Omaha daily bee., 1908-03-26
DEPOSIT GUARANTY IN OKLAHOMA.

In view of the fight that is being
made to eliminate from the Fowler
currency bill the provision for the
guaranty of deposits in national
banks, the report of results of one
months operations of the deposit
guaranty law in Oklahoma is particu-
larly interesting. Bankers through
out the country have been watching
the Oklahoma experiment and the ini-
tial effects are taken to confirm the
general opinion among bankers that
no marked improvement in the opera
tion of banks under that law is to be
looked for.
To the extent of allaying uneasiness,
the law has unQuestionably succeeded.
At least Oklahoma banks have had the
confidence of their patrons to a degree
not known during the few weeks prior
to the time the law took effect on
February Is. Part of this confidence
may be due to the restoration of nor
NAL financial conditions throughout
the country, but it is safe to say that
some of 1t lis to be credited to this
enactment. With that, however, the
fulfilment of the loudly-heralded pre-
dictions of benefits to accrue ends.
No rush of boarded money from the
surrounding states to the banks of
Oklahoma has taken place. Although
the national banks have declined to
enter into the guaranty plan, reports
fail to show that any one of them has
lost in deposits or other business to
the guaranteed banks. 1t was pre-
dicted that the people of Kansas, along
the Oklahoma border, would patronize
the Oklahoma banks to the incalcu-
liable loss of the Kansas banks. The
president of the Kansas Bankers as
sociation, after investigation, reports
that no Kansas deposits have gone to
Oklahoma except where geographically
nearer or easier of access.
The Oklahoma experience will
doubtless prove something of a
damper on those who have been urg-
ing extension of the deposit guaranty
system to the national banks of the
country. Opposition to the nationali-
zation of the plan has been strength
ened by an able argument from Con-
gresham Burton of Ohio, a member
of the house committee on banking
and currency, in a minority report
against the deposit guaranty clause of
the Fowler bill. Mr.. Burton says:
Such provision places upon the same
level the banker of prudence and honesty
and the one who is careless and ready to
resort to questionable methods. II there
is any line of business in which care and
conservatism is essential II is banking.
This proposed regulation places those very
qualities at a disadvantage and gives a
premium to those who are guilty of reck-
less and dishonest management.
Under guaranty of deposits the money
of depositors would inevitably gravitate to
banks or financial institutions in specula-
tive centers because higher rates of in
terest could be obtainedi though the result
would be that capital would be invested In
manner which would be sure to lead TO
speculation and to unsuccessful undertake
ings. In the long run the public, as IN
the case of all oppressive or unnatural
legislation, would be compelled to bear the
loss either i'm the form of higher rates of
interest or of a lower return upon deposits.
The banker. convinced that his de-
positors were properly safeguarded,
would be faced with the temptation to
send his money wherever speculative
demand forces call loan rates up to
dangerous proportions. instead of
being content with the normal interest
on commercial paper. Under such
conditions, the business man in need
of funds would have to compete for IL
against the Wall street spectators.
If deposit guaranty ever comes, 1t will
have TO be accompanied by other pre-
cautionary measures to make sure
that it does not produce greater evils
than IL cures.