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About The commoner. (Lincoln, Neb.) 1901-1923 | View Entire Issue (June 5, 1908)
- m wy n w"r wiT" JUNE' 5,11908 The Commoner 3 n penalty for the violation of this provision of the law. If ten per cent of the capital and sur plus is as much as a bank ought to loan, then no bank should be permitted to loan more than that. If the limit Is too low, the limit should bo raised But whatever percentage is fixed as the proper one, let the law be enforced by a criminal penalty. If the law is only directory the bank can violate it with impunity for the comptroller can punish the violation of it with out suspending the bank and thus throw the burden upon the community and upon innocent stockholders. The penalty ought to fall upon the officers and directors who violate the law, and a law fixing such a penalty would be a pro tection to officials as well as to the bank be cause they, could use the law as a reason for not yielding to the pressure that is often brought to.r.bear upon them. Just as tl-o law against rebates is a protection to the railroads from the big shippers who attempt to extort reductions, so a law against over-loaning would be a protection to Tiank officials. If a borrower attempted to urge a larger loan than the law required, it would be a sufficient answer for the official to remark, "I will not incur criminal liability to accommodate anybody." It will be easier to get better regulation when the banks have to participate in a loss brought about by the mismanagement of another bank. The depositors need another law for their protection, namely, a law that will prohibit gambling on the part of bank officials. No man who handles the money of another ought to bo permitted to subject "himself to the temptation of gambling. You may not agree with me in the opinion that gambling is the most demoralizing of, the vices, but you can not doubt that it has led to the ruin of many banks and to the sui cide of many bank officials. When people en gage in a business which involves the handling of other people's" money, we are justified in im posing restrictions upon them which are not necessary for other Individuals, and one of the restrictions that ought to be imposed upon the banker is that he shall not be permitted to gamble on the market. But to return to the complete security which Is furnished by a guaranty system. Oklahoma has adopted- a plan under which all the banks are required to stand back of each bank, and thus every depositor Is given complete protec tion. Under the Oklahoma plan a tax of one per cent is cpllected on deposits and the bank ing board is authorized to collect assessments from time to time to keep this guaranty fund up to the maximum. The one per cent was more than was really necessary; a half or a quarter of one per cent would be enough for the power to assess gives a sufficient protection. After one month's trial in Oklahoma, it was found that this system had increased the deposits in the secured banks a million, one hundred thousand dollars while during the same time the deposits .in the unsecured banks had fallen off a half a million. This was proof that the depositors in the unsecured banks were not sufficiently pro tected, but it was also a proof of a further fact, namely, that the secured banks drew more money from hoarding and hiding, or from out side the state, than they drew from the unse cured banks. This morning's paper reported the first failure that has taken place under this Oklahoma system. And what was the result? .Within less than an hour the examiner in charge of the bank secured authority to pay the deposi tors in full, and thus the business of the com munity was Undisturbed. The depositors were protected and rthe community was protected, while the officials responsible for-the failure will be'jprosecu.ted under the law. What objection is raised to this system? It can not be that the tax is too heavy, because the amount turned to the banks by the greater security given will more than reimburse the banks for the expense of the system.; ,V The mam argument made is that, the big bank will he deprived of its advantage over the little bank. If this were true we might ask whether society can' afford to safeguard this prestige at so large a cost. But as a matter of fact, the big bank will still .have a consid erable advantage oyer the little one. As loans must be in proportion to the capital and surplus, a liank with a qapital and surplus of a million can loan ten times as much to one person as can be loaned by a bank with a capital and surplus of 'only one hundred thousand. Thus the big bank is; able to draw the deposits of the big business men. Then these big business men have their business Acquaintances who naturally follow them to the big bank. But there is an other advantage. 'There-is a certain amount of vanity that mtit tie taken into account. A de- posltor likes to have business dealings with the biggest bank in the town; he likes to bo ac quainted with the moBt prominent financiers he enjoys having them address him famifiarly or take him out to lunch. Then there is a still more substantial advantage in that the deposi tor can refer to the big bank when his financial standing is asked. The big banker by his very prestige becomes the adviser of more people in business transactions and the adviser in larger transactions. All these things tend to protect the big bank In its prestige. It can not in good conscience demand that all depositors shall bo made insecure and all communities be subject ed to embarrassment merely that it may have an advantage over the smaller bank. Then, too, the big bank is as liable to bo embarrassed by a run as a little bank and the guaranty of depositors protects all banks from runs. Nobody cares to demand his money when he knows that his money is safe, and this pro tection from runs would in itself justify banks, big and little, in supporting tho measure. But if this appeal to the sense of justice is not sufficient, allow me to add another argu ment. Unless something is done to protect de positors, the government savings bank will bo established. I have been pointing this out for years and been illustrating it by what has been done in other lines of business. The people did not want to extend the spread of governmental activity. In our cities the people would rather have the franchises operated by individuals if these individuals would deal honestly with tho public, but experiences show that the holders of franchises have watered stock and extorted from the public, and then when regulation has been attempted, they have corrupted politics. The people have in desperation and as a matter of self-defense been driven to municipal owner ship. And so the people desire to have tho banking done by the bankers, but the people demand security and the failure of the banks to permit this security has caused a rapid growth in sentiment in favor of the postal sav ings bank. A great many people are now buy ing money orders payable to themselves rather than deposit their money in banks. They not only get no