12 < Cbe Conservative *
TO SKCUKK BANK DEPOSITS.
Part of Tux on National Bunks Cnn Wo Sot
Aside to Creiito a Guiiruntco Fund The
Amount Probably Needed.
LINCOLN , Neb. , Dec. 15. Every de
positor in a national bank is interested
in the enactment of a law which will
tend to the security of the deposit , i
have prepared and enclose herewith , a
bill for an amendatory act which has
for its object absolute security to deposi
tors without additional expense to the
banks. If yon can devote the space I
request that you publish this bill and
invite comment thereon. Briefly stated ,
its important features are these : The
tax now paid by national banks upon
circulation aggregntea something more
than two million dollars per annum.
It is proposed that one-half this tax
shall be retained by the treasurer as a
trust fund for the payment of depositors
in the insolvent national banks. It is
estimated that , at the expiration of ten
years , the fund will amount to at least
ten million dollars , making due allow
ance for the demands that will be made
upon it during that period. At the ex
piration of ten years the tax upon
circulation is to be reduced one-half and
the income of the trust fund will be re
duced at the same rate exclusive of the
interest from bonds in which the sur
plus of the fund may be invested.
Since the adoption of the'present bank
ing system the total loss to depositors in
national banks has been less than six
teen million dollars. In view of this
fact it is believed that one-half the taxes
now collected on circulation will be
amply sufficient to create the necessary
fund and one-half the amount collected
after the tax is reduced with interest on
bonds in which the fund may be invested
will be sufficient to maintain it. The
result of this legislation will be that
depositors will bo absolutely safe and
have implicit confidence in the banks
based upon the fact that in case of a
failure they will get their money in full
without waiting until the affairs of the
bank are settled. It has been urged
that if this measure becomes a law some
banks will offer unwarranted induce
ments in the way of interest on de
posits to secure business , and as all
banks will be equally safe , depositors
will patronize the institution which pays
the highest rate of interest on deposits.
This objection is met by the section of
the bill which prohibits the payment of
more than 2 per cent per annum on
deposits.
The government has provided a bank
ing system and yet it will not patronize
the banks organized under national
laws by the deposit of money therein
unless the banks put up government
bonds to secure the government deposit.
By this bill it is proposed to place all de
positors with reference to these banks
in a position equally as good as that
occupied by the government. It may
be urged that national banks have
creditors other than depositors and this
bill makes no provision for securing
them , but prefers one class of creditors.
Such preference is intended. The
government , by existing law , prefers and
secures some creditors of national banks
to the exclusion of others. The person
who holds national bank notes does not
hold money , but promises-to-pay money ,
signed in the language of the national
banking act , "in such manner as to
make them obligatory promissory notes ,
payable on demand , " at the bank issu
ing them. These notes may be protest
ed for non-payment as notes issued by
individuals and indorsed may be. A
holder of these notes is a secnrod and
preferred creditor of the bank issuing
them. Primarily the security is govern
ment bonds deposited with the treasurer
of the United States. If the bank fails
to pay its notes the bonds may be sold
and the proceeds applied in paying
them ; but if upon a sale the bonds do
not bring enough to pay the notes then
the government pays them and has a
paramount lien upon all the assets of
the bank and the deficiency must bo
made good to the government out of
the assets of the insolvent bank in
preference to the claim of any deposi
tor any claim whatever except costs
and expenses. Aside from depositors
and note-holders the most numerous
creditors of a national bank are those
who purchase its commercial paper.
These creditors ordinarily may look to
the bank which indorses the paper and
also the maker of it for payment.
With the depositor the case is different.
He can look only to the bank ; if it fails
to pay he must suffer loss. It is to pre
vent this loss and to increase not only
deposits , but confidence in banks that
the proposed legislation is urged.
OHAS. O. WHEDON.
The Bill.
A bill for an act to amend sections
5 14 , 5235 and 5280 of the revised statutes
of the United States and for other
purposes.
Be it enacted by the senate and house
of representatives of the United States
of America in congress assembled :
Section 1. That section 5214 of the
revised statutes of the United States be
and the same is hereby amended so as
to read as follows :
Sec. 5214. In lieu of all existing taxes ,
every association shall pay to the treas
urer of the United States in the months
of January and July , a duty of one-half
of one per cent each half year npon the
average amount of its notes in circula
tion. Provided , that after the first day
of January , 1911 , every association shall
pay to the treasurer of the United
States in the mouths of January and
July , a duty of one-fourth of one per
cent each half year upon the average
amount of its notes in circulation. Pro
vided , further , that nothing in this act
contained shall exempt any bank or
banker from the payment of the special
tax mentioned in an act entitled "An
act to provide ways and means to meet
war expenditures , and for other pur
poses. " Approved June 18,1898. One-
half the amount so received by said
treasurer shall be by him kept as a trust
fund for the payment of depositors of
insolvent national banking associations.
Whenever in the opinion of said treas
urer the amount of such trust fund in
his hands is more than sufficient to meet
the demands liable to be made thereon
in payment of the claims of depositors
of such insolvent associations , ho shall
invest the surplus in United States
bonds and the interest accruing on such
bonds shall be added to such trust fund
and become a part thereof. Said treas
urer may , whenever in his judgment it
is necessary to increase the amount of
cash in said fund for the purpose of
paying such depositors , sell at not less
than par and not less than the market
value thereof , any of the bonds in which
said trust fund has been invested.
Sec. 2. That section 5285 of the re
vised statutes of the United States be
and the same is hereby amended so as
to read as follows :
Sec. 5285. The comptroller shall , upon
appointing a receiver , cause notice to be
given , by advertising in such news
papers as he may direct , for three con
secutive months , calling on all persons
who have claims against such associa
tions to present the same and make legal
proof thereof. As fast as the claims of
the depositors in such associations are
established by legal proof to the satis
faction of the comptroller , he shall issue
his warrant in favor of each depositor
or his legal representative upon the
treasurer of the United States for the
amount which shall be due such de
positor as established by such proof and
shall transmit such warrants as fast as
they are issued to the treasurer who
shall forthwith pay to each depositor or
his legal representative out of the trust
fund mentioned in section 5214 the
amount so found to be duo and mentioned
in said warrant. Any dividend which ,
but for the passage of this act , would
have been payable to a depositor of such
association , shall be by the comptroller
of the currency paid to the treasurer of
the United States , and shall be by him
paid into and applied in reimbursing
said fund for the amount paid therefrom
to the depositors of such associations.
Sec. 8. That section 5280 of the re
vised statutes of the United States be
and the same is hereby amended so as
to read as follows :
Sec. 5280. From time to time after
full provision has been made for re
funding to the United States any
deficiency in redeeming the notes of
such association , the comptroller shall
make a ratable dividend of the money
so paid over to him by such receiver on
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