[Volume XXV
THE CHICAGO BANKER
22
as the sun and air are essential to life and health, that you as bankers, whose profits range from 10 per cent to 100 per cent upon your capital investment, whose taxes are only four mills, not including your circulation tax, which is a special tax, and from which you derive a special privilege, that you are unwilling to have your taxes increased two mills in the interest of the public welfare?
I defy my opponent to advance any reason why this tax which I propose will ever be any greater or any reason why you should not have the patriotism if you have not the business acumen to agree to pay it. “We have no way of judging the future except by the past, and judg-ing by the past” the record of national bank failures for the past forty years would amount to less than a tax of one mill upon your capital stock, and yet men will argue that it is unfair to tax good banks for the poor management of other banks.
If you want to continue as a part of the great whole in the banking system you must either make up your mind to assume your share of responsibility or cancel your charter and go into the private banking business. The farmer and home owner to-day are bearing the chief burden of taxation of this country. Shall they take the same attitude as you men and say that it is unfair to be taxed for things which are of no direct benefit to them, or that it• is unfair, which they have a right to say, to tax them more heavily than any other class of men on the face of the earth? Take my advice and do not raise that contention.
If the government of the United States is going to participate in the banking business of the country to the extent, as it now does, of giving one man the power of life or death over your institutions, then it must go to the fullest extent of saying to the depositors when a bank is ordered closed, we shall see that your money is returned to you when you want it. If the national government don’t want to do that, then it ought to withdraw entirely from the banking business. The principle of government supervision is either right or wrong. If it is wrong then the government should withdraw its supervision entirely. If it is right, the government should go to the bottom and compel the banks to join hands in a self protective insurance which will safeguard the depositors and the country against such a panic as we have had since last October. Talk about losses, there is not a bank in the country to-dav when they come to figure up the direct and indirect losses of this panic, but what will admit that it has lost more in earnings than the tax which I propose would amount to for the next twenty years.
Now let us be fair as business men and look for the real milk in the cocoanut in this opposition. You know in your own hearts that the profits to your banks would be more than any loss which vou might sustain through an insurance tax. You know that it would be a good thing for the public and for the nation to prevent bank failures, the losses and the panic of fear which follow in their wake. You know that you ought to bear your share of the burden of taxation, as a corporate institution representing the most profitable business in the country. Why not be men enough to come out in the open and say that the reason you are opposed to this proposition is because your neighbor across the street will be as strong in the eyes of the public as your are, and because of this you feel that you mav lose a little business.
Now, just a word to the banker who is afraid that his less deserving competitor is going to be given an undue advantage. This applies to about 99 per cent of all bankers, because you believe that you have the best and most conservatively managed institution. If vou will make inquiry into the success of a banking institution you will find behind that institution an asset which neither law nor government can give, and that is the
is higher to-day than ever before. It is impossible therefore, to concede that because the possibility of loss is removed from his depositors the banker is going to take greater risks than he did before. The banker of the present day has no thought of the depositor’s loss at all. He is concerned entirely and solely for his stockholders, and knowing as he does that before the government can supply the loss to his depositors he must first give up the earned surplus of his bank and call upon the stockholders of his bank to pay an assessment of ioo per cent upon their stock, the same degree of conservatism will exist as before, and more so, for the reason that the Comptroller of the Currency will have authority to remove any officer or director from any bank whose conduct has been in direct opposition to the best interest of the bank.
Unfair to Tax Good Banks for the Failure 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 bank 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 paying line of business it is just as much an economic waste to close up the bank and destroy its patronage as it would be to burn down a factory because a certain factory manager had robbed the treasury. But are bankers to be a specially favored class of men who first want a government to give them special privileges through which they can make very large profits and yet refuse to contribute their share toward the maintenance of their government, or the prosperity of our people?
