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The Commoner
VOLUME 9, NUMliER 1,
(Rwsr-iiiyl,q'r'
Ms
howovor, fihould havo power to mako a larger
assossmont in caso of an omcrgoncy, and horo
it may bo woll to dopart from tho Oklahoma
law. Under tho Oklahoma law tho banking
board can nnrnm WITHOUT LIMIT to pay de
positors of failod banks. Whilo thoro is no
llkllhood that It would over bo necessavy to
exorcise such a power to an extent that it would
embarrass tho banks, yet, as this law is oxpori
montal, it is wiso to mako tho oxporiraont in
such tx way and under such conditions as to
produco tho minimum of friction. A maximum
assessment, thoroforo, is suggested, of not Icbs
than ono, nor more than two per cent in any ono
year. This answers tho objoctlon that tho
honest banks may bo crippled by tho failure
of dishonest hanks, and yot tho depositors can
bo mado socuro by a provision that, in caso
an omergoncy arisos, undor which tho fund is
doplotod, certificates bearing a fair rato of in
terest can bo issued and paid in the ordor in
which thoy aro issued, out of tho first monoy
coming into tho fund. Thus the only effect
of such an omorgoncy would bo to delay de
positors, their security still remaining whilo
tho banks would bo protected from tho dangor,
largoly Imaginary, of assessments greater than
they could bear.
Tho state banks of Oklahoma have asked that
each bank contributing to tho guaranty fund
shall bo pormittod to keep its contribution on
deposit, subject to call from tho state board.
Thoro Is no roason why this should not bo per
mitted, tho bank paying a reasonable interest,
say two and one-half or three per cent, upon
such deposits.
Provision should be mado for the prompt
paymont of depositors in failod banks, imme
diately upon tho establishment of tho depositor's
claim. Only by immodiato payment can tho
depositor and tho community bo fully protected.
If a cortaln timo must elapso aftor a claim Is
provon boforo it Is paid, some depositors will
bo driven by. their necessities to discount their
claim, and delay In thp paymont of depositors
embarrasses tho business of tho community anil
n tor fores with tho prompt collection ' of the
assots of tho bank.
Solvent banks should bo permitted to borrow
from tho fund upon approved security in antici
pation of a run, tho amount so borrowed to bo
repaid within a reasonable time with a fair
rate of Interest.
' Tho adoption of tho guaranty system should
bo accompanied by legislation providing for bot
tor regulation of tho banks and tho following
restrictions aro proposed:
No ono should bo permitted to act as a bank
ofllclal unless ho is a person of good moral
character and approved integrity. As all tho
banks aro liable for tho acts of each bank, all
tho banks have a pecuniary Interest In tho
character and Integrity of bank ofllcials and a
protest fllod by any bank against an ofllcial of
any other bank should bo considered by tho
board. Tho banking board should havo power
to pass upon this question upon its own initia
tive or whenevor a protest Is filed against a
bank olllclal, appeal being allowed to tho dis
trict court of tho county In which the bank is
located.
A ratio should bo established between tho
capital and surplus, on tho one hand, and tho
loans of tho bank on tho other. Such a limit
has boon fixed by the banking board in Okla
homa, but it might bo well to insort tho limit
in tho law, and the ratio of eight to ono is
suggestod as a reasonable one, that is, tho loans
should not bo more than eight times the com
bined capital and surplus. If the bank has
deposits which enable it to loan more than this!
it will bo compelled to increase its capital or
surplus in order to make use of such increased
deposits, and this will increase tho margin he-
,w UnQ baink'8 ass.cta und "abilities, and thus
reduce tho chance of failure.
ofTn?JS ?h!,ld al,s, flx tno mimum rate
of interest to bo paid on deposits, subject to
which the banking board should bo allowed to
fix tie maximum rato in various coun In
mTithe bankiUB board lms flxed ie maxi
mum at threo per cent on ordinary deposits
and at four per cent on deposits of six months
or more, but local conditions might make thia
siim different in different states.
Nearly all bank failures aro traceable to tho
m sconduct of directors and bank ofllcials usu
ally to tho borrowing nf vnni!0i " ." , U.8U
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T 1 " dlrcts'or t0 " loamug of oVoa-
K i MM1IIQ LU lltll NI1T1U TIT I ft hma 1
pored by the bank. It is nSiJESS?
R'h ll,"ir01i,(Lb? .s,tringent regulation
n lnv,f l" " P.11100' U0 01l Should
.. ,v ,a uirwior unless ho has a
substantial holding in stock; second, every
director ought to bo required to examine tho
books of tho bank at stated periods, say twice
a year, and report on tho samo to tho bank
ing board; .third, tho executive committee of
tho board of directors should bo required to
oxamlno the loans at least onco a month and
mako a record of such examination on the books
of tho bank; fourth, no official of a bank should
bo allowed to borrow of tho bank unless he is
a director; fourth, no director should be allowed
to borrow moro than one-tenth of the capital
and surplus, and then only upon the written
approval of a majority of the board of directors
tho total sum loaned to members of the board
of directors not to exceed, say, one-third of the
total capital and surplus. Not moro than one
seventh of the capital and surplus should be
loaned to any one person, other than a director,
as principal or surety. Tho national banking
law limits tho amount to one-tenth, but no ade
quate penalty is provided. The law should n t
only limit the amount to be loaned to directors
and to others, but it should make the violation of
this provision a felony, punishable by fine or
imprisonment, or both. Where a limit is flxed
but no penalty prescribed, the law is practically
worthless, for then tho provision can only be
enforced by tho suspension of the bank, and
tho suspension of a bank throws the penalty
upon tho innocent stockholders and upon the
community. As tho officials can offer no excuse
for the violation of the law on this subject, the
ponalty ought to be put upon them and not
upon the stockholders or the community. When
ever a bank official or director has any pecuniary
interest in the use of any money loaned to others
that fact should bo stated on the face of the
note.
