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About The commoner. (Lincoln, Neb.) 1901-1923 | View Entire Issue (Dec. 25, 1908)
DECEMBER 25, 1908
The Commoner. 3
on Guaranteed Denn&ife
A Timely Article by Hon. Robert L. Owen of Oklahoma
The Oklahoma' bank deposit guarantee plan
makes the following provisions:
First: The law requires a fund equal to
approximately one per cent of the averago annual
deposits to be placed under the control of the
state, out of which the depositors of any defunct
bank can bo immediately paid.
Second: It provides that any person in the
banking business under a state charter shall be
a person of good character, of good precedents,
and of good conduct. It provides- that the money
of the bank shall not be loaned to any of the
active officers of the bank. It provides that not
bver four percent shall be paidrfora bank de
posit'of six: months. ttme;' or longer, -and not?
over three per- cent for shorter periods, of time.'
It provides that no excessive loans shall bo
made to. any. individual or corporation. It pro
vides for a substantial and safo reserve in cash. .
It provides for"v frequent examinations of- tho
state banks. It permits the redeposit with the
bank of its own contribution to the guaranteo
fund, provided such deposit is secured.
' The law is, skillfully drawn to prevent its
abuse by speculation, by improvidence, or by
oorrupt oflicers. The state bankers on December
7, 1908, held a convention for the purpose of
considering this law and perfecting the law out
of .their experience in its present' operation.
. The first argument in favor of the guarantee
v'jl ,:. 'plan is that .it. will have a powerful tendency
to promote ana esuiuusn luu staunuy ui our
national commerce by the prevention of panic.
Financial panic, which is the basis of commercial
paTalysis and disaster, is invariably caused by
the withdrawal of deposits by frightened deposi
tors for hoarding. Many causes may contribute
to excite the distrust of the depositor, but if
the state has available an adequate fund from
which the depositor knows he will bo immediate
ly paid, the effect of such knowledge is to pre
vent the withdrawal of deposits for hoarding,
and will prevent the more acute form of "a run
on the bank." When a depositor is satisfied In
mind his contentment goes far to establish the
commercial confidence upon which our commer
cial prosperity. must rest, and business will re-
main stable and undisturbed when the fifteen
million depositors of the United States feel se
cure in their deposits.
The comptroller's reports for thirty years
shows that for every dollar In currency in tho
banks there is $10 of deposits. In other words
one dollar of currency in tho active American
business lifo is turned over ten times, and be
comes a basis of ten times that amount of bank
credits; and the reverse is necessarily truo that
if tho depositors become frightened and with
draw a hundred million of currency for hoarding
it would result In a corresponding shrinkage of
credits approximately of ten times this
amount. This.- moans commercial -paralysis, such"
as wo witnessed in October, 1907.
The second argument Is, that the depositors
from whom tho banks make their dividends aro
entitled to safety, and that since' this safety can
be assured by a very small tax tho welfare of
tho individual unit demands this protection
Tho history of tho national banks for tho
ton years past shows that only one dollar annu
ally has been lost to tho depositors, out of
$70,000,000 of deposits. In other words a tax
of one-seven-hundredth part of one per cent
would be sufficient under a system where tho
bank examination was thoroughly well made.
It would not only be inexpensive to1 the
banks to provide this guarantee fund but would
actually be profitable to them, because It would
bring from hoarding probably from ono-flfth to
one-third as much money as Is now in circula
tion, and increase their deposits a corresponding
amount, towlt, from one-fifth to one-third. This
would Increase the earning power of the banks;
It would make money more abundant for tho
borrower; would enlarge the volume of our
credits, and generally stimulate tho activities
of commercial life in the United States.
It would give peace of mind to the banker
and savo him from unexpected and undeserved
disaster, where perhaps a current rumor might
cause "a run" and paralyze his institution.
Before the war tho state bank of Indiana
had a guaranteo plan protecting the depositor,
which worked with entire perfection. The Now
The national corn exposition recently held
in Omaha was a revelation to thousands of peo
ple who entertained the idea that "corn is mere
ly corn." A few years ago the uses of corn were
confined to feeding stock, making corn bread
and mush. Now this cereal is taking its proper
place among the foodstuffs of tho world, and
Its many by-products are being utilized to tho
fullest extent. As a result the price of corn is
enhanced, and the price of corn land grows dally.
The corn raising area is restricted, and the fu
ture enlargement of the corn crop is dependent
upon intensified farming rather than upon the
utilization of added acreage. Tho corn pro
ducer no longer selects his seed haphazard, puts
it Into the ground after hasty preparation and
depends upon chance. Agriculture Is becoming
an exact science, and state agricultural schools
are doing a splendid missionary work Prepar
ing the way for scientific soil culture. The Oma
ha corn exposition will give an added incentive
to further investigation and experiment, and tno
results will be beneficial in many ways. It is
not hazardous to predict that the days of ten
cent corn are forever gone from tho west.
A DEMOCRATIC PAPER LOST
The Des Moines Daily Tribune, established
less than two years ago as a democratic news
paper, has been forced to abandon the field. The
Tribune becomes the evening edition of the Des
Moines Register-Leader, and is therefore no
longer a democratic newspaper. George i .