In this scheme of human government each citizen assumes his share of responsibility. Who supports our hospitals, our insane asylums, our homes for indigent persons? The people. Ever)' personal or business failure in life means that the burden of the loss of that failure must be borne by somebody. So in our American government the burden of this social and economic life is distributed throughout all strata of society, through the medium of taxation. The banking business being a public business, it is better for the public good that the burden of loss, if losses there may be, shall be distributed throughout, and rest with equal fairness upon the broad basis of our entire banking system, rather than it should fall upon isolated communities and upon a limited number of individuals. So if the banker wants to take advantage of a federal charter and because of that advantage coax more money into his vaults, he• then must be willing to evince sufficient patriotism to stand up like a man and assume his share of the burden of taxation. Do you want to go before the country and say to the farmer and home owner and wage earners of the country who now bear the whole burden of taxation, and who are each contributing a per capita tax of $12 to each person for the support of the national government to meet our annual expenditures, that you are willing to profit by receiving their money, but unwilling to help bear the burden of taxation and a share of the burden of economic loss which always falls upon the people?
Are you willing to say to the man with a family of five members, who is contributing through the indirect medium of taxation $60 per year to his national government, that you as bankers with a capital of one hundred thousand dollars, and a total asset perchance a half million dollars, are unwilling that you shall be taxed for the public good to the extent of $200? Are you willing to say to the farmer whose general average of taxation amounts to 16 mills, and for which he receives no special privileges, whose surplus from his eight billion dollar annual crop production passes through your hands at a profit, whose friendship and financial support are as essential to the prosperity of your banks and the country
Federal Guaranty of Bank Deposits
(Continued from page 7) bank before it is permitted to receive this guaranty. The general average of bank stock dividends or net earnings throughout the United States is 15 per 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 business. But even suppose the banks were obliged to bear this small tax, if it can be shown to be in the interest of the public welfare, the tax would be justifiable. Though it would seem to be beyond all argument amid the widest possible stretch of imagination that the bankers would not receive through the increased deposits which would come into their vaults because of a guaranty of this kind and a larger loaning and earning capacity because of a more steady volume of deposits, sufficient to increase their net earnings very much greater than any possible tax which might be imposed. Therefore, I claim that a federal guaranty will not only work to the public good but the benefit of all banks, and I challenge my opponent to produce satisfactory evidence to the contrary.
Wall Street Argument Against Depositors’ Guaranty
In his effort to produce the evidence in answer to my challenge, and in addition to his claim that if the government should guarantee one business it should guarantee all, which I have already answered, my opponent will urge that it will encourage and increase “wildcat” banking.
Second, that it is unfair to tax good banks for the loss of poor ones.
Third, that it will give the small bank an unfair advantage.
Fourth, that it is paternalism and unsound as a bank principle.
Wildcat Banking
As to the question of this proposed law encouraging wildcat banking, it will have the opposite effect, because each bank in a community will then have an interest in every other bank, and will be on guard as to its own affairs as well as its neighbor’s affairs. The same argument would be just as reasonable as applied against life insurance, that a man would be more disregardful of his health because his life is insured, or it would be applied to fire insurance, that a man would be more careless of his property because his property was insured. If business history teaches us anything, we have learned that insurance is a fundamental and economic principle, and the question of this insurance is not so much to prevent the loss as to prevent the wide spread of harm which comes from a loss of this character, and the opposition of banks to this bill is not because of a fear of loss to themselves, but because of a selfish fear of competitors’ possible gain.
Fewer Bank Losses in Future Than in Past
This recent agitation for reform, judging from actual results, has been used more as political asset than for the accomplishment of real good to the masses, and has included within its realms various attacks upon the general banking business. True, men in high places have proved faithless to the trust and confidence imposed in them by their business associates and by the general public. Isolated cases of this kind always have existed and always will exist. There is one element of good, however, which will come from this panic and this general business reorganization. Corporate management of all kinds, whether applied to industrial pursuits or to the general banking business, will be cleaner and of a higher personal order than at any time in the past, and that, too, without any change whatever in existing laws.
Losses through national bank failures will be less in the future than they have been in the past. Men are growing better, and the standard of individual honor among all classes of business men