THURSDAY, SEPTEMBER 10, 1908.
THE COLUMBIAN.
SU PPLEM ENP
GOVERNMENT GUARANTEE OF BANK
DEPOSITS DEBATED AT BEDFORD
THE CRUCIAL FEATURE OF THE
FINANCIAL PROBLEM DISCUSSED BY
HON. JOHN C.M'HENSY AT BEDFORD
SPRINGS.
Bedford Springs. Ra., Sept. 9 The
feature of the second days' session of
the Pennsylvania Rankers' Associa
tion in annual sesion here, was the
ad bess of Hon. J;hn G. Mcdlenry,
.T Columbia county, in support of the
proposition that the Federal govern
ment ought to miarautee deposits in
banks. The opposite side of the
proposition was supported by Mr.
James J- Buchanan. President of the
Pittstburg Trust Company,
air. "McHenry said:
Mr. Chairman and Ceivthmen of ;he j
Convention: '
Your accomplished Chairman has
invited me to present the argument
of the people ill the case of the Banks
i.
I.
IE
. .
i v
wa-rf" ... ..
v ' 1 ' '.,-
JOHN G. McHENRY.
vs. the .people now up for trial be
fore this splendid tody of jurymen.
The question under debate is:
Khali Congress enact a law levying
-uiaoiiable tax on National Banks,
permitting all banks to avail them
selves of the privilege, as an insur
ance fund for the protection of the
dr positor?"
In speaking for the people on the
Affirmative side of h':s great quejtion,
1 realize to the fullest extent thatl am
addressing a jury of men the majority
of whose minds are already adversely
fixed. But I respectfully ask that
you at least let your minds open to
conviction and in a receptive mood
to receive my argument. The final
solution of this important question
tion will iie largely a question of hu
man judgment. You may be right,
and I may be wrong or I may 'he right
and you may be wrong. We are
dealing with a fundamental principle
and because I may favor it. it does
not necessarily follow that I am right
ror "because the -big bankers of the
country oppose the measure, it does
iiO't necessarily follow that they are
right, but when the great mass of
American pet.ple finally make up their
minds urrnii ativ ureat public question.
past history r."Cords them always In
the right : so it will be will tl:Is
quest ion. the final decision, for it
is a fundamental q-H-stion and canno
r.e d'-eided 1-v mere argument. The
Americtiii pipl' as a whole embrace
the Cbris-tian reiiaiot:. yet there are
many unbelievers whi can marshal
;.ti a-'oiii.diii-z array of facts and e'o
ipehce with wh.v tltev consider con-
c',iisie pro.-:f that the Christian !
Itgioti i.- ail w: Hit So it will be wi'h
lnv V-Ulini:' oppotlllet who is to fol
li'A !)! rakitiir -lie neirativi- side of
ih' question, whom 1 have no dviubt
lun..-stly belives lie is right but you
miiM remeiir'aer the "fake" profit idea
ba-l; of his argument and the infi
delity of his teaching as applied to
the banking religion.
You have a c-oiidi:i.jn confronting
you not a theory. You must ac
cept 'rhcr a form of guarantee of
le:jxisi! or a Postal Savinsrs Rank.
Because the people demand that their
earnings shall lie profited. To ar
gue that they are already protected
is net sufficient. This is a people's
Government and after the public
mind is fully made up the people al
ways get what they want. The pred
atory interests and the politicians
may thwart the people's wishes for
a time but in the end the people will
rule. if you choose you may have
moulding ihcir final opin
hese great financial j 1 1 o s-
t :011s and help frame the law but if
:" !imv th ill(5if-
j .1 ii in-f wuicii cnarac;erioii villi uui-
1
our recent currnecy legislation
ou must accept Hit? law as given
you and abide by the result.
Is It Right and Will It Pay?
When the honest legislator is call -
d upon to consider a public ques -
ion. he has but one predominant
bought for bis guidance, is it right?
Wheii the banker or business man
apporaches any question relating to
his business he has but one pre Join-
itiant ibouglr: Will it pay?
