The Ellensburg dawn. [volume] (Ellensburg, Wash.) 1898-1914, 1909-02-04

The chief cause of bank failures is
'he making of excessive loans to direc-
'ors or officials of the bank. This is
tue fruitful cause of disaster. and /, b.s
oeeh impossible to secure legislation
protecting banks from their own of,;
Gals and directors. Why? Because
there has been no mutual responsihil.
ity' When all banks become liable for
the deposits of each, the stockholders
Will insist upon the enactment of Jaw
making 1t criminal offeuse for a bank
onciai to loan more than the prescribed
amount to one individual At present
we have law prohibiting the loanipe
OF more than one-tenth OF the capital
ana surplus to one person or corpora
tion, but the law is only directory. OF
course, the comptroller can suspsnd n
bank II it violates the law, but the law
Is not enforced, because the enforce.
ment OF such law would throw the
punishment upon innocent stockholders
ana upon the community, since the
suspension OF bank inAicts great
loss upon stockholders and disturbs the
business OF the city or town in which
the bank is located.
The law should make it q criminal
offense to loan more than the prescribed
amount 70 one person, and we would
probably be able to secure the passage
OF law prohibiting market speculation
by bank officials.
The Oklahoma plan is working salts
factory. a bank recently failed in
Oklahoma; within forty-eight minutes
after the notice OF suspension, the Off
Ger in charge had authority to pay all
depositors, and then the banking board
proceeded TO collect tie assets OF the
bank and to prosecute the officials
criminally. When the business was
closed up, the stockholders passed a
resolution thanking the state board for
its prompt action, the action OF the
board being protection u the stock
holders, as well as to the depositors
and TO the public generally.
Compare this failure under the guar
anty system with failure where there
is no guaranty. Ia Oklahoma the bank
commissioner telephoned the farmers
TO come 10 and get their money, and
the answer was: 81 am busy today with
my CROP | will be In in day or two y
In Cleveland, Ohio, bank failed
about the same time, and the papers
announced twelve thousand Infatuated
Italians stormed the closed doors OF the
busted banking house of Costan Liopea
on Orange street, today. The police
/ drove the crowd back. "
An objection 10 sometimes made to the
guaranty law that new bank would
start up across the street, and, being
able to promise it's depostors absolute
security through the guaranty law
could draw the deposits away from con-
servatively managed banks by Offering
]
a hipher rate of interest than the latter
could pay. This objection is urged as
;f,t were an unanswerable one. But
Lot us see how easily it can be met
since the law makes all OF the banks
liable for the obligations OF each bank
and in Oklahoma the banking board
has already fixed the rate OF interest
that can he paid to deposltors' Ac-
cordipp to the rules OF the banking
hoard no bank is permitted to pay
more than three per cent on short-time
deposits or more than four per cent on
,ime deposits running for six monthS
or more ,;
7, has also been urged as an obJec
,;on that under the guaranty system
h;o hank would have no advantage
over a little bank. Even II THIS arsu'
ment were found, it could not weigh
aoainst the advantages of the SYSTEM
~ hanks are made for the people, no'
,he noople for the banks. While there
ore advantages in having big DAMS
,be advantages are not sul'lc'en' "
ius,ifv the ieopardizing OF the uePo'',
,or or Of the business interests VI q
community .,.o biz, hank