Evening star., 1933-02-28

acknowledge that the thing Is easier
said than done. But shall argue that
the presumptions favor its success, pre-
cisely as the necessities favor its con-
sideration.
General GUARANTEES Fail.
discuss new stabilization for time
deposits distinguished from other
deposits-and their Federal insurance
supported by cooperative contribution.
To forestall prejudice, let me immedi-
ately point out that this proposition
avoids the traditional infirmities which
always have attached to a general guar
antee of all bank deposits. Wherever a
general guaranty has been tried it has
| failed, and usually with accumulated
deficits and disappointments for the de-
positors themselves. refer to State
experiments in Oklahoma, Nebraska
North and South Dakota, Washington
Kansas, Texas and Mississippi. Any
general Federal guaranty would reduce
reckless banking, and would charge the
resultant mortality either to the sound
survivor or to the public treasury
There could be no permanent advan-
tage in embracing this repudiated prin-
ciple.
But declinc to concede that the in
frmities of a general guaranty make 1t
| Impractical to contemplate a more lim-
| tied but scarcely less effectual protec-
ton for bank deposits in that particu-
lar sector where banking touches our
mass citizenship in largest degree -
namely, in savings and certificates. This
is the sector where contagious uneasi-
ness sometimes generates-often need
lessly and without justification, and
often in response to idle, empty gossip
If not to actual Communist propaganda
It Is the sector where the greatest So
failures which often could be averted
II mass confidence were not needlessly
disturbed In other words. If these
time deposits" are protected, our &C.
tual problem is conquered. On the
other hand. by confining the new pro-
| lection to time deposits" the infirmi-
ties of a general deposit guaranty are
effectively avoided
Therefore, I am suggesting that q
Time Deposit Insurance Fund" be Gre
ated within the Federal Reserve Sys-
TEN; that these time deposits" be
made contract deposits" in literal
fact instead of idle name, and the In
surance Fund" shall pay any time
depositor" IS per cent Of his deposit
within 30 days Of the closing OF any
insured bank. I submit this would bt
the beginning Of the new confidence
which Is our frst necessity.
Resource Is Annual Tax.
The resources Of this Insurance
Fund" would come from an annual tai
Of one eighth of per cent upon all the
time deposits in the member bank!
in the Federal Reserve System, plus ap.
propriate annual premium by non
member banks wishing to participate
A share of the earned surplus OF thu
Federal Reserve System would also an
nually contribute Whether this pros.
pectus is actuarily sound would have u
be probed by acid test. only
sketch the presumptions in its favor
Suffice it to say that If this system hac
been in operation for the 17l2 year!
OF Federal Reserve experience from
1914 to June, 1882, which includes two
years of heaviest mortality, the fune
would have been 2i2 times sufficient te
pay all the net losses. Here are the
rough figures: Total losses in Fedora
Reserve member banks. 81 800, ,000, 600
average of time deposits" AZ per cent
or s750 oo0, 900; average liquidation re-
covery. SIS per cent. Therefore, II the
Insurance Fund paid rs per cent. 1T
net loss for 17la years would have beer
20 per cent of S750,000,000. or $l50,.
0OO, 600. Meanwhile its receipts woulc
have been in the neighborhood o.
s375 900 900. I recognize that many