I hope
to prove to the satisfaction
of both the unbiased Law Maker and
the Ranker that a form of Federal
Guarantee of bank deposits is not on
iy right and sound as a fundamental
principle of Ranking economics but
that jt w ill pay and I also shall prove
that a Postal Sivttt-s Bank, law
tin
nace to 'he banking
1
interests of the country and to the
welfare of cur people. j
VO.ee 111
;i upon :
For the intelligent consideration of-1'11'" f"r lne public welfare in c-on-this
question, 1 beg your indulgence ' --ving the mutual interests of the
that it may be taken up in a system j stockholders, the officers, depositors
a:-c way. Ixt us consider briefly: j d borrowers of the c:mmuuity.
First, is the Banking business a! Cause of Bank Failures,
public or a private business? j Hanks never fail except for one or
Second, what is the real mission ! ihrc-e specific causes violation or ue
of a Bank? J gleet of the banking laws upon the
Third, would a form of Fe.Ioral i'arl of ,tje officers or director8; bad
r,, ,t, i I .'nveaunents, which is one cause of a
urn nu . 1 u 1 i-taiu nil 11 iiij 1
n.ission if a Bank?
Fourth. Will k pay?
Is the Ranking Business a public
or a private Business? That de
pends altogether on how you run
your Bank. In the early history of
Banking, the business was confined
exclusively to men of great wealth
who carried on the business of loan
ing their own money to the borrow
ing pllO.lc.
Iter on in the natural
evolution of 'he
began to receive
business. Ranks
moneys In trus-t
from the poo;!e. So rapidly did the '
b.isimss develop that it was deem-1
ed neci-jisary for the public welfare j
that same form of Governmental sl'-
pit-vision should be devised until lin-
a'ly we have the National Rank act I
:i!!.tr:z:nir tae issuimr "I freiierat ,
charters for the oti' ra'lon of Nation-j
til Ranks ;,t:d our several States issu- j
ii.y ."a'e diarets for the 1. per. it ion
of st-a'e B;inVs. So if you are run- j
niim a priva'e Rati I, ai d some of the!
le st i,:,i,i'.s I know are private banks, I
sitnp.y il-'.nj your
not receiving mm.
own
y oti
t lien
mom
and 1
ile,,
the
has
It. from 1
1
general public
Govern-
i
no con- j
leetii. .Valletta! or
-: it if lonal rli'ht to
:i r v.oa'.i -hey in;
Ii r this pt o;io.-ed
in'oi-fi re with you
rfere witli you un
Gnaratitee. If v-.iii are runuiii
a pi
i v a t
Rank
wi ll your own money and not with I
P'. blic money, then 011r failures or
are of no concern to the gen-j
era!
H'i!
asto
pub.tc nor to tlie Government. I
if. iiiKin the other hand, von have
d either the Str-.te or the Fed-1
eial Govern tneni to give you
cl.il chtirti't- and are nceivlng
a spe
money on deposit from the genera! public,
ih n your Rank immediately bifomes
a public institution and the Govern
m -ii ; issuing your cliartcr owes a
ni-tral obligation to the public to snr
n mid t.he business with su b sttfe
gitards as will insure the public
asainst loss.
In this connection and under this
head I want to answer in advance
one of the arguments which my op -
110111 nt will produce, and that I.-,
Why Not Guarantee All
Lines of
Buisness?
lie will argue that if the Govetn
nient is to guarantee the Hanking
IJu-iness why not guarantee the 'bus
iness of the merchant, the manufac
turer, and the farmer. The absur
dity of this form of argument carries
with ii its own rebuttal as being un-
worthy of earnest, consideration.
I'nder a form of Federal Guarantee
o1 the overnmetit does not guarantee the
; Hanking P.tisiness it does not re-
; merely requires the Rank to return
'ihe Depositors' money any time they
j call for it by levying a reasonable
: tax upon the Ranks for that purpose,
It puts the Ranks in a pnsition to
' n;
any demand their dejiosllors
may maki1
I Important,
and that wnicn is most
removes the dangerous
! elements of fear and distrust from the
depositors mini which at the same
j time, removes h's desire to withdraw
his deposits more rapidly than he
needs them in his daily use.
Tile Covernnient would never pay
a dollar out of the People's Treasury
but would simply act as a Trustee to
r.'Ci-ie and ilis'iurs this insurance
fund.
