Omaha daily bee., 1909-01-08
New Governor Urges Passage of Bank
Deposit Guaranty Law by the
Legislature Without
Any Delay.

their money in banks operating under its
laws.
Losses Very slight.
From time to time these guarantees have
been Increased until losses TO depositors are
rare indeed. The report OF the comptroller
of the currency for 1903 shows that a tax
or one twenty-sixth OF / per cent levied
upon the deposits in national banks dur.
ing the forty-five years that that system
mas been I'm existence would have raised
. sufficient sum so that no person who
mad trusted his money to a national bank
would have lost a cent.
A study of the figures OF our own state
banking department shows even a more
satisfactory condition. Only during the
last eight years has the law provided for
a complete report from receivers OF failed
banks. During this period a tax of less
than one-thirtieth of l per cent levied upon
the deposits in our state banks would have
raised a sum sufficient to have insured
every depositor against any possible loss
With these facts before us. l do not hes.
itate to say that IL Is a reflection upon our
American civilization and business meth.
DDS to longer fail to provide an insurance
guaranty fund and banking law which
"H' hhahb every uOllhT QeDOalIe0 IN a
Nebraska bank absolutely sure Of being
returned to its lawful owner upon demand.
Certain deposits are now Secured in state
and national banks by safeguards In addi-
ton to the guarantees which the law ex-
acts Of the banker to protect his Individual
depositor. The county. the state and the
nation having found by experience that
the securities which the law provides for
the ordinary depositor are at times in.
sufficient and therefore required that the
banks shall at their own expense deposlt
ponds az additional security to protect
them against any possibility of loss. There
can be no rule of business ethics which
makes 1t just to secure the state ana the
nation and deny the same protection to
the Individual depositor. The only uues-
ton for you to decide, II seems to me.
Is, as TO whether or not the proposed adj
ditional guaranty fund can be created with
the certainty that It will provide absolute
security to the depositor and not place an
unfair burden and responsibility upon the
banker.
How IL Can BE Done.
[ believe that the desired security can
be obtained by levying a light tax upon
the capital stock OF each bank transacting
business under our laws, thus providing a
guaranty fund to pay promptly any pos
sible loss to a depositor by reason OF the
failure of a state bank. The amount of
such tax to be a certain per cent OF the
average deposits as shown by the reports
or the department OF banking. and pay
ment to be made at stated periods and for
a fixed amount.
The volume of money supposed to. be in
circulation in the United States on October
!, 1908, according to the latest report OF
the National Banking department., was
$3,S7S, 500, 900, Less than one half OF this
enormous. sum is accounted for by report
ing banks of every description, or as on
deposit in the national treasury. Not one
tenth OF that portion which is unaccounted
Tor il serving any useful purpose in the
economy OF modern business methods. IL
one-half OF 1t were returned to the banks.
1t would enormously expand the business
and wealth of the state and nation and
raise the banking power of the United
States until 1t would exceed that of the rest
OF the civilized world. To bring this great
idle fund into active channels Of trade ia the
problem for the bankers and legislators to
solve. II loss of bank deposits Is made "A
thing OF the past, 1 believe a great step in
this direction will have been accomplished.
Experience I'm Insolvency.
The reports OF the comptroller OF the
currency and Of our own Department of
Banking furnish us with data which show
that the cost OF an adequate insurance
fund would be a very small charge upon
The profits OF the banks. A total OF 4s
national banks have become insolvent dur
ing the forty-five years that the national
system has been in existence. Against
these banks, tl76, 0S1 in deposltors' claims
nave been allowed Four hundred and one
lhsolNent national banks have been liqui-
oateo ana the receivers discharged. There
has been Sls2, lS2, 3l3 collected from the as
sets and stockholders liability OF these
rallied institutions, or more than 100 per
cent OF depositors' claims. The expenses
OF hauidations and the payment of claims.
other than those OF depositors, has reduced
the amount collected until only about Is
per cent of the amount due depositors has
actually been returned to them. In later
years under better conditions, this per-
eentage OF loss has been greatly reduced.
fourteen national banks became insolyent
during 1908 and have been Iquidated. and
~ per cent of their deposits have been re.
turned to their creditors.
Vur state department OF bankinK has a
complete record for the last eight veara
showing the result OF recelverships Of in.
solvent state banks. This record shows that
since 1900 a total deposit Of $5l5, 26A.24 has
oeen placed in jeopardy by reason OF the
failure OF state banks. From the assets OF
these insolvent Institutions depositors'
claims have been liquidated until the bal
anee unpaid for the entire period OF eight
years is SlSs, S6.2S, or an average annual
loss OF about $26OOO to depositors. Credit
able as this showing is, l feel quite Ger.
tain that with a number OF improvements
which can be made in our present law.
the percentage OF loss can stilI be mate
riaIly reduced. The minimum capital re-
quired for the incorporation Of a state
bank should be increased to at least MS
600. Bank examinations should be made
twice a year instead OF once. as now re-
quired. Examiners should be assigned to q
certain territory and thus eventually would
become familiar with conditions and se-
%curities in that locality and would aequire
the necessary knowledge as to the worth
OF the bills receivable OF the banks which
they would examine, which is the essential
thing in determining the solveney OF sny
banking corporation.
Bankers should share Control.
Under a guaranty pan which would make