The Fargo forum and daily republican. [volume] (Fargo, N.D.) 1894-1957, 1914-07-02

state, but upon the banker VINO Iiau no
voice or Tart in managing the failed
bank and upon the state which 1ur~
nished the law and license. ,
In making loans and in the general
conduct of business, the capable oanh.
er counts character and capacity OIL
the borrower as additional security 10
the collateral offered. If a law does
not lead the people to inquire into the
character Of a banker, IL is not likely
that he will emphasize it as a qualitl-
cation of the borrower, ana When We
reach the point that law and the peo-
lie do not regard character as a prime
qualification in the banker, and he fol-
lows their example. what difference
whether the deposits are guaranteed
under the law or not? They are more
certain to lose than are the patrons
of n~on-guaranteed banks who do give
serious regard to character on every
hand.
Lessenina Individual Responsibility.
One vital error in the guaranty law
theory Is its lessening OF lndlViduaI
responsibility of the banker, and a re-
Taxing of the force of the code of COM
mercial honor upon which this is bas-
ed and out of which credit comes.
however beautiful in theory, in prac-
tice it Weakens the sense of RESPONSE
bility Of the banker whose depOsitors
think they are guaranteed, because it
relieves him Of the necessity of hold
ing himself responsible to them, and
as the law weakens the sense of re-
sponsibility on the TART of the banker,
it likewise has a tendency to weaken
the sense of responsibility Of the Off
GERS Of the state charged with the
supervision of banking institutions,
Other Loss Besides Depositors.
When a bank fails, there is loss to
persons other than depositors, Bust
ness men who are dependent upon a
bank for loans are as much real sut-
ferers, because credit is shut off n
the whole public suffers from the fail
ure by the disturbance Of local credit.
But, it is only the depOsitors who get
any protection from the guaranty.
fund. The legislature which makes
the laws provides a means to lessen
the Of nCOmpetency and
dishonesty in so far as these protect
a part of the people, but they do not
provide ENCOURAGEMENT for bankers 10
be honest, able and frugal.
CAPABLE Banker Not Benefited.
The argument is advanced hat a
guaranty law is not only a good thing
for the depOsitor but it IS an actual
protection to the banker. The latter
statement is far-fetChed, for a guaran-
tv law does not give the capable
banker anything he did not have be-
fore, but actually weakens his position
nv having an unknown liability all the
time. The only bankers who are bene-
flied by the guaranty law are those
who are either too incompetent or dis
honest to take care of their business
properly,-the men who make the law
necessary,-should, if possible, be the
ones to contribute to the full amount
Of the guaranty fund. But, it Is not
so under the guaranty law theory.
Payments to a guaranty fund are re
uuired from the sound banks who
stand square all the time, the very
ones who do not need the protection
which is provided primarily for eX-
p~erimentalists n failures. If frugali-
tv and honesty are not to be commend
ed and encouraged by a law, then at
least these qualities ought not be
penalized. I nave often heard this
statement; 81 don't care anything
about the unlimited liability Of a
banker, just so l get my money But
only those of limited experience in
business, with radical ideas INC who
seek improbable argument. will at
tempt to Justify such statements,
There are always those who are willing
to get something for nothing without
regard for the rights Of the majority.
But is this sound doctrine? The un-
limited liability might make it doubt
full if he would get his money, and a
depositor cannot expect much pro-
lection from a bank that probably
would not nave been in existence if
there had 10 been a guaranty law.
Present Systems Not Perfect.
The banking systems of this country
were not created in a day. They did
not spring full-iedged from the MIND
of one man, and find immediate enact
ment in the statutes of the country.
Their creation was the growth of years
and exchange Of experiences in meet
ing requirements, effected after trial
and by degrees, but through all the
changes and detail, law makers have
kept in mind the historical n funda-
mental theory Upon which confidence
and credit are founded, and the fact
that the banking system is n of
credit.
No human institution is perfect, and
with all their merits, faults spring
from the accepted systems. These
faults are due to the ever present
temptations for men to err. 1t is well,
however, to emphasize h fundament-
al truth that no bank competently and
honestly managed and in conformity
with good banking laws will ever fail
with loss to depositors, but experience
has proven that failures cannot be
prevented by adherence to statute
laws alone.
Credit.
Credit is the established foundation
of business. 1t is based on confidence.
Confidence and credit are always as
ISOLATED. Credit grows out of charac-
ter and is always associated with NOR
atty and integrity. Character being
established by honesty, industry and
ability to meet obligations. The prin-
cipal business of banks is to deal in
credit, and they are concerned with
confidence and character, for credit
must have a pure source and a sure
and certain basis. The banker must
trust the borrower, or there cannot
be credit; at least, the volume of bus
mess would be small. The depositor,
in turn, must trust the banker, else he
will nave no credit to sell to he Dor
rover.
The bulk Of deposits Of the banks
are merely exchange of credit made
from business propositions from the
banks and it's customers. Bank depos-
its might be divided into two general
classes. For illustration, l will use only
one which l think is largely in the
majority, those arising from use of
credit. A customer applies to a bank
for a loan. He does not ordinarily
carry the money away with him, but
wants credit with the bank so that he
can draw his check on it in due course
Of his business. Modern business
methods nave proven that his is the
most convenient and satisfactory way
to do business. The nominal deposits
of the bank have thus been increased
nv pIacinp the amount represented bV