.:: s tlie f.i'tner or tile merchant
or :!,! matin r.ii-t ur'r receive a N'a
tieii.il char'er frcm the Gover:inien.
til-it the love rn.'in should guarantee
bis litisiness? No. Why have you
NaMof.al Rankers asked for a Feder
al charier? Recause you believe it t.
is tin advantage ft r you to do so and
because you iielieve it inspires great-
or cor.fideuc upon the part of the
public. The great structure of the
Rat kirg Business of the country Is
built upon confidence. Any law or
any condition which helps to in
crease publi - confidence by surround-;
ing the business with fundamental ; ,,., ,)tJ country contributes his:
safeguards is a good law and will I of hat 111 towar 1 the country,,
work a grttit lwnefi.: not only to the,,., .am:i;i be- cetisunsl. for the:
country lint will bring ab.iut greater
;.-ifi:s to the bunks themselves.
Flirllieiiiiiee, the inerclitilit. the 111:111-iif.it-t
ill er or lb'- farne r may fail, but
u- failure lias to do only with him-'
-ell' and his immediate red i tors but'
win 11 a Rank fails it involves the
st: ckliolib s. !. .'.-fo-itors and the
brjrinpps :t:tcrv-'.i :l:v t holt; c.'lii-'
munitv.
Willi the iss "tof a federal char- j
n r autlic: i?;n" . to establish a;
ti.itional iai.:w a' :nes is no'
longer a j-rtva'e htiitie.-s but be- '
!.". s a . V h.ivc i
atked for the ( barer because you j
iielieve it wil; insure greater profits .
to you as stockholders. Therefore it
is but fair, right and equitable that
;he government shall act as a me-
hundred or embezzlement upon the
part of the cashier or-officers. In
either of these cases a failure might
have been prevented by a close sur
veillance upon the part of the Gov
ernment. This being true, I hold
that the Government is, to a certain
extent, an accessory before the fact
ii,, every national bank failure, and:1
! ;he United States Government should
'tither withdraw entirely from
the I
i banking business OR ASSUME ITS
1 :
rigals ana prmtegeb
..,,,1 1,v .Ml.-ird lis?
ii- business in the interest
' tlie 1
ilic welfare still more closely.
Tile national banking business of
!!iis c lun'.ry is operated upon a strict
ly sclent ilie basis and properly offi
ce, -d and the present laws lived up
th'-re is no reasonable excuse fof
: ny national hank failure, and in ail
ic liistoty of American banking we
i.a-n- yi l to record the first failure
( f any national bank where tile laws
".axe bein ligidly observed.
A Bank That as Once Eeen Success
ful Should Never Be Closed.
R. 11. ks wili make bad loans and
..tit with losses ju.-t the same as a
i.iauul'aeiurer or merchant will make
. ad sales and have bis losses, but
j v. here a bank is so located as to slip
; ;i public m-cessity and with a
I line nf ilep.isi's to make it profitable
there is no tea.-on under the sun why
itiiat bank should cIos- its doors, and
J under tlie operation of my projiosed
!'ij! tnere will never in: any more
I i iiiin l.iiiiiieb 01 misj-iisioiij..
Tlie ajiplicat ion of the proposed
law would work with automatic and
.scientific, precision, a.i 1 if losses
have been sustained to tlie extent of
impairing the surplus and capital of
a nank. the Comptroller has it in his
p.er to remove the cause and. In
stead of closing the doors, the banks
t:o on doing business. There has
nt vf r yet in en a bank failure within
the limit of my observation or knowl
edge, but. the cause of the
t failure being removed, the business
1 reorganized, public confidence restor.
1 ed, the bank has invariably recover-
1
i ed j;s losses and continued as a d!v-
nU-ml paying proposition to its stock
holders. A most striking pxctr of
this truth is found in the recent
Knickerbocker Trust Company sus
pension which closed by the arbi
trary action of a clearing house
committee, and within eight months
j ;s found ;u ;, solvent condition and
;s ow ,ijng a prosperous business
! wi;n pearly f. ny million of deposits.
ln providing a Government guaran- j
r .... lluiri. M'lllllil IIAV.M ti.i i II flltlti-
tiontil tax levied to meet any loss.
