Omaha daily bee., 1909-01-08

coin at stated periods and be paid for the
actual time in session. They should have
complete control OF the Issuance OF char
tiers and the general administration OF the
banking laws. It has been urged by critics
Of the guaranty OF deposits plan that 1t
would lead TO the establishment OF too
many banks This would be a serious OBJ
lection IL such were the result. 1t would
greatly strengthen our banking system IL
the banking board were empowered to exer-
else a proper censorship over the issuance
of bank charters.
The possibilities OF profit to be made in
taking other peoples money on deposit,
loaning 1t to the public and keeping the in
terest thereon is so alluring that at times
the number of banks increase more rapidly
than the needs of business require with
consequent overcoming. hazardous risks,
extravaganza in buildings and expenses,
with the result that in lean years failures
occur and innocent people suffer. The over
issuance Of charters can be In a great meas
ure overcome by increased requirements as
to the amount of capital stock necessary
to be paid in by the stockholders before
. charter shall issue. The amount re-
ouired in each instance should bear a proper
proportion to the population Of the town
or city in which the bank is TO be estab-
lished. AS an example. showing the man
ner in which requirements as to capital
effect the number Of bank charters issued,
S.s42 national banks a been organized
since 1900 when the requirements of capital
stock was reduced to $4,000 as the mini
mum. This is 1882 more banks than the en-
tire number in existence when the law was
changed in this respect. The reduction Of
A.. .-tl--..s- -. .N1,1s -.
$4,000 has doubled the number OF national
banks in eight years. A substantial in
crease in the amount required as a mint
mum capital for the establishment OF state
banks would have a salutary effect in keep
ing the number Of banks within a sstisfac-
tory limit and also provide greater Sc
curity to the depositors.
Compared to Oklahoma.
1t has been claimed that in the state of
Oklahoma the guaranty of deposit law has
led to the issuance Of an excess OF bank
charters and the establishment of too many
banks with the minimum capital. l have
examined the last report of the comptroller
OF the currency as to the organization OF
national banks in that state to ascertain
If there might not be general causes which
have led to a rapid increase in the issuance
u Dhuh tuhItcIb III OhidHomds buCh dS alC
incident to the settlement and development
Of a new state, and having no relation TO
this guaranty law. 1 find by way Of com
parison that whereas since 1900 there have
been eighty-five national banks chartered
in Nebraska, eighty-four in Kansas, forty
three in Colorado. t~wenty-four in Wash
ington and twenty-six in oregon. In Okla
bona during the same time there have been
aGfahliahad 40 national hanks 2n2 Of which
have the smallest capital which the law
permits.
Details of this Plan.
As to the amount of assessment to be
levied in order to provide an adequate fund
for the prompt payment of depositors of
banks, / would suggest that one
of l per cent be levied upon the de-
posits as, shown at the last statement pub
lished prior to the commencement OF the
operation OF the law, and this assessment
to be followed with additional levies in
like amount at periods OF six, twelve and
eighteen months thereafter. After the ac-
emulation OF & guaranty fund equal TO /
per cent OF the average deposits in the
guaranteed banks. an annual tax OF one
tenth of / per cent should be levied, because
it is necessary under a proper system of
insurance that the prosperous years should
pile up a surplus fund TO provide for the
inevitable demands OF less fortunate times.
As an additional security against any pos
sible emergency, such as extraordinary de-
mands upon the fund, the board should be
empowered 10 levy an assessment of not
TO exceed 2 per cent OF the average de-
posits in any one year. While this assess
ment might never be levied. the power to
use It would have a sustaining effect in
times Of possible panics. Such provisions
would result in accommodating in eighteen
months, with the average OF deposits re-
In state banks as at present, a
guaranty fund of $642. 351. This would be
*lS',Os1 more than the entire amount of
deposits involved in bank failures in this
state in the last nine years. II is three
times the amount that would have been
necessary TO have paid upon demand all
the money due depositors in failed banks
curing the years with the heaviest failures
or any in the last decade. It Is seven items
as much as would have been required to
pay Immediately all OF the deposits tied up
IN state banks during any one OF the last
seven years. With the additional amount
thst would be contributed to such a guar
amy fund during the years when no fall
ures would occur and added TO this the
power TO raise in any one year by txtra-
"oNsSH1cHt SIX times as much as
mas oeen placed in jeopardy during the
worst year that we have experienced since
the present law was established. It is my
judgment that such a system would be a
rock OF refuge for the banks and for the
people In the fiercest financial storm that
may come. These comparisons you will OBJ
serve are based upon the experience de-
Veioped under our present law. With the
aooltlonal safeguards and requirements.
which l have indicated. the demands upon
a guaranty fund should be stil lighter. In
oeeo' your first purpose should be 10 50
surround the banking business with safe
guards and practical regulations as 10
make our system The safest and best in
the republic aside from any sustaining
force OF a guaranty fund, and thus YOU will
make the demands upon your guaranty sys-
tenn so Ight that il cannot fail. At this
time ] want 10 congratulate and command
the management OF our present banking
experiment for the splendid results it has
secured under the present law. 1t is the
showing OF exceedingly small losses ,us-
tained under our present management ana
system which gives us confidence 10 he
neVe that with Improvements in our iaw.
as TO capitalization, management and con-
'rol a stu better showing can be accom-
pushed. The proposed guaranty ,,nd 80