ted in my bill the interest-bearing securities. If you bank under contract, then you are getting a rate of f, say, 4 or 5 per cent, as the case may be. You have contract with the bank and you assume your own risk of the bank. Hence, the bill that I have introduced ir noninterest-bearing deposits.

ank to say, I have never heard any objection to this that I am going to enumerate for you.

AN. Let me say a word or two on the point you are ot interrupt you. I am interested in your suggestion aring deposits should be excluded from participation ion provision for deposits, for the reason that such a return on their money and stand in a different cateeral depositors, whose money is used without interest. ought of the situation with reference to bankers who other banks, and whose funds draw interest and who hem for the interest they make out of it and for the ke? The fact is that bankers when they go to deal er demand ample protection in liquid securities upon realize, with a big margin, an amount equal to the at true?

s. That is quite true, Mr. Chairman. But, of course, on of detail, and I have given the reason why I should ime certificates of deposits, because I felt they were g and there is a contractural relation there between the the banks.

AN. What I am calling attention to is the fact that bankers who insist that the public furnish the greater money with which the banking business of the counon, come in and exact the highest form of security on y make to a bank for profit, but insist that the public out of the calculation so far as protection of their oncerned.

s. There are two arguments that may be made against ly two which I have heard.

SON. On that point, I want to direct your attention to culty to my mind, is that the people who put their n time deposits contract for a rate of interest, are very h not entirely, people who are unable to make their nts and who look upon the bank as being a public the care of their funds from which they get an income e; that is, money from helpless people financially. Do ought to be left out?

GS. No; I do not know that they should be left out, but we first ought to protect the general deposits in prefe interest-bearing deposits that are made on contracts. is a question of detail, and I would have no objection, ee thought it best, to amend that.

any question but what this kind of a bill would do he objection I have heard

IAN. Just a moment, before you leave that. Let me question: Are there any insurance companies now enbusiness of guaranteeing deposits?

Mr. HASTINGS. That is what I was coming to in a second. The two objections that have been urged, which I do not think are serious objections, are these: First, that it would cost the banks a premium. I think that, as I said a moment ago, the deposits would be increased so that the earnings of the bank would be much greater than the expenses of the premium on the bonds, as the chairman very well suggested.

Second, do any insurance companies or surety companies make this kind of bonds? May I say this bill provides that as to a going concern that these bonds must be given within six months. At pres ent, as I stated a moment ago, if a county deposits funds, this kind of a bond must be given; if a city deposits funds this kind of a bond must be given; if a school deposits funds this kind of a bond must be given; likewise if there are any Indian funds deposited in Oklahonia this kind of a bond must be given. Now, they certainly are making this character of bonds.

Then, my next answer, Mr. Chairman, is: You pass this law and of course every reputable insurance in the United States will go into this class of business. Why not, if you can get insurance companies to insure the life of every individual in the United States Why will they not go into this kind of business! If you can get them to insure every business house in the United States with some sort of insurance, why will they not go into this kind of business! If you can get them to take out every conceivable kind of insurance-automobile insurance, indemnity insurance, insurance against damages, and insurance against theft-there is no kind of insurance that a man can think of that the insurance companies now do not write.

Certainly, if this sort of a bill were enacted and a time given-six months in these perilous times perhaps is a little too short, and it may be that the committee, upon mature consideration, will think that that should be a little longer. This bill was written a few years ago and reintroduced at this present session, but it does involve this principle, that the individual deposits are entitled to the same guarantee against loss that your deposits of public funds are, and I have never had any person who satisfactorily argued against that.

Now, diverting from this bill just a moment, let me say in the first place, I am in favor of any kind of a guaranty of deposit, but guaranty by the various State banks, under State laws, may have this objection raised against it: It made the good bank and the weak bank, the strong bank and the inexperienced banker all contribute to a common fund to guarantee all deposits against loss. It resulted in the public not discriminating between the strong bank and the weak bank; they thought they were all alike. And, so far as I know, all of those laws have been failures for that reason. The law in Okishoma was a failure for that reason, and it had to be repealed. They are still litigating over or attempting to distribute the funds that were contributed by the various banks to the common fund to guarantee the deposits of savings banks.

I am not sufficiently familiar with the details of the Nebraska banking law to discuss that, but I understand they have had recently a very great deal of trouble.

The provisions of your bill here, from just a casual reading, provides for the assembling of various funds into a common fund and

ons from member banks to this fund for the purpose g deposits or insuring deposits. That makes the well, the strong bank, as well as the inexperienced banker, he same plane, and makes them all contribute alike to

TAN. Let me ask you a question.

GS. I think that is better, however, than no guaranty

IAN. Let me ask you this question: What is the differple, admitting for the sake of the argument that you a practical guaranty fund by insurance to be carried idual bank? Is it not true that the same objection t out will obtain under an insurance system as obtains ers? In other words, does not this illustrate it: Does who pays fire insurance and whose house never burns cises all honesty and good care and good faith in preay his part, as well as the fiend who burns his building? GS. No; Mr. Chairman, he does not, because the first pany agent goes and examines to ascertain the kind of mines the flues and he sees how that house is profeguarded and all that sort of thing, and the rate is he kind of supervision that you give your property. re to pick out a good bank, a well-managed bank, one d by experienced bankers, when that bank made apa bond the rate would be much less to that bank than ne newly organized and in the hands of inexperienced

am inviting attention to and that I am stressing that nd, to use a slang phrase, makes "every tub stand on

m."