I ordinary withdrawal of deposits, and
: t(J on as t;1(. banker can rely with
j ;l reasonable degree of certainty
j ti,.lt his demisiis will remain at a
; normal state he can tell with very
j r..a. accurac y just how for lie can
j extend i,js accommodations to the
i ,,,,,1,311; and manufacturer and gen-
oral borrower, and thus increase
his earning capacity to the fullest
; jj,,, ne cau tojj wnat Joans can
"... S if.i'v .-.ill f.Wfl.l O .1
well
as what
Our re-
i'lK-w loans can be made
j ent panic, as far as the country at
j targe is concerned, was caused more
by fright upon ilie part of the bank
er than upon the part of the deposl
The average banker is not only
tin honest man. but a man of -the
h'.-'he.-.t character in his community
ami one who prides himself upon be
ing able to give his depositors their
!i!i.cv when they ask for it. So,
.ill' n a condition of panic exists each
e. iiM rxutiw bunker wants to keep
bis own ins-'t it tr i'.n strong, and is
, , , to call in outstanding loans,
ancj t0 refuse to grant any new loans.
. while in many cases there is no real
. j::!iifi,,itii.ii for this procedure, and
;; . ; ,-, i; hstanding the harm he works
1 his individual community and as
ntegral part of the hanking eys-
tea-oii that he does n;i
01. liis t'e.o?l:ois 111. t
e, and l;t.e up in fiotll
know how !
be frighten ,
!' his win- j
I , demanding cash, so a foi'iii of I
t gi:ara:e w'nieh will ..albfy the ih-j
insoi.r under any and all conditions;
... , ... .1
s iiet as essential tor me oeneni o'
1 e hanker as ii is for the deposits
fair interests of the borrower.
la tlie individual management of
u:i incorporated hank and ;iie laws
which govern ... '!u-re arc four sepa
i,iii' ;..-(..-3a he cinserveii. viz:
The Govern liietit titer ui
;a'e. ttie sio'Ktioiaers, ine ae;osi-
ors and -the borrowers. Under our
modern . system of banking there
seems to have developed a new type
! of bank managi r who believes that
the sole right in a 0ank is centered
entirely within the stockholder. This
type may jusitly be styled the Wall
Street Ranker.
jmi filled are they with the "divine
right" idea that Rankers of this
ciass look upon their deposits as
their own money and therefore for
their exclusive benefit. They chafe
under any and all governmental re
straint and are usually opposed to
any form of banking legislation that
looks to the welfare of the depositor
and borrower. This principle seems
to underlie every financial measure
which has been favorably considered
1 i v tlie last session of Congress and
- 4 '"t "KSiy exenipnneu i,y me
dis. ingilished Senator from Rhode Is-
.and. the Republican leader in the
Senate, the author ot the Aldrlcn-
1
' " '
Rill, the sole arbiter of
American Legislation, in his speech,
in
delivire.l in the Senate on 'March 20,
Rei.v Congressional Record. page
11. -.1'. I
In discussing the question of a Fed
eral guarantee of bank deposits, he
' said:
"The peo;ile of I he Stales of the
' I'nioii are not in'erested in this ques
iieii. They are not the depositors.
I refer to the common people. The
. i.'opb- who deposit in the banks and
he people who borrow the resources
' f the banks are business men who
.an take care of themselves, and
there is no reason why we should run
uad in Jiis idea of paternalism."
1 I submit in all fairness to you men
as practical bankers that if any bank
r v.nuhi come before you and make a
similar statement, "that the jteople
-. f the states of tlie I'nioii are not
Interested iu this question, that they
are not deposit :irs," you would be forc
ed -o admit that he didn't Lne .'. ttie
I .0. ini.try principh s underlying true
, banking success ami thai if lie did j
n il understand the primary princi- j
i.e.-.; he would not be fit to partici-i
ji-iio in bank management much less
become tlie sole maker of laws
et'.'.rtng the currency and banking
li.o'stjons of the great American peo-1
pie. Yet it is this type of 'bankers
'!:; now oppose a Federal Guarantee
ami vou cannot disguise the fact that
yr.ur opposition is not based upon
ound economic principles but Is
'ounded lijxiti absolutely selfish mo
tives. The true mission of a liauk is one
of pteblie good. It presents the true
TpTT-iT- of scientific co-operation. An
lionestlv managed bank helps men tonore become insolvent under the law. I
help themselves and when a bank
is established in a community it
should be so organized and managed
! i
and the stock so widely distributed i preserve to each state ibank and each ! unsound as a bank (principle,
that the greatest number may share j national bank its own individuality; Wild Cat Banking,
in its profits anil 'bring to the bank I and its own control under its sepa-; As to the question of this proposed
the widest possible degree of public j rate charter, it will be a good law j law encouraging wild-cat banking, it
confidence, hence any antional law ! and work to the benefit of th gen-1 will have the opiiosite effect, because
which will further the true mission eral. banking business. There should j each bank in a community will then
of a bank such as a Federal Guaran- j '-e some law to d-emand an uniform j have an interest in every other bank
tee of leK)sits is a law in 1he in-j percentage of reserves in all banks i and will he on guard as to its own
teest of the public welfare and one I and an uniform percentage of undi- affairs as well as its neighbor's af
that will increase the profits of the j vided surplus in addition to the cap- j fairs. The same argument would be
. links as well. (
Would a Form of Federal Guarantee i
Help, or Retard the True Mis- .
