The Fargo forum and daily republican. [volume] (Fargo, N.D.) 1894-1957, 1910-07-05
INsURINe BANK DEPOSITS.

Commenting on the question Of in.
suring bank deposits, The New York
Journal Of Commerce has the follow
ing:
Another effort to supply one o. the
defects of our national backing sys-
tenn appears in the proposed organiza-
ton Of the National Bank Audit COM
pany to be organized under the laws
&C the District of Columbia ard sub
ject to the supervision Of the comp
troller of the currency. Its purpose
appears to be to issue certificates Of
guarantee of the assets of such banks
as may be become Clients" in other
words, such as may become the hold
ers Of its capital stock. 1t is spoken
Of as In effect a plan Of insurir2 de-
posts. The details of the plad have
not been sufficiently set forth for a
clear understanding, but apparently
each bank entering into the arrange
ment is to pay a certain premium upon
it's own deposits to constitute a fund
in the keeping of the audit Company
from which any losses to depositors
from the failure of any bank in the ar
rangement would be paid.
AS stated by one who Is taking an
active part in effecting the organiza-
ton of the company, its capital stock
is to be placed among the banks and
bankers who are the clients for audit
certificates and asset guarantees" each
holding an amount equal to l per cent
of the deposits covered by it's cer:ih-
Gates. That, 1t seems, would determine
the amount of stock to be issued, and
it Is said that banks having a total Of
$300,000,000 deposits have already an
nounced their intention of Joining the
company. That would mean a capital
Of 100000. to be increased proper
tionately with the accession Of new
Clients" who would become share
holders in the audit company. The
stock is to be sold at $3.50 share, so
as to provide a surplus equal to so
per cent of the capital, and tho pre-
MUM charge Is to be IA of 1 per cent
per annum on the average depositG. 1t
is calculated that the cost Of secur-
ing business, conducting examinations
and managing the company" would not
be more than one-half the premium in
come after it is in successful operation,
which would. leave u of l per cent on
deposits for the guarantee fuud.
ejaculation was made by the comp
troller of the currency in 1908 the re-
suits of which were given In his report
for that year, showing that the losses
to creditors of national banks from
failures since the system was estab-
IN,
OF l per cent of the averags deposits
per annum. 1t is assumed that the or
ganization of the audit company, in
which the banks themselves would have
an interest, would result in = careful
selection of risk" and a constant Wig
lance over condition which would re-
duce losses to almost nothing" But
whatever dividends might result firm
this would be turned back to the banks
holding the stock or added to surplus,
and the net cost to them would be that
of conducting a system which would
eliminate all loss to depositors from
the failure of banks joining in this
guarantee or insure nee system
There has been a good deal of criti-
cism of all proposals for a compulsory
guarantee of bank deposits, which
would be in effect a mutual insurance
by the banks not against their own
losses but against losses by depositors
in any of them prescribed by law and
administered under official supervi-
sion. The plan now proposed would be
voluntary action through corporation
but would be limited to those who
were shareholders in that corporation
AS careful selection of risk" is spoken
Of 1t is apparently intended to dis
criminate in the distribution of the
stock of the audit company and not
have subscriptions to 1t open to all
banks and bankers" who might de-
sire to avail themselves of it's adyan-
tages. 1t is not stated that any dis
| tinction would be made between ma
tional banks and other banks and
bankers among whom stock would be
placed, and as there are approximately
10000 banking institutions in the coun-
| try, 1t would hardly be practicable to
handle such a guarantee or deposit in
surance for them all 1t may be pre-
sumed that the general purpose is to
strengthen confidence in the banks
which join in this plan and to benefit
their business at the expense Of those
who do not participate.
Like most schemes for improving
our banking system by private and
voluntary effort, it leads up to the sug-
gestion that what is most needed is a
reform of that system, by legislative
action to relieve it of it's defects, give
it cohesion and strength, and estab-
fish it in the confidence of the people
| by the soundness of the principles upon
which 1t is based and of the methods
| by which it is administered. Whatever
is done should apply to all or at least
be open to all on the same terms, and
those terms should be prescribed and
enforced under public authority. A
a Skin of Beauty Is q Joy FoFevag.