THE CHICAGO BANKER
September n, içoç]
difference being that the depositor in the bad banks .might receive one hundred cents on the dollar, paid back to him by the good banks of the state, provided, of course, the good banks could stand the strain long enough to remain in existence until the depositors of the last bad bank had received his one hundred cents.
"The public must eventually pay the tax,” and “It will cause and not avert panics.” It is necessary to regulate any business so that its income is satisfactory to the owners of such business, and if it becomes necessary for banks to pay a heavy tax to meet the deposits elsewhere, or to create a guaranty fund, to be held for the purpose, the bank customer would have to bear his proportion of the burden in raising the additional income necessary in the conduct of the business.
“Business Ethics”
President Robert B. Armstrong, of the Consolidated Casualty Company, Chicago, is sending out a beautiful and useful booklet entitled “Business Ethics,” which will be worth your time.
V•
A New Chicago Savings Bank
The Archer Avenue Savings Bank opened its doors for business Thursday morning, September 2d. This is the first bank established on the famous “Archie Road.” The bank is situated at 3517 Archer Avenue, and is under the management and direction of P. A. Hines, with Henry J. Fritch, as cashier.
experience. No provision of law can possibly make a banker conservative or his judgment sound. Now presume a loan is offered the more conservative bank across the street and is declined ; the applicant walks into the bank managed by less conservative officers and the loan is made ; the amount is placed to his credit, thus creating a deposit. An issue of bonds is placed on the market, the conservatively managed bank declines to handle any of the issue. A liberal amount is taken by the less conservative institution. The proceeds are placed to the credit of the seller and become a deposit. No matter whether the proceeds of the loan or bonds remain to the credit of the maker or seller, or are checked to the other accounts, or elsewhere, the fact remains, deposits have been created by the passing of questionable paper. Repeat these operations time and again and we have a bank that has built up a line of deposits largely on questionable or refused loans of other banks. In time the result of the management of the different institutions is inevitable. The banker lacking conservatism and sound judgment fails, and the conservatively managed bank would have to help make good the deposits in the failed bank that were built up by the making and discounting of the very loans and bonds that were declined by its officers.
I do not understand how the conclusion can be reached that bank guaranty would prevent bank failures. Beyond question, such a law would encourage bad banking or at least would invite the poor banker into the field. Bad banking and poor bankers would undoubtedly increase bank failures instead of preventing them ; the only
Peoples Savings Bank & Trust Co.
Capital and Surplus, $285,000 Deposits, $2,317,110
Solicits Accounts and Collections from Banks, Firms and Individuals on Favorable Terms.
WM. BUTTERWORTH, PRE8.	NEL80N H. GREENE, VICE PRE8.	C. W. LUNDAHL, CA8H. AND 8EO.
Gordon Jones
Cheyenne Convention
Gordon Jones of Denver made a hit in his Cheyenne paper on Guaranty of Bank Deposits by quoting the action of the ׳A. B. A. convention on the subject, at the Denver meeting last year. He said in part :
At the last annual convention of the American Bankers Association the following resolutions were adopted by a practically unanimous vote :
Resolved, That the American Bankers Association is unalterably opposed to any arbitrary plan looking to the mutual guaranty of deposits, either by a state or the nation, for the following reasons :
1.	It is a function outside of state or national government.
2.	It is unsound in principle.
3.	It is impractical and misleading.
4.	It is revolutionary in character.
5.	It is subversive to sound economics.
6.	It will lower the standard of our present banking system.
7.	It is productive of and encourages bad banking.
8.	It is a delusion that a tax upon the strong will prevent failures of the weak.
9.	It discredits honesty, ability and conservatism.
10.	A loss suffered by one bank jeopardizes all banks.
11.	The public must eventually pay the tax.
12.	It will cause and not avert panics.
It is to be regretted that a political issue in the nation and in some states has been made of a subject. The issue was undoubtedly made on account of its supposed popularity. The idea of guaranteeing one’s claim as a depositor of whatever bank he may see fit to become a creditor seemed to appeal to the masses. Little time was taken, especially in state campaigns, to go into the subject, further than to occasionally touch on the fact that the candidate advocated the guaranty of bank deposits (usually applause). Undoubtedly as an offset to the popular advocacies of the guaranteeing of bank deposits, so cleverly injected into our recent campaign, the republican party incorporated a plank in its platform advocating the postal savings bank system. It is not the purpose of this address, however, to dwell upon the fallacy of the latter proposition, but to endeavor to set forth in as clear and concise manner as possible what means the popular term “bank guaranty” ; and its probable effect, both upon the banking interests and the general banking public.
It is estimated that by far the greater portion of the deposits in the banks of this country have been created by the extension of credits. That is, in the flotation of bond issues or the negotiation of loans. Let us illustrate, in order to bring the matter more clearly home to us, by presuming a case, and the presumption would doubtless become a repeated reality where there are several banks in a community. One bank in a community is managed by officers lacking conservatism and
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ILLINOIS ADVISORY BOARD
Charles G. Dawes, Resident Vice-President A. J. Earling	David R. Forgan	John A. Spoor
Walter H. Wilson	M. J. Kirkman
COUNSEL
Calhoun, Lyford & Sheean	Winston, Payne, Strawn & Shaw
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