sion of a Bank? j
When men organize a bank, their j
! 1. r r,t
find, however, that in addition to 1
.. . , 1
f, k,: it nlv in
creases their profits but increases I a"e national bank losses have
the usefulness of the bank as a com- i not weeded $850,000. My proposed
munitv builder. Idle money in a i W" wnicn a ,ax of two mil,s
'. ,-i;i. mpn i nn!1,Ion ,h? ,a'l'al stock provides a
economic loss io a enmmunity. Idle j
money is one of the principle causes
of idle men for it takes money to env j
ploy men.
Therefore, no community
witt rise to its hi-bes desrree of:
. . , , , , " , ,,
final. cial and mora! development tin-
the money of tile community is
t;ei: i-i n't reiitiil inn I: i estiniat
.-! tint there is one billion dollars . !hat ,he p"bIic mini1 wouId not con-' This reecnt agitation for reform.
f idle nionev money hidden at j S"ler " as a sumc'ent tax to give , j,iging from actual results, has 'been
h .me and not in circulation, which I thm ,hP P'ection which they want.lls,H, nl0re as a pmical asset than
would represent four billion dollars witn ,!le average bank of a hun-; for the accomplishment or real good
of additional commercial credits. ! ,rH' thousand capital, a two mill an-j-to the masses, and has included with
Now isn't ii better to try to get and i "ilal ,ax wo'd mean a tax of $200 . in its realms various attacks upon the
t:eep this hidden money which Is ',f,r 'ear- Xow counting the net, general banking business.' True,
-eal money into circulation than to !'ror'f w n'eh yon make on your dopos- linen in high places have proved faith-
ry the dangerous experiment of is-: its- a,'Pr deducting all fixed charges I less to the trust and confidence im-
suing a new kind of money as provid"
fd under the Aldrich-Vreeland Rill,
at a high rate. of tax which means a'
.'.x upon production?
Before nu n will put their money I
into a hunk they must first have con-
i'uli r.ce in the management of 4he '
nstitiition. So long as times are
. , , 1
,..1 ..,.! 1 .11. 1.11! nmiil t inn tir.iinnl
.1. ami iiii.hii' -i-i ,it....
, . , ,
uiiilisturiied tiiev; are saiisneu anu
willing to leave their money remain
11 di-iKiwit. but even under the most I
, j favorable eondit ions, there is a large
-
-TTTlTTT-r.
TtTtmhfT ;-f -nP7i1 r1ft-T ' r f pmr.rr.TiTirrT
j who are afraid to trust their savings j
! iu any bank and those who have al- j
! ready deposited their savings are
i afraid the moment there is talk of a
panic or a -business depression, and
deposits.
In the removal of this fear in the
public mind lies the great necessity
for a Federal Guarantee. As far as
actual losses are concerned in the
fast the percentage of losses to de
positors and to -the general public
has been less, perhaps, than any oth
fr pirblic loss in other lines of busi
ness hut a law of this kind is not
intended either for the profit or the
bank or for the profit of the individ
ual but it is intended as a economic
factor for the public good.
If Mr. Aldrieh is right in his
statements, and you men who bow
before the shrine of Wall Street in
following his leadership, unite In Re
lieving that the people are not de
positors in the .banks, that the banks
ton't need the deposits of the peo
ple, then I am wrong and you are
right, but if upon the other hand you
!o need the money of the people to
tarry on your business and if the
people have a right ro withdraw that
money when they choose and destroy
your business, it seems to me to be
pi 1 unanswerable argument that a
Federal Guarantee of Deposits wil!
help further the true mission of the
hank and in so doing help ad ranee
the interests of tlie great American
. onle for both go hand in hand.