MAN. That is what they are doing now.

GS. If you did this you would protect these depositors. llow says some of these banks may not be able to make Vell, now, they are given a length of time to make it. y be extended, as I said a few moments ago, and may is is too short. But let me say to you if a bank is an agent of a reputable insurance company that wants class of business, and it is in the business, and if that ny refuses to write a policy guaranteeing 25 per cent its, the sooner the public knows that the better, and at class of banks liquidates or gets out of business the or the community and the better it is for the public

ant to take up any more time.

MAN. We are glad to have you here and glad to have re time if you desire. Let me ask you this question, s: What would have happened in the last 12 months aranty had been obtained by an insurance system, with mpanies insuring each bank on a different basis and charges, with this wave of bank failures and this undepression that we have had-what do you think would ed?

NGS. I think people would have had more confidence in here would not have been the hoarding of money, and

I do not think you would have been having the troubles you have been having the last year. Then let me remind you, Mr. Chairman, that even during the last year county funds had to be guaranteed, city funds had to be guaranteed, school funds, and Indian funds; and this is only for 25 per cent of your deposits.

The CHAIRMAN. I will say to you in that connection that we are advised that the insurance companies have been coming off of these particular bonds for the banks, and that has thrown a lot of banks into a great deal of trouble and a great many of the bank failures have grown out of that very question.

Mr. HASTINGS. Mr. Chairman, there might have been cases where there would have been bank failures otherwise.

The CHAIRMAN. A great many banks have found themselves embarrassed because they have been getting these special funds and the insurance company gets off the bond, and then the bank comes running with hands up and nobody will take them, and they have to close their doors.

Mr. HASTINGS. Suppose in all those cases they had had a critical examination made and there was found to be a pretty good reason why the insurance companies came off of those bonds."

The CHAIRMAN. That would be true in some cases, but there are cases where the insurance companies had investigated them, and had approved the bonds.

Mr. HASTINGS. I had about omitted one other section to the pending bill, H. R. 10241. I made an observation of one objection. namely, that all banks had to contribute to this fund.

The second objection is that this creates another bureau. I am in hope that if this bill is favorably reported, instead of creating additional bureaus, that you may be able to find somewhere in the present official family a board that could administer and supervise this fund without the creation of a new or additional board. That is one of the things that has been criticized.

The CHAIRMAN. We are much obliged to you, Congressman Hastings, for that suggestion, and I think I share in it. Indeed, I am sure we all share in the hesitancy that you express as to the wisdom of creating more boards and bureaus where it can be avoided. Possibly this could be better done without setting up a board. I have had in mind for some time, in the bills I have introduced for years, the idea of having the Federal reserve banks themselves handle the funds. But I finally, came to the conclusion that about the best plan was to have an independent board to do this particular job, because it is not a small undertaking by any means, neither in point of the work to be done or the ability required.

Mr. HASTINGS, Well, it is a very important piece of legislation, and that is a question of detail.

The CHAIRMAN. Yes.

Mr. HASTINGS, But inasmuch as we have created so many independent boards and bureaus and commissions, et cetera, and inasmuch as there has been a great deal of criticism against that, I am in hopes that this bill, if reported, may be amended so that we could find some board already existing that could administer the act without the creation of a new board or commission.

Senator OWEN. Mr. Hastings, when the Government of the United States asks a bank to put up its bonds to secure the Government

ot that add additional weight to the demand from o have security?

. I thank you, Senator Owen, for that valuable

I want to call your attention to is that we require a bank to give bond. Why are we doing that? Officers of a bank are bonded officers. We require itten, do we not? Why do we do that? It seems an additional argument in favor of this legislation. rather tenaciously cling to the idea I have inis bill is that it does not make any bank dependent ank. If you have a good bank, a well-managed pay the rate of interest that is required on those t kind of a bank, and it does not make them connd to help the inexperienced bank. I think that effect of weeding out a good many of the smaller ienced banks, but I think that would be to the inositors and I think it would really be to the interests

ers.

N. Mr. Hastings, in connection with your last suggone a good way here in endeavoring to keep any n closing at this particular time, have we not? Ing them out, we are trying to hold them up, are we

. Yes.

N. Do you not think if we required banks to guarand a bank found itself unable to obtain the ind be in a situation where the public confidence was h a bank would virtually have to close its doors? 3. Mr. Chairman, this bill gives them six months. is an arbitrary length of time. If the committee, se extraordinary times, deem it advisable to make eriod of time, there ought not to be any objection e say to the committee

N. One thought you have expressed appeals strongly hould be general; that each bank should carry this intain its own independence. If I thought that would rather it were done that way, but I am afraid e us exactly where we are at the present time, with ling on its own bottom," and that has gotten us into rouble. We are all agreed on that.

1. Another feature of this bill of mine is that it does creation of any board; it does not require a single r. You simply enact the law and you require the bonds within the time provided in the bill, and there stion on earth but what it guarantees the public

N. Would not this bill, Mr. Hastings, if you did not but put this work on the existing agencies of the at those agencies upon whom the additional burden ild in turn employ additional personnel to do the So that in effect the result would be an added exhe administration?