Aberdeen herald. [volume] (Aberdeen, Chehalis County, W.T.) 1886-1917, 1909-01-28
GUARANTEED
BANK DEPOSITS
BRYAN Still CON1ENDING FOR
DEPOSI1ORS' PROTECTION.
Bank Failures Mostly the Result OF
Misconduct of Officials, Which
Guaranteed Plan Would Eliminate.
The State Of New Jersey Nay
Adopt Plan.

Mr.. Bryan continues to hammer
away in The Commoner for the ad-
option of legislation requiring banks
to guarantee the repayment of de-
posits by the establishment of a
guaranty fund, which he insists
could be adequately furnished by
an assessment of one-half of one
per cent upon the gross sum of de-
posits. With view to greater Sc
curity. Mr.. Bryan would establish
rigid measures of preventation. He
says:
Nearly all bank failures are
traceable to the misconduct of d.
rectors and bank officials, usually
to the borrowing of excessive sums
by the officials or directors or to
the loaning of excessive sums to
persons who are improperly favor
ed by the bank. 1t is necessary.
therefore that there should be strin-
gent regulations on this point. In
the first place, no one should be al
lowed to be a director unless he has
substantial holding in stock; Sec
ond, every director ought to be re-
quired to examine the books of the
bank at stated periods, say twice
year, and report on the same to the
banking board; third, the executive
committee of the board of directors
should be required to examine the
loans at least once month and
make a record of such examina-
tions on the books of the bank;
fourth, no official of bank should
be allowed to borrow of the bank
unless he is a director; fourth, no
director should be allowed to borrow
more than one-tenth OF the capital
and surplus. and then only upon the
written approval of majority of
the board of directors-the total
sum loaned to members of the board
of directors not to exceed say, one
third of the total capital and sur
plus. Not more than one-seventh
of the capital and surplus should be
loaned to any one person other than
a director, as principal or surety.
The national banking law limits
the amount to One-tenth, but no ad-
equate penalty is provided. The
law should not only limit the
amount to be loaned to directors and
to others, but it should make the
violation of this provision felony,
punishable by fine or Imprisonment
or both. Where limit is fixed but
no penalty prescribed, the law is
practically worthless, for then the
provision can only be enforced by
the suspension Of the bank, and the
suspension of a bank throws the
penalty upon the innocent stock
holders and upon the community. As
the officials can offer no excuse for
the violation of the law on this
subject, the penalty ought to be
put upon them and not upon the
stockholders or the community.
Whenever a bank official or direc-
tor has any pecuniary interest in
the use OF any money loaned to
others that fact should be stated on
the face of the note.'
He further suggests that it should
be made a felony for any bank Of
fetal to buy or sell stocks. bonds
or merchandise on margin other
than the market price. A bill has
been introduced in the New Jersey
Legislature for the guarantee of
deposits in banks and trust COM
panies patterned on the Bryan
plan. It authorizes the State Treas
; urer to collect an insolvency fund
to be drawn upon to liquidate los
ses Of failed banks and trust COM
panies. Whether practical or not,
there is no question of the favor
with which the plan of guarantee
; ed deposits has been received by the
general public. The result of the
, trial of the system in Oklahoma will
be noted with interest throughout
the country.