Will It Pay?
Now we come to that part of the
question which appeals to you as
practical bankers more than the ques
tion of public good will it pay? Dur
ing tlie recent session of Congress
I had the honor to prepare and pre
sent a Bill, a copy of which I mailed
to each batik iu Pennsylvania and
with which you are 110 doubt famil
iar. The Rill provides a semi-annual
tax upon the capital stock of the one
tenth of one percent or a two mill
tax a year upon ca-pital stock of each
year upon capital stock of each
bank. My bill alos permits state
..anks to participate in the benefits
by submitting to the same laws gov
erning national banks as applied to
xaminations, publication of reports,
reserves and surplus fund. It
should also 1 iuW the maximum
:i mount of interest on time deposits.
..'hat we need in banking legislation
a greater unanimity and uniformity
of bank nianagt ment.
One state for instance will have
a law fixing five per cent, of law
ful reserves, another will have 10
per cent., another 15. while all na
tional banks are compelled to carry
1." and 2. per cent, lawful reserves.
In a time of panic t.he 'burden or sup
port falls largely upon the national
hank reserves and the drains upon
j them are such that they cannot main-
' tain their lawful reserve and there-1
If any federal law can be framed i
such as is proposed, to help amalga-
mate the banking business and yet ,
ital and a maximum rate of interest
n deposits. A bank failure is worse
than a fire it not only incurs a di
rect loss but it involves a still I
Sreater indiret loss ,0 the alk j
and community through the loss o 1
1
-e and the arousing or those
destructive elements in men of fear
ian(1 distrust. Since 1SC3 the aver-
fund of Two Million Dollars annual-!
1 Iy or about two and a half times as i
I "much money as past experience has '
proved we need. I agree that It
would be more fair to have this tax j
' ,nr luil "ae lui3 I
-based upon deposits instead of upon i
11 1 I
capital stocs, out ir based upon ue-,
1 -posits it would seem so insignificant .
.ncluding your depositors interest 1 posed in them by their business as
ictount. at one per cent., your sociates and by the general public,
bank would have to secure an In-! Isolated cases of this kind always
creased amount of deiposits of twen-ihave existeii and always will exist.
:y thonsand dollars or increase its I There is one elemen.t of good, how-
I loaning capacity to the extent of
5."..h:o either way you want it. 'c and this general business reorga il
ls there any banker here who isllzatiun. Corporate nianagement of
I ailtilf tl llk'llff. ttlA LtiFbTiianl Dtll
... .... ,nai iiti ii. miui
I
! lie ibelieves he
cannot increase his
deposits upon the ratio of $20,000 per
J10O.1M.O capital or that he cannot in-
1 crease his ioaninsr ranacitv to the
extent, of io.tM wheu.h.is bank is
' .
.ackel .by a federal guarantee to de-
positors and he knows that he is
not going to have any extraordinary
demand from his depositors for their
1 money.
1 .
V Hue. ...j l'' ' ' ...
' meat and associated banks are first
I . . . . 1 1 . v : . 1 , 1 . .
""""'
I ment; seCond' b tne surPlus d un"
divided profits; third, by the stock
holders' liaibility representing three
times the capital stock, and I should
like to ask if any banker here knows
of any hanking institution anywhere
that he would not be willing today
to take Its business over upon that
basis. This is what we propose un-
tier my tbill. Instead or liquidating
the affairs of a bank and creating
losses we continue the business with
out drawing a dollar from the Na
tional Treasury, and apply the earn
ings of the bank to repay the losses
before the stockholders get any divi
dends. As a husiness proposition I
know that you would the willing to
t?ke over the banking husiness or
;he country today upon that basis,
and especially so would yon take it
over ir you could have the privilege
which you have under this bill of ex
amining the conditions or the bank
before it is permitted to receive this
cuarantee. The general average of
bank stock dividends or net earnings
throughout the lnite4 States is 13
:ter cent, annually. The annual tax
provided herein is two mills on the
capital stock.
