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The Commoner
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DECEMBER,
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out from and imposes no hardship upon the
rthblg hank- fears that such a guarantee
iw will draw away. Its depositors from the largo
nk to the smaller, hank,, th big hank can
nilily obtain a similar guarantee by paying
precisely the same tax rate that the smaller bank
Stents' Favoring Proposed Guarantee Law
The main advantage of the bill for the gua
rantee of bank deposits may be briefly summar
ized as follows:
FIRST SUCH AN ABSOLUTE GUARANTEE
wv THE GOVERNMENT "WOULD BRING FROM
rrq HIDING PLACES MANY MILLIONS OF
HOLLARS OF HOARDED MONEY IN ALL
PARTS OF THE COUNTRY, SOME OF WHICH
tc i BEING KEPT IN STOCKINGS AND CUP
BOARDS AND SOME IN SAFE DEPOSIT
VAULTS.
Thero are thousands of people throughout the
country who hold on to their savings and hide
them in their homes because thy are afraid to
trust ANY bank. Of course, uppn such money
they get NO INTEREST that money is simply
idle and wholly unproductive. If the government
should give its guarantee, this money will come '
out of its hiding places and again become active
in the currents of trade, where it Is especially
needed in these times of war. These owners will
realize that, when GUARANTEED BY THE
GOVERNMENT, it is safer .ban it could possibly
be however carefully it may be stored away in
their homes. In the second place, it will YIELD
them 3 per cent interest instead of nothing, and
will be helpful to others to whom the bank will
then be able to lend it.
IT IS INCONTROVERTIBLE THAT
1. Such a law would bring large sums of
hoarded money back into circulation.
BECAUSE t
1. Such funds aro FAR SAFER in 'banks
guaranteed by the government than in any hid
ing place.
2. In bank the owner "can get 3 per cent per
annum interest; if hid away, he gets nothing.,
SECOND. THE PASSAGE OF SUCH' A LAW
WOULD GIVE AN i ABSOLUTE GUARANTEE
TO 15,902,19.4 DEPOSITORS--IN .NATIONAL
BANKS, THIS BEING THE NUMBER OF'-DEPOSIT
ACCOUNTS ON MARCH' 4, 1918, OF
$5,000 OR LESS.
That means that this law, if availed of,' Would
give a Bense of complete protection and comfort
to nearly SIXTEEN MILLION depositors' or
owners of deposit accounts, scattered throughout
our 48 states and the District of Columbia.
The records show that those whose
bank balances amounted toinore r',
than $5,000 each, and whose ac- ,' l
counts would riot be guaran- '.
teed, numbered only 3 153,1 3 9
The money to the credit of the ': ' :
15,902,194 depositors was $4,521,027,000
while the large balances "to the
credit of the 353,139 large de
positors aggregated about.... 8,000,000,000
THHID. THE PASSAGE" OF SUCH A, LAW
S5HD PRACTICALLY PREVENT, IN 'THE
S2?B RUNS 0N ALL NATIONAL BANKS
WHICH MAY ENJOY THE -PROTECTION -OF
taxtLA guARANTEE, WITH THE MANY
DANGERS AND DISTURBANCES ATTENDANT
vt?TTTSUCH RUNS AND THE . FAILURES
WHICH SO OFTEN FOLLOW THEM.-
aJJad such a law been in operation In times
wfci ii S?me of tlle PanIcs and commercial crises
nnJ i.Ie disturoed and wrecked -the country
rnw i Ich were Precipitated by runs onbanks
could have been averted.
PaSSS?' THE GUARANTEE OF BANK DE
PoSJ a2ULD GIVB PEACE OF MIND, COM
2TlSd CONFIDENCE TO THE POOR MAN
ArPTmTT?P00R WOMAN. WHO MAY HAVE
TIM? tSL?BD THEm SAVINGS OF A LIFE
THESE I BANK3 SAVINGS DEPARTMENTS OF
Ba3u???ntal worry and anxiety which thou
claiivi eads of families have endured, espe
heenrni J 5es, of illneas for fear of what might
awav ti ?eIr familles it -they should be taken
their up ?i at the same tIm the anlc ln whIcu
fail JLif; mv savinSs aave been deposited should
safe'tv n?vL comP1etely relieved as far as the
and Ln ir savinSs is concerned. This-nxiety
unahia i and T0Tt7 whIcb- depositors have been
Eood ?nSu?aat asIde' even when banks are in.
condition,;is4multiplied a hundredfold when
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PRUSSIANISI'S PROGRESS
tfjgS
Chicago Daily News.
the bank fails and closes its doors, as has hap
pened with national hanks 451 times since 1890,
and when the depositors realize that their sav
ings o"f all their earlier years are lost, -or else
that it may be months or years before they re
cover their money. Depositors sometimes have
to wait through long years of misery and priva
tion before they get back their deposits. Thoro
is one bank still in progress of liquidation which
failed over 27 years ago, whose affairs were so
hopelessly tangled that it has not yet paid its
final dividend to depositors, and there are doubt
less many depositors who have died while wait
ing to get their money their deaths probably
hastened by the tying up of their1 lifetime sav
ings. Such harassment and distress not only im
pair the efficiency of the depositors as workmen
in such times, but have often driven both men
and women to desperation and suicide.
