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Show Reorganization of Banking Into the last message of the man who has been chief executive of the nation during one of its critical periods should be concentrated much wisdom. President Hoover's Hoo-ver's communication to Congress of yesterday will nevertheless ne-vertheless arouse severe criticism, particularly his recommendation re-commendation of the sales tax. But his plans for economy econ-omy and the reorganization of the government departments depart-ments to avoid overlapping and waste, will meet general acceptance. One of the principal recommendations that the banking bank-ing system be reorganized at once, needs no argument. The president states that it is "responsible for periodic dangers to our whole economic system." He pointed out that in Great Eritain during the depression not a single bank has failed, and no substantial bank failures have occurred in Canada, while in our country in 1931 the failures rose to 10Y2 per cent of all the banks, as compared com-pared with one-half per cent failures of all other enterprises. enter-prises. This resulted in $3,300,000,000 of deposits being tied up in failed banks, and $1,600,000,000 being hoarded. hoard-ed. The reason that Great Britain and Canada have cot had failures is due to several causes. Traditional conservation con-servation plays an important part. Moreover while one law governs the banks in each country, ours are under some fifty separate banking laws, those of forty-eight states, the District of Columbia, and the federal government. govern-ment. But the principal reason is that in Great Britain practically all the banking is done by five large institutions, institu-tions, and in Canada by ten. These have in both countries coun-tries many branches, but the control and management is highly concentrated and highly efficient. In the United States we cannot look forward to adoption adop-tion of the British pattern. Branch banking is unpopular in this country. We must find security by some other formula, but to find it we must make unremitting effort. In reading over one of President Theodore Roosevelt's old letters to William H. Taft, one finds this passage, "As you know, I felt . . . that this securing of a guaranty guar-anty for depositors by the action of the government, or by the action of the banks, was something hat ought ultimately to come." One of the bankers of this city, Mr. J. E. Cosgriff, has been outspoken in urging the guaranty of deposits. And Mr. T. E. Gregory, of the London School of Economics, recently advocated the same idea before the Institute of Politics in Massachusetts. Look on it from the standpoint of insurance. A bank insures the building in which it does business. It insures the honesty of its employees. In many cases it takes out insurance on the lives of its key men. It insures in-sures also against burglary, covering thereby every phase of danger susceptible of insurance. Insurance has come to be such an important part of our business life that its withdrawal would instantly shrink the confidence of the business world enormously . Take fire insurance for example. It secures against loss, but it does not prevent loss. Unfortunately sometimes some-times it is a temptation to cause loss. But insurance of bank deposits would not only protect depositors, but would protect the bank itself, for wifih the assurance to depositors that banks would pay out, no one would withdraw with-draw his funds There may be other and better ways of meeting the national necessity for perfect safety in banks, but to that end we must progress. The shrinkage of deposits of the banks of the United States from 1931 to 1932 was from $51,800,000,000 to $42,000,000,000. A part of that was due to frightened depositors and part to frightened bankers. The fear that afflicted both would never have materialized to any extent, if insurance premiums to the federal reserve system, had given depositors the assurance assur-ance that their funds would always be safe. Deseret News, Dec. 7, 1932. |