The midland journal. (Rising Sun, Md.) 1885-1947, 1933-06-23
INSU nee PLAN FOR
BANK DEPOSITS

A program of insuring de-
positors in American banks
against loss, starting next jar.
1 is included in the Class
Steagall banking bill, just pas
sed by the Senate and the
House.
To get the measure of the
task imposed on the rew insur-
ance scheme, the record of past
United States bank failures
must be surveyed.
In rough figures, America
had a generation ago about 3d.
900 banks; today there are
about half that number. In
the past dozen years about two
out of every five banks have
| failed. In 1881 some 1920
banks failed. In 1882, another
1850 banks failed. Even today
Approximately 5000 banks,
with $4,000, 100000 of frozen
deposits, still have their doors
closed from the universal bank
holiday" of last March. 1t is
to end all this that the new de-
post insurance act is passed.
The fact definitely energies
that the new banking law is
asked to accomplish one of the
most drastic and radical re-
forms in Amrican history, and
almost overnight to insure
practically every American
bank depositor against finan-
cial loss, despite past record
of extraordinary bank failures.
The triumph of the act was
the measure of the national cry
for banking reform, and an in
dex of the popular support for
the deposit insurance feature.
The act carried other vitality
important financial features
but none has attracted atten-
ton like this.
The pros and cons of the de-
post insurance feature are
brought out in typical disputes
carried on. Both sides agree
something had to be done
about banking. Both sides adj
NIT the new insurance proposal
is one of the most radical eff
forts at reform since the prohi-
bition act. But whereas the
orthodox" financial school OPP
poses the measure, the reform
group insists it will be success
full and that the blight of bank
failures will be removed from
the American scene at last, as
it has been from every other
great nation.
To begin with, here is the
viewpoint of the measures
| advocates:
The proposed insurance, they
declare, will be supported by
the, banks entering the pool
themselves. An initial assess
ment of one-half of l per cent
of their total deposits is re-
quired, and if the experiment
proves costly, additional assess
ments of one-quarter of 1 per
cent will be made from time to
time. Thus a direct financial
interest is placed on the bigger
banks for almost the first time
to raise banking standards all
over the country, and to pre-
vent failures.
Second, no bank can enter
the insurance pool till an ex-
animation has been held. 1t
has been the fault of American
banking in the past that cx-
aminatiOns were too often
superficial. Most bank failures
have occurred in state banks
where, it is asserted, exanlina-
ton has been particularly
slack. Now it is declared a
! tremendous pressure for higher
bank standards and better ex-
aminatiOns will come from the
banks themselves.
Finally, advocates of the
measure declare that even if
some bank failures ensue it is
better to tax all the banks of
the country to meet the loss,
rather than to let the burden
fall with crushing force on the
individual depositor, who has
no mans of protecting himself.
So much for the major argu-
ments in behalf of the act.