Where officials or directors of a bank over
borrow, it is frequently due to speculation (or.
gambling) on the market. Those wno handle
tho money of depositors are entitled to protec
tion from this overmastering temptation and
depositors are entitled to protection ahso. It
is not sufficient to punish a bank official when
his gambling ventures go wrong, he ought to
be punished if he gambles at all. The Com
moner, therefore, suggests the propriety of a
provision making it a felony for any bank offi
cial to buy or sell, on a margin, stocks or bonds,
grain, produce or other merchandise through
any stock exchange, boaTd of trade, chamber of
commerce or other association formed for the
sale .or exchange of such commodities, and a
margin, for the purpose of this act might
be defined as a purchase or sale on a pay
ment or deposit of less than one-half of the
market price. It might even be wise to define
a margin ns the purchase or sale of these things
on a payment or deposit of less than the entire
market price. The danger of market specula
tion lies In the fact that one is induced to be
lieve that by risking a small margin he may
realize a large sum by a quick change in the
price. Tho very enactment of such a law would
deter most officials from such speculation and
the enforcement of the penalty would deter the
rest.
Banks should be allowed to keep a part of
their deposits in approved bonds. This, enables
the bank to draw an Interest upon the reserve
and yet keep it in its vaults.
These suggestions do not cover the entire
ground, but they are offered for the considera
tion of those who are interested in the per
fection of the banking laws of the various states.
It is believed that such a banking law as is
proposed will protect the depositors without
hardship to stockholders and make for the
SSKvf bU8lUef and the ntinued pros
perity of the country.
v & uV3
"INEVITABLE" AND "IMPOSSIBLE"
A speaker at a banquet recently given by one
of the democratic societies in New York assumprt
the role of adviser and outlined! plan by Xlch
ho -thought a democratic victory could hi L
cured. His plan is for the party to q it ''onnnf
ing the Inevitable and attemntlne X i pos"
sible" This is quite a SwSSh a?t
is about as definite as the cinher ,ikm?
which pass constantly between those fcf
who want to make the democratic nartv I ?S
petltor with tho republican par y fSJ th m"
port of the plutocratic element Of cour
democrac party ought not to oppose the &
ovitable," but what is inevitable? wi
the tmhaSft Are
four elections in which the democratic party op
posed tho trusts. Is a high tariff inevitable?
The republican party has won half a' dozen yicr '
torles when the democratic party asked for tariff
reform. Tho democrat who attempts to give
advice ought to bo more specific; he ought to
plainly state what he regards as inevitable,
for democrats might differ on this very impor
tant question.
It Is true, also, that the democratic party
ought not to attempt the "impossible." But
, what is impossible? The party has three times
asked for the election of senators by tho people.
Is this impossible? The party has in three
campaigns advocated an income tax. Is that
impossible? It has insisted upon tho elimina"- '
tion of the principles of private monopoly. Is
that impossible? It lias contended for a reform
of the tariff in the interest of the consumer.!'
Is that impossible? It has demanded labor
legislation in the interest of tho wage earners.
Is that impossible? In the last campaign it
demanded the publication, before the election,
of campaign contributions. Is that an impossl- "
bility? It demanded the security of bank de-
posits? Is that impossible? Those who talk
about reorganizing the democratic party ought
to do the rank and file of the party the honor
to outline the basis of reorganization and the
platform upon which the reorganizing is to tako
place.
Possibly the character of the reorganization
desired is indicated by the plan proposed, name
ly, that a committee not the national commit
tee, but a self appointed committee, or if not
self-appointed, appointed by those who assume
the authority to appoint shall outline a course
for the future. This is an aristocratic- way of '
reforming the democratic party. The reorgan
izes will learn what they ought to know al
ready, namely, that the democratic party ia a
party organized from the voters up, not from a
few leaders down. The democratic voters have
the right to frame the platform and to select
the Issues. A defeat can not rob the voters of
the party of the right to control the party's
course. If the party is defeated when the ma
jority controls the party's policy, can It hope for -victory
by turning the control over to a
minority? If defeat follows when the party
makes an honest fight for principles plainly
stated, can it hope to win a victory by making
a dishonest fight on an ambiguous platform, aiiS
pledged to nothing in particular? Those who
ndviapu5 an p1Icies Inevitable are not safe
advisers of the democratic party; those who
iv ovffm?ratic reforms impossible can scarce
ly expect a laTge or enthusiastic following in "the
democratic party.
8 & S S
WANTEDDEMOCRATIC! NEWSPAPERS
Whatever may be said as to the influence
exerted by the different factors that contributed
to democratic defeat in the nation, one thing
must be apparent to all democrats, namely that
our party is at a great disadvantage Fn the mat
ter of newspapers. In the northern states wa
have comparatively few large democratic dallil
and from the very nature of thmgs we fare unl
likely to find an increasing renrespntninn 1
the large dailies. ThereiraSSoMftS '
S?:,11! th? st Plac. a successful daUy in a
b g city is a business proposition of the first ma
nitude. It requires large capital tc start ft- S
a large bank account to keen it enh,? tw ?nd
SSSSeSf l0Ca1' w" the PotoSefoAKTi
inreTS IX g
support of the weeklv LH , 5d ln tho
paper presents the aemoMJ Week thls
by its readers bi?!n S of aP.Prval spoken
is small compared with Cotminofnf ! circulation
vote. While Jt reaches innen!tal deinPcratic
united States-anWo 3
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