- 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"
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