Rinehart, than whom there is no more loyal or
able democrat, established the Trbnuemdoc
it a strong and virile exponent of democratic
principles. He devoted himself to the work with
all the arcor of his intense natureYaa hne0a?n
the Tribune one of the strongest weapons in
the democratic arsenal. But the business strug
gle was too great and the Tribune -was forced
to abandon the field. Mr tafe'n 52!SSS
Will not bo lost to the ranks of the newspaper
workers. His splendid talents will be given an
outlet in another direction, and he will con
tinue to be one of the strong, able and tireless
defenders of the principles of democracy.
1 its fcT
Out of the great mass of words employed
by President Roosevelt in his latest message to
congress, the Omaha World-Herald selects tho
following as some of the phrases and adjectives
used In declaring that there is no need to in
vestigate the charges respecting the purchase of
the Panama canal:
"Scurrilous and libelous."
"False in every essential particular."
"From Individuals known to be of bad char-
"The wickedness of the slanderers."
"For campaign purposes."
"Concocted with a view of possible black
mail." "Need no investigation whatever.
"String of infamous libels."
"Lying and libelous editorials."
"Real offender is Mr. Joseph Pulitzer.
"He should be prosecuted for libel by tho
government authorities." n
"Encouragement of iniquity.
"Infamy of wrong doing."
"Guilty of blackmail." j
"Vllllfier of the American people.
"Wantonly and wickedly."
"Blacken the character."
"Wrongdoing of the basest and foulest
In his latest message to congress, referring
to the Panama canal affair, Mr. Roosevelt said:
A member of congress has actually Introduced
a resolution in reference to these charges. I,
forelay all the facts before you
Now the stories, as a matter of fact, need no
Invtigatlon whatever. No shadow of proof
York ante-bellum plan did not fail to protect
the depositor, but the state banks, twin? pormlt- .
ted to issue money without ndoquato control got
into difficulty because of this fact. Wo have In
forco now even a guaranteo plan that works to
perfection In guaranteeing every bank note Is
sued by ovory one of over six thousand national
banks, which hns thoroughly perfected tho pe
culiar deficiencies of the old Now York plan.
Tho objections made to tho bank deposit
guarantee plan aro the objections offered by tho
big city banks, who bollove that perfect safety
to tho depositors of small banks will deprive
tho big bnnks of aomo deposits which tlioy now
enjoy. For this reason the big bankB have been
vigorously oducating the people ngarnst tho bank:
guaranteo plan, using- numerous Ul-consldored
arguments against it.
First: Tbat it will promoto speculative
banking, the offer of high rates of interest for
deposits, the loaning of tho deposit so obtained
to tho bank oflicers, tho establishing of banks
by corrupt aud unprincipled people Those in
considerate charges ure fully mot by tho Okla
homa law, which does not permit a man of had
charactor to run a bank; does not pormlt him
to lond tho inonoy to himself; docs not pormlt
him to offer over four per cent for money, and
forbldH him lending the money at exceeding ten
per cent, so that ho can not. jeopardize tho bank
by dangerous loans. -
. It really Is a conflict of intorostfl. Tio Utg
banks have a quasi guaranteo ot thofr bank de
posits, which they Ingeniously and properly call
"the guarantee of character." It Is the purpose f
of tho Oklahoma plan to put tho "guarantee of
character" of a well-organized stato adminlstra-
tlon behind every state bank, with a guaranteo
fund sufficient to protect every depositor who,
trusting In the good charactor of his stato, puts
his funds with a bank chartered by that state.
The state has no general liability, but only tho
liability of custodian of the fund, and tho faith
ful administration of tho law. Tho plan has
worked excellently woll In Oklahoma, and if any
defect should appear in the statute it would bo
ROBERT L, OWEN.
has been or can bo produced in behalf of any
of them. They consist only pi a string of in- '
Let us hope that the president of tho United
States Is not mistaken. But the serious charges
made Involve Mr. Roosevelt's administration and
ho is not tho one to say that they "need no In
vestigation," Indeed, he should be the first one
to demand an investigation and to Insist that it
should be made by such men and under such
circumstances as will preclude the suspicion that
investigation, in tho event ot a verdict of acquit
tal, has not been thorough.
. v 5 tJ t
Following Is an extract from a Washington
dispatch to tho Denver News:
"President Roosevelt's message on tho
Panama scandal was read in the senate today
and was received with loud laughter. Few of
the senators seemed to take the message serious
ly, and those who did were apparently paln6d
and surprised at tho general levity. But frown
as they would, their colleagues cast aside august
reserve, lay back In their seats and laughed.
Some of the laughs were derisive, some good
natured, some boisterous. Never before had a
president been so laughed at in the upper cham
ber of congress, and what made the situation
acutely painful for Roosevelt's close friends waa
that the message itself showed that the president
was deadly in earnest. Senator Bailey started
the merriment at 'the very first paragraph of
the message. As the secretary read the presi
dent's statement that the canal charges were
'false in every particular,' the Texas solon just
screamed. Other senators on both sides of the
chamber joined with him and the chorus became
a roar. When tho secretary read that 'unfor
tunately Ill-informed people would believe tho
charges even though they read them In 'a paper
published by Mr. Pulitzer there were repeated
peals of laughter, and this time tho merriment
was somewhat at the expense of the newspaper
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