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Vol. 88 No. 2

1003

Secretary Taft on the Panic

Those who expected that Secretary Taft in his Boston addresses and Governor Hughes in his Message would make each a pronunciamento embodying his National political platform as a Presidential candidate are, we are glad to say, disappointed. Neither of them is seeking the Presidency, though each of them is being urged by his friends as a candidate. Each one is attending strictly to the business of his office, and in each case it is the office seeking the man, not the man seeking the office. Secretary Taft made two addresses in Boston. In the minor address before the ministers he reiterated his well-known views respecting the Philippines: that the object of our Government should be to prepare the Filipinos for self-government, but that it would take a long time, at least a generation, before they could be left wholly to govern themselves. His chief address, at the banquet of the Merchants' Association, was devoted to a consideration of the causes of the recent panic, which he explained substantially as follows: The world has a certain amount of loanable capital available for new enterprises. This amount is, in the course of time, graduaily absorbed, and then new enterprises mist wait, and even old ones may for a time be crippled. Besides this gradual absorption of loanable capital there has been recently great waste, both through extravagance and through war-the Spanish, the Boer, and the Russo-Japanese war. These facts had, eight or nine months ago, produced a stringency throughout the world; to this stringency has been added a weakening of that public confidence on which our credit system is based. "The revelations of irregularity, breaches of trust, stock-jobbing, over-issues of stock, violations of law, and lack of rigid ate or National su

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pervision in the management of some of our largest insurance companies, railroad companies, traction companies, and financial corporations, shocked investors and made them withhold what little loanable capital remained available." Secretary Taft believes that already the country is beginning to recover from the panic, which will not be long continued, for the reasons that (1) we have the gold standard, (2) the railways are on a more solid foundation than in 1893, (3) the balance of trade is with us. To which we may add that the revelations of irregularity and dishonesty have had a tendency to strengthen ultimate confidence, both by showing the people how to discriminate between the gamblers and the honest producers of wealth, and how at least to restrain and make more difficult the gambling operations and the more flagrant robberies perpetrated by the comparatively few dishonest capitalists. Secretary Taft made it clear that he approves the prosecution by the Administration of the wealthy lawbreakers, and the supervision and regulation of the great carrying corporations by the Federal Government in the future. "No panic, however severe, can make wrong right. No man who sincerely believed the Administration to be right in its measures to punish violations of law can now be turned from the earnest support of that policy to-day." No backward step should be taken. The protection of the country from the danger of Socialism is governmental regulation. "Any one who seeks a retrograde step from that policy of the Administration, on the theory that it would be a real step toward conservatism, is blind to every sign of the times." Readers of this speech cannot doubt that Secretary Taft desires to take his full share of responsibility for the general course of the present Administration, both in its prosecution of wealthy lawbreakers

and in its endeavor to secure more effective laws for the protection of popular rights and the preservation of popular interests; and