Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-09-14
The Political Mill
By C.. Could Lincoln.

Notwithstanding all the resolutions
adopted by the American Bankers As
ISOLATION at its convention in Chicago
denouncing insurance of bank deposits
and its preparation for war" on the
insurance provisions of the Glass
Steagan bank act, the American peo-
pie are to experience for the first time
Nationwide insurance of bank de-
posits, beginning next January. The
bankers must know that nothing can
halt the operation Of the new law ex-
cept a special session of Congress called
in the interim to repeal the insurance
features of the act. No such special
session is in sight. Furthermore. if 1t
were called and the question of insur-
ance of bank deposits were taken up,
the law probably would be made more
drastic than 1t is instead of being re-
pealed.
Senator Arthur H. Vandenberg of
Michigan, author of the so-called Van
denberg amendment to the bank act
which provides the temporary" insur-
ance plan, going into effect on next
January l and lacting until July /,
1894, entered into an illuminating de-
tense of the insurance of bank de-
posits at the convention of State bank
commissioners held in Chicago this
week. The Michigan Senator made a
sensible analysis of the scarecroW of
State bank deposit insurance, which has
been tried in seven or eight States in
the past and has failed. This is the
scarecrow to which the bankers OPP
posed to deposit insurance have turned
and chung SO persistently, urging that
bank deposit insurance cannot work,
and should not be attempted. What
Senator Vandenberg had to say in this
connection is worth repeating. 1t fol-
lows:
I'm the first place, the State guar
antees involved purely localized and
concentrated risks which thus geo.
graphically invited the collapse of all
insurance. on the other hand, faithfully
reflects the cardinal principle of difused
risks. which is the time-honored and
approved reliance Of all sound in
surance in all other fields.
In the second place. the State guar
antees involved complete protection for
all banking resources, thus largely
eliminating the crucial element of di-
rect and individual banking RESPONSE
bllity from the banks and bankers
themselves. Federal insurance. on the
other hand, leaves the individual bank
ana banker so seriously responsible for
such preponderance of their re-
sources that there is no appreciable
immunity at all
**
In the third place, the State guar
antees were loosely administrated and
were freely opened to multitudes of
new and needless banks, which pro-
duceo a fatal orgy of unrestricted COM
petition. Federal insurance. on the
other hand, will be firmly handled and
IS but one factor in a new statutory
regime which aims at enforced sound
ness both in bank population and In
bank practice.
In the fourth place, the State
guarantees had no back log of resources
and credit for the hour of stress. Fed
eral insurance. on the other hand. is
capitalized with truly prodigal reserves.
The initial fund is 1920. 000,O 900 before
single penny Of insurance premiums
are paid. Its temporary borrowing
capacity will exceed billion dollars.
These and other pertinent distinc-
as completely as the poles Yet Fed
eral insurance is lynched for the sins
OF the old State guarantees every time
the problem is adversely dissected. It
would be as logical to say that be-
cause some old State bond issues once
defaulted there can be no integrity in
the bonds of the Government of the
United States"
The Michigan Senator is quite natu-
rally particularly interested in the
operation OF his emergency insurance
amendment to the bank act. Indeed.
he IS pretty well convinced that if this
temporary insurance plan were made
permanent, it would probably turn the
trick OF maintaining absolute conf
dence in the banks by the great mass
Of depositors. Furthermore, he contends
that this temporary insurance plan
leaves the bankers responsible for the
great bulk of the bank deposits and
therefore would not make for bad
banking, as the critics of insurance of
deposits have insisted. He said:
Certainly the limited emergency
formula-the $500 formula which is
the sole necessity for some time to come
as I view the problen-leaves banks
and bankers amply responsible for their
own individual acts to a formidable
and significant degree. 1 repeat that.
although this formula insures 96l2 per
cent of our depositors (using Federal
Reserve criteria), it insures only 23l2
per cent of our banking resources. 1t
leaves our banks and bankers them
selves responsible for the other 7612
per cent of their resources. 1t would
be strange arrangement indeed which
vIrn ri 6riy hoy INIT no q
donment of cautious management SIM
ply because he might ultimately escape
one quarter of his ultimate liability.
The contingency is too remote for seri-
Gus consideration"
The strained relations" which were
said to exist between the Roosevelt
administration-as represented in
Massachusetts, by James Roosevelt. son
of President Roosevelt-and Senator
David / Walsh. senior Senator from
the Bay State have. it now appears,
been denied by no less a person than
Mr. Roosevelt himself According to
reports from Boston. James Roosevelt
has announced that he not only regards
Senator Walsh as the leader of the
Democratic party in Massachusetts,, but
that he also has a personal genuine
that he was looking forward with keen
anticipation to the pleasure Of support
ing him and assisting in any way within
nv power toward his reelection in
1884" Certainly that sounds as though
Mr. Roosevelt was seeking to bury the
Ratchet. The trouble has been over the
Gispensation of Federal Office in Massa-
chusetts. Some of the PRINCIPAL Offices
have been handed out without any
regard to what Senator Walsh might
desire. and thev have been made. pre-
sumably on the recommendation of
James Roosevelt. whom some Of the
Democrats in the Bay State are coming