Guaranty of Bank Deposits
Performed by William Jennings Bryan
Recorded July 21, 1908
The fifteen million bank depositors
of the United States demand security for their money,
and the Democratic national platform pledges the party
to legislation under which the national bank should
be required to establish a guarantee fund for the
prompt payment of the depositors of any insolvent
national bank. The system could be available to all
state banking institutions wishing to use it. Oklahoma
has enacted a law compelling the state banks to establish
such a guarantee fund, and permitting national banks
to take advantage of it, and the experience under
the Oklahoma law has been very satisfactory. This
guarantee system has been in operation since February
14th of this year, and up to May 14th the secured
banks have increased their deposits more than four
million dollars, while the unsecured banks have lost
in deposits a little more than one million. The decrease
in deposits in the unsecured banks is proof that the
depositors felt the need of greater security and the
large increase in the deposits in the secured banks
prove that some three million dollars has been gone
from hoarding and hiding or from without the state.
But one bank has failed during this period, and within
one hour of the suspension the receiver had received
authority to pay all depositors in full. This not
only protected the depositors from loss, but protected
the community from the embarrassment that follows
a bank failure where no provision is made for the
guarantee of deposit. The Federal government demands
specific security when it deposits money in the national
bank. States, counties, and cities require security
when they deposit in either state or national banks.
Why should the individual depositor be left without
security? Why should the individual depositor be compelled
to bear the loss if the stockholders and directors
of the bank employ careless or criminal officials?
During the last 40 years the average loss to depositors
in national banks has been less than 1/10 of 1 percent
of the deposits, and while this loss has sometimes
been severe upon the individual depositors in failed
banks, it would have been very light upon the banks
themselves, and as Oklahoma has shown, the tax would
have more than been offset by the increased deposits
gone into the bank. There are two arguments made against
the guarantee system. First, that it defies the large
banks of the advantage which they now have over small
banks. But why should large banks demand an advantage
at the expense of the depositor and the community?
They have advantage enough in their ability to make
larger loans and in the value of the endorsement to
those who do business with them. The second argument
is that the guarantee of depositors would make the
banks careless. Theres no weight in this argument
because in case of failure, the stockholders of the
bank lose all their stock, and additional penalty
besides, before other banks lose anything. The fact
that the stockholders would suffer such loss would
be a sufficient punishment for carelessness. Most
of the failures today come from careless management,
and we can secure more stringent regulation of banks
when all of the banks have to stand in back of each
bank, for then all banks would be interested in the
careful management of each bank. If the bankers are
short-sighted enough to oppose the guaranteed banks,
they must be prepared to accept the postal savings
bank, for the depositors will not longer consent to
having their savings jeopardized.