FIFTH. IT .IS PROBABLE THAT NOTHING
WHICH HAS THUS FAR BEEN SUGGESTED
WOULD CONTRIBUTE MORE TO- TPIE UNI
FICATION AND SOLIDARITY OF OUR EN
TIRE BANKING SYSTEM THAN TPIE ENACT
MENT OF SUCH A LAW AS THIS. IT IS
BELIEVED THAT IT WOULD HAVE A PARA
MOUNT AND DETERMINING INFLUENCE
WITH THE STATE BANKS IN INDUCING
THEM TO NATIONALIZE TO GET THE BENE.
FIT OF THE GOVERNMENT GUARANTEE OF
BANK DEPOSITS.
The desirability of the unification, as far as
possible, of the banking system of the country
is, I believe, generally admitted by the thinkers
and leading men of both political parties
especially in these times of war where the closest
co-operation and co-ordination on the part of all
financial interests Is recognized to bo of such
preeminent importance.
The records show that the national banks of
the country, for several years past, have out
stripped the state Institutions in the rate of
growth; while at the same time they had made
a more creditable exhibit in the matter of losses.
Such a guarantee measure may be confidently
expected to have an immediate and potent effect
in bringing state banks more rapidly into the
national system and In strenghtening and solidi
fying our whole financial structure.
SIXTH. THERE IS NO FORCE IN THE
SUGGESTION WHICH "HAS BEEN URGED
THAT THE GUARANTEE OF THEIR DE
POSITS JBY THE GOVERNMENT WOULD
HAVE THE' EFFECT OF MAKING NATIONAL
BANK OFFICERS LOOSE, LAX, AND CARE
LESS IN THEIR METHODS AND MANAGE-
MENT.
The supervision by the government would, if
there Is any change, be even more thorough and
effective. It would be idle and unrea sonable to
suggest that, because the money of DEPOSIT
ORS is fully protected, the directors of a hank,
who are always necessarily STOCKHOLDERS,
would be less vigilant, less careful to protect
their own personal interest particular y their
capital placed in the stock of the bank. The
management of the banks would therefore still
have thS vast stock investment of OVER TWO
BILLION DOLLARS to protect: and further
more, they face the danger of the 100 per cent
assessment on the stock of any bank if the bank
should he so indifferently or loosely managed as
to bring insolvency.
A guarantoo of DEPOSITS carries no guar
antee of STOCK; and the ofllcors of national
banks would not be t,omptcd more readily than
now to make bad loans or to adopt loose methods
when they kiiwW that their losses must fan ex
olusively upon themselves and upon their fellow
stockholders and on tho government, 'even
though tho government should protect the gen
eral depositors, ' ' ,?'
SEVENTH. UNDER SUCH A 'PLAN AS'tS
PROPOSED, ALL BANKS WILL EARNESTLY"
STRIVE TO INSPIRE PUBLIC CONFIDENCE
AND MAINTAIN A GOOD REPUTATION, 'NOT
ONLY FOR THE SAKE OF PROTECTING
THEIR STOCK INVESTMENTS BUT . ALSO
FOR THE SAKE OF DRAWING TO THE
BANK THE LARGER DEPOSITORS THO0E
WHOSE DEPOSIT ACCOUNTS AMOUNT TO
MORE THAN $5,000.
The large depositors will naturally exercise
special discrimination in placing their 4undHj"
and will endeavor to select for such deposits,
which may not have the govornmont guarantee,
those banks which have tho best reputation for
honesty, fidelity, and Intelligence in management.
Tho suggestion that the benefits of tho guar
anty law will apply mainly or entirely tov tho
smaller banks and their depositors rather than,
tho depositors of tho .larger banks is not borne
puUby the facts of tho case.
The records of this office for the past 36 years
show that the total deposits of the smaller banks
or, say banks with less than $200,000
capital which failed in this period amounted
to $00,788,000, representing the amount of
money which was tfed up from time to time
during this period In these banks, a portion of
which was lost. In the same time, the' amount
of deposts tied up in banks with capital of
200, 000 or more amounted to $133,572,000;
and of this sum oVor $68,000,000 was tied up
in the largest banks ; those with capital of
$500,000 and over.
The aggregate amount of deposits of national
banks which wore tied up by bank failures from
1912 to.1917 was about $30,000,000'-cxcluslve of
deposits aggregating approximately $50,000,000
mors in banks which suspended temporarily, but
wore subsequently restored to solvency, in tho
same five-year period.
The tying up of $194,000,000 of deposits In
failed banks over this period may not seem large
as compared to the total deposits of all banks;
but it is of high importance when we consider
the untold misery which these failures, brought
to tens of thousands of helpless men and women
who, under the provisions of such a bill as Is
now proposed, could have been spared,and hero
after ought to be spared, such loss and suffering.
It Is believed, and with much reason, that it
this bill should become a law, leaving it discre
tionary with national hanks as to whether they
accept its provisions or not, the vast majority
of these banks wHl come in promptly, and that
they will he .followed rapidly by those state
banks that are eligible for nationalization,
JQHN SKELTON WILLIAMS,
' ' . Comptroller.
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