'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.