So the argument against the tax
falls in the evidence of past history
and our general knowledge of the
banking husiness. Rut even suppose j paying line of business it is just as
the banks were obliged to bear this j Ima?h of an economic waste to close
small tax. if it can be shown to be in 1 ,,, the iank an, destroy its patron
the interest of the public welfare, j a?.e as it wouUi fl) 4lllrn (lown a
the tax would be justifiable. Though
it would seem to be 'beyond all argu
ment and the widest possible stretch
of imagination that the bankers
would not receive through the in-
creased deposits which wouUl come privileges through which they can
Into their vaults liecause of a guar- j n,.,I;e Vtrv i.lrp prints and yet re
antee of this kind and a larger loan-, fllst. to ....mrihtue their share to
Itig and earning capacity because of' v.,r, the maintenance of their gov-
more steady volume of deposits, suf
ficient to increase their net earnings
very much greater .than any possible
tax which might be imposed. There
fi re. I claim that a Federal Guar
antee will nol only work to the pub
lic good 'but llie benefit of all banks
and I challenge my opponent to pro
duce astisfa,ctoiy evidence to the
contrary.
Well Street A jument Agamst De- 1(0rne ly slllt,M,llv So , 0r
positoi ; Guarantee. American government the burden of
In his effort to produce the evl-i this social and economic life is dls
dence in answt r to my challenge and : trihuted throughout all stratas of so
in addition to bis claim that if the;ciety through the medium of taxa-
government should guarantee
business it sh uld guarantee
one
all,
which I have already answered, my
opponent will urge that it will en-
courage and increase 'wild cat" bank-1
ing.
.Second, that it is unfair to tax good
banks for the loss of poor ones.
Third, that it will give the smajl
'bank an unfair advantage.
'Fourth, that it is paternalism and
just as reasonable as applied against
life insurance, that a man would be
more disregardful of his health ibe-
cause his life is insured, or It could
be allied to fire insurance, that a
man would he more careless of his
property because his property was in"
sured. If business history teaches
us. anything, we have learned that In
surance is a fundamental and eco
nomic principle, and the question of
this insurance is not so much to pre
vent the loss as to prevent the wid?
spread of harm -which comes from a
loss of this character, and the oppo-
sition of banks to this bill is not he-
cause of a fear, of loss to themselves.
hut because of a selfish fear of com-
petitors' possible gain,
Fewer Bank Losses in Future Than
in the Past.
1 ever, which will come from this pan-
'ill L-tt..lo u-ht..v nr.t.Ttn.1 n tn.1...
. .111 niiiit.-i, nil. nil i x .LJl iru I VI lliu U'
i
t rial pursuits or to the general hank-
ing business, will h cleaner and or
i higher personal order than at any
time in tlie past, and that, too, with
out any change whatever in existing
laws.
Ijosses through national 'bank fail
ures will be less in the future than
they have been in the 'past. 'Men are
growing better, and the standard of
t --. .-. ,u. .., UUi.'Ua '.. l.aSita
of business men is higher today than
ever before. It is impossible, there
fore, to concede that (because the pos
sibility of loss is removed from his
depositors the banker Is going to
take greater risks 'than he ever did
before. The 'banker of the present
day has no thought ct the depositors"
loss at all. lie is concerned entirely
and solely for his stockholders, and,
knowing as he does that before the
: government can supply the loss to
his depositors that he must first give
ip the earned surplus of his bank and
call upon the stockholders or hi?
bank to pay an assessment of 100
per cenif. upon their stock, the same
degree of conservatism will exist as
berore, and more so, for the reason
that the Comptroller of the Currency
will have authority to re-move any of
ficer or director from any bank
whose conduct has been in direct op
position to the best Interest or the
bank.
Unfair to Tax Good Banks for the
Fairure of Poor Banks.
I believe I have already answered
the argument which my opponent will
produce that it is unfair to tax good
banks for the losses due to bad hank
management. I have tried to show
that there is no excuse for any bank
failure. That there always have
been and always will .be bank losses.
But where a bank has once had a
factory because a certain factory
manager had robbed the Treasury.
But, are bankers to he a specially fa
vored class of men who first want a
government to give them special
eminent or the prosperity of our
leople?
In this scheme of human govern
ment each citizen assumes his share
of responsibility. Who supports our
hospitals, our insati-- asylums, our
homes for indigent persons? The
people. Every personal or business
failure in life means that the bur-
, di n of 1 lie loss of that failure must
tion. The banking business being a
i
j public business, it is better for the
j public good that the iburden or loss
if losses there may be, shall be dis
trihuted throughout and rest with