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About The commoner. (Lincoln, Neb.) 1901-1923 | View Entire Issue (Aug. 5, 1910)
'Tpvowrv 6 "THrv'y'' "T' '"''wpi'npswswiwl Insuring Bank Deposits D. L. Hoinshoinor, President Mills JDounty Na tional Bank, Glonwood, Iowa It is not so much tho question of moro dollars, but how to koop busy what wo havo. Tho public grants tho banker a greater credit on his repu tation than a bankor would grant to a manufac turer or morchant. A statomont for credit from ono of those, with a showing of $25,000 capital, and $100,000 in debtedness, noarly all of which is duo on de mand, would not bo regarded by a banker as strictly "gilt-edge," and socurity would bo asked for a loan in any amount, and yet this is a bet tor statement than tho average bankor offers of his condition to tho public. Thoro is no good roason why tho banks, and through them tho commorco of 85,000,000 of people should bo so radically disturbed at a tlmo when other conditions and resources wero novor equalled, because of tho action of a fow high-grado promoters and gamblers. These wo shall always havo, but their power to injure ought to be kept down to tho minimum, so that they would not bo able to create distress boyond their own associates and immediato con nections. But undorour present systom this is Impossible. When it requires 9G per cent of confidence and 4 por cent of currency to do tho business of the country, why tako up so much of our valuable tlmo in discussing tho kind of securities neces sary to bolster up tho 4 per cent? Why not devote moro time to tho more Important feature, and insuro tho stability of tho 96 per cent? Wo keep on discussing currency and moro currency, when it Is only through a1 lack of con fidence that wo have been deprived of tho cur rency that rightfully belongs to us. An emergency currency, based on furnishing sufficient confidence for the 96 per cent used in business, will be a failure and a disappointment, for, In times of panic, tho emergency currency would bo locked up as fast as it was Issued, and would not do tho business expected. There havo been many plans suggested to Improve and remedy our financial system, but all, except tho guarantee o deposits, aTo based on tho issuance of moro currency in times of stringency, and not ono without a guarantee, or olso backed up by the government, or both. Then why should tho friends of these measures cry "socialism," "paternalism" and other bad names at tho believers In tho guarantee of deposits, when wo are willing to furnish the funds for tho payment of depositors, and do not ask tho government or the state to act otherwise than as a depository for tho funds. Look at it from any standpoint, and carefully analyze all tho proposed remedies, and you will find tho government will have moro to do with tho banking business under these plans, than under the insuranco of deposits. Unless the bankers come to their senses and do business, wo will have tho government in the banking business on a grand scale, and our strongest competitor, bo much so, that when wo look backward, the friends of the insurance of deposits will bo looked upon as extremely con servative, and not as socialists and destroyers of tho reputations of banks that flatter them selves that they are able to do business regard less of tho rest of tho world. I fully appreciate the personal worth and rep utation of tho honorable banker who has, and Is doserving of tho confidence of tho people. This Is generally true of most banks and tho un deserving are few In comparison. During tho recent unpleasantness, many of tho country banks, deprived of their deposits as they wero, and notwithstanding the advice and action of their correspondents, paid out cash In un limited amounts to their customers, while dur ing the same period, their correspondents locked up everything in sight and gave as their reason for bo doing, that "they wero afraid of tho country bankor." There are many moro of the country banks than of the large city banks, and if their de posits are not as great, neither are their liabili ties. Yet in times of stringency, as in 1907, their reputation will compare favorably with the larger banks, and it is for the stability and protection of their capital, and for their profits and in their business that tho "insurance of deposit" sentiment has been growing among them like the city bankers, they are inclined to look at tho question from a selfish stand point. The insurance fund could bo used only for paying deficiencies, after all assets are exhausted The Commoner. and assessments havo been mado against tho stockholders as provided by law, therefore I am unable to soo where there can bo any Induce ment on tho part of any ono to do reckless bank ing, when, as now, their own capital Is involved, and only depositors deficiency is to be paid from this fund. ... As it is now, if there Is a failure In his town, tho banker will discover that his de posits will shrink from tho effects of loss and general confidence, while on tho other hand, under the Insuranco plan, tho depositor will find a ready market for his claim. So the remaining banks will receive tho benefit and business of the failure And the community In general, will not find their funds, which are nocossary to conduct their business, tied up and unavailable for an indefinite period. Did tho Chicago clearing house apply this method of reasoning at tho time of tho failure of tho Chicago National Bank? Did tho clear ing house say to Mr. Walsh, "You have done fraudulent banking, and it would encourage others to do tho same If we paid your deposit ors." No, like sensible men, looking out for their own Interests, they wisely paid tho de positors, and substantially applied the principlo that we are advocating today. Tho Iowa State Bankers' Association, in tho past years, has been interested in, and has accomplished much In matters pertaining to their financial welfaTe. If we had deposit in surance, it Is reasonable to suppose that they, being financially interested, would Interest them selves in weeding out fraudulent banking. This would become an important feature of their business, and I will vouch for much cleaner banking, when these competent men, many of whom I have served with on committees, inter est themselves In this matter. They are much better informed as to the banks and their man agement than it is possible for a few men to be, on whom all tho responsibility and duty of investigation now devolves,. The question has been frequently discussed of late. Tho Item of the cost of this -insurance is conceded to be so comparatively slight that our opponents do not usually argue from that stand point. The comptroller's report shows that the loss Is about one-twentieth of one