "the masses" H
%. believes the majority of Americans d
at not stop to think and that any cla]
"a. trap aevice may gain some votes fc
ns him. In fact, he believes that tn
m voters do not need to think-all ths
ar is necessary for them is to listen I
,s him talk.
to This Oklahoma plank is about 8
;e- rotten as the rottenest in the whol
10 Democratic platform.
Sc ----
One of the humors of the Haske
fiasco is found in circular letter frol