interest, but they have to pay for the money orders, and yet they incur tho ex pense rather than risk the loss of their savings. The postmaster general, in recommending the postal savings bank says that many millions of dollars are sent abroad every year to bo deposit ed in the government banks of Europe. Why? Because those who send money abroad would rather risk the government banks of other coun tries than private banks in this country. Mr. Wanamaker was quoted as saying that a largo amount of money was hidden under carpets In this country. If I were a banker I would be ashamed to be in competition with a carpet as a safety deposit vault in times of panic. I believe that Jthe timidity of depositors is largely unreasonable. Our banks are, I believe, as a 'rule good. Conditions are not what they were in 1893. Then we had had an era of fall ing prices and many of the notes held by tho banks were worthless because the holders had become insolvent, but up to the time of tho panic of last fall, prices had been rising, crops had been good, laborers had been employed, and there was no reason to suspect tho solvency of our banks. But it is not sufficient to provide a reasonable security, the security ought to bo absolute so that no one would distrust the banks. Some of you have called me a socialist, and possibly some of you have called me an anarchist, although the two terms are opposite in mean ing. But I am not a socialist, I am an indi vidualist. I prefer to have the Individual act where he can do so to the advantage of society. I favor governmental action only when govern mental action is necessary for the protection of the public. I would rather have the banking business done by the bankers if they will do it in such a way that the depositor is protected, but if I must choose between the twenty thou sand banks and the fifteen million bank deposi tors, I am on the side of tho depositors. I am in favor of the postal savings bank if we can not have the guaranteed bank, and remember when we get the postal saving bank, it will not be limited, as now proposed, to five hundred dollars for each family. That limit will not last more than one congress, for the people will demand that its benefits be enlarged and from a saving bank it will become a checking bank, for whatever tho people, need in this country, the people will have. Is it not better to have the banks provide, as they can easily do, for the security of depositors and thus retain all of the banking business? If we establish a national plan for the guaranty of deposits in national banks, such a system would discrimi nate between state banks unloss stato banks wore permitted to avail themselves of it. There fore, I am in favor of admitting stato banks to tho benefits of a national system until state systems are adopted, and so I am in favor of admitting national banks to tho benefits of stato systems until tho national system Ik adopted. But we ought 10 have some system in both state and nation for the protection of depositors. But I am not willing to allow this occasion to pass without presenting a broader argument! I havo presented the subject from tho stand point of tho depositors, and I boliovo their cause is Just. I have shown "you why the bank ers should bo willing to havo the system Adopt ed and I havo pointed out that their own selfish interests will compel thorn to consent to this guaranty. But I am not willing to discuss nny question entirely from the standpoint of a class. Our society is not stratified as tho society of Europe is. You who are engaged In the bank ing business in this great city have many of you come from the farms. It Is our boast in this country that tho door of opportunity Is open to every child, and It should remain open. I am glad that wo are not divided into por manent classes; glad that wo havo no law ot entail by which a degonprato son must rattle around in an estate left by an ancestor; glad that wo are not compolled to protect our de scendants from changing conditions. In New York I believe they havo a society which you can not join unless you can show at least three generations between yourself and any honest work. In this city I supposo it is not necessary to show more than two generations to got into the most exclusive sot. We ought to recognize that we are one In our real interest and that tho only safe plan is to make our laws such that tho whole of society will bo protected. Wo are thus linked together In sympathy and com pelled to consider questions upon their morlts rather than from tho standpoint of a temporary selfish Intarest. We are all one in destiny. Tho farmer, the laborer, the merchant, the banker, these have a common light when we take a far-sighted view of our own interests. And I appeal to 'you to decide this question by conr sldering the fundamental principles of justice involved. Let us consider 1 anklng as ono ot the departments of the nation's activity entitled to consideration, and yet entitled to no more consideration than Is to bo given t5u.fci.ey; " Ta.'; partmonts. Lot us make ou exagj Thos.McCorr may have a , -ward commenb-rato wnii Vis con tribution to me welfare of society and thus each will be stimulated to tho largest possible effort. w t5 w w A WORD AS TO COWARDS wITltfjf Ex-Congressman LittlefleM NaIhviHo quoted as saying that "co. '. v? ;.' . i"' -most cowardly set on earth, f'iid thac uioy aro "afraid to act in any manner which could preju dice their re-election." Ho admits (but there Is a seeming reluctance in it) that "the people should control tho government," though he adds, "but because of this cowardice of legis lators I doubt if direct election of senators would Improve conditions. The senators would then be in a like position to members of tho lower body.", Tho dispatch concludes: "Mr. Llttlefleld deprecated tho branding of all rich men as male factors and said he believed the amassing of great wealth is of considerable benefit to tho country if rightly administered." It was not necessary for Mr. Llttlefleld to say this in order to disclose his point of view. No one brands "all rich men as malefactors" and those who begin their defense of predatory wealth with the assumption that all rich men are attacked aro either deceived themselves or are trying to deceive others. But what about Mr. Llttlefield's attack on congressmen? Aro they all cowards because they are afraid td act contrary to the wishes of their constituents? And are senators brave because they defy the wishes of their constit uents? Senators who defy thejr constituents do so not from a high sense of duty but because they aro servile representatives of great cor porations that hide In the darkness and con trol the government through the official whom they raise to power. Mr. Llttlefleld was not always thus. When ho went to congress he was something of a re former himself. He introduced an anti-trust bill it was said to bo an administration meas ure. It passed the house by an almost unani mous vote but it died in the senate. Tho "brave" senators killed it, after the "cowardly" Hi if m m mi i mi M J 4 .d 41 ,n A fl--. -"-J-l