per cent on the average yearly deposits of national banks since they have been in existence and for the last ten years it has been very much less, so the loss is but nominal. I do not like to pay for other peoples' defi ciencies and crime, but do we not do so and do it willingly when wo patronize fire, burglary, fidelity and numerous other forms of insurance? Would not the banker decline or decrease the line of credit to the merchants who refused to insure against fire because he was opposed to paying for the carelessness and crime of others? We must look at both sides of the ledger and cut out all sentiment and nonsense and not de pend so much on the length of our pedigree. We must not forget that such men as Bige low, StenBland, Crocker and many others, up to a short time ago, could outshine the most of us in that respect, and that now and then our depositors remind us of this at a time when we try to convince them that they are per fectly safe and call their attention to our repu tation and standing In tho community. Wo can not depend too much on our reputations, as we have witnessed time and time again that general confidence declines more rapidly than Wall Street stocks when there Is something spe cial doing. Runs are common even among the largest and the oldest banks, and only a word from an evil disposed person without reputation can, at certain times, Interfere materially with a bank'B career and expectations. What we need and must have at all times In banking Is con fidence and stability. It is everything to the banker and we 'can not have it as long as we are subject to such performances as we had in 1907. At that timo we were politely told that we could shift for ourselves and our correspon dents would care for our funds. I do not criti cize the big banker in this, because ho, like everyone else, had lost confidence in everything and was obliged to look out for himself regard less of results. We were all to blame, and yet It is not our fault, but tho fault of our banking system. Our banks were suddenly transformed into hoarding institutions and thereby created more mischief in a fow hours to tho commerce of tho country than can bo repaired in years.. . The present is an age of insuranco and se curity. We, as bankers, demand the highest VOLUME 10, NUMBER 30 recommendations from our borrowers and em ployes and yot wo ask security from both. This is right and it is also right and proper to grant tho depositor the same security that the govern ment and state demand of us, especially when it Is to our Interest to do so. Is It surprising that the depositor loses con fidence when the only privilege granted to him for safety is to examine our published state ments which, In almost every instance in un sound banks, failed to state the truth? Often after a large failure, the bank examiners or their superiors admit that tho bank was insolvent long before, but for fear of general loss of confidence they did not act as provided by law Is it surprising that tho depositor should lose' confidence when the truth is withheld and ho is deceived so that he continues to increase his deposit while tho condition of such banks have been covered up by the public officials? Tho wealth, safety and reputation of conserva tive banks are today too much dependent on the movements of the unprincipled stock jobbery annexes to the great banking institutions. We must have something that will discon nect the affairs of the legitimate banker from these. With the insurance of deposits such men as Morse, Heinze and others will not bo permitted by bank examiners and public officials to cover up their peculations of long standing for fear of producing a panic. With the in surance of deposits tho career of this class of banks would be shorter. There would be every inducement to expose their condition as soon as their banking methods were discovered and their power and influence for harm to commerce in general would be greatly diminished. When a proposition is favored by probably one-half of the bankers and practically all of their customers, is it wise to act as the railroads did, who now appreciate the fact that they were too slow to act and remedy their faults and so compelled the people to act? Insurance of deposits can not be downed be cause of the individual banker who places him self, through pride In his strength, personality and reputation, against what Is for the good of the nation. The demands of great commer cial interests, stagnant and prostrated at this time, will not consider this kind of logic as of much importance. The banker who opposes the insurance of de posits because it might help a weak competitor and make all banks safe, must give his atten tion to something more logical because this argument is not sufficient. By this plan we hope to make all banks safe because our system is like a fence, it Is no stronger than its weakest place. A plan that will furnish and maintain con fidence the principal asset needed in the com mercial world is one that, I believe, will In time overcome all the minor objections. WHY DON'T THE PEOPLE RULE? P. Zuckrlegdl, Cleveland,, Ohio Because, since the dawn of civilization we have systematically made it to the material interest of the rich and strong to take advantage of the weak and poor. Which .under our form of government could easily be remedied, but for the fact that $100 In the hands of political manipulators is more effec tive on election day than 100 unorganized or partisan slave voters. Make all the evils of so ciety which entails public expenditures, payable from a graduated income tax, thus making it to the material interest of the rich and strong to improve human and social conditions in a gen eral way, and the problem will soon be solved. For this I believe we can easily get a majority vote, even against tho combined money power and old party organizations. S. B. Brown, Wayne, Mich. The reason why the people do not get what they want, is tho same reason that the wolf did not catch the hare, Aesop's well known fable. When the wolf was bantered by the dog for not catching the hare, he made this reply: "The hare is running for his life, and I am only punning for my dinner." Special privilege is the very life of these corpor ations and they make a business of it just as large firms make a business of advertising. It is part of their expense account, and as in ad vertising it is the larger part. They are fighting for their existence, while the people aro fighting for a principle, or their dinner. Tho American Homestead, a monthly farm journal of national scope, "will bo sent to all Commoner subscribers, without additional cost, who renew their subscriptions during the month of August. Take advantage of this offer at once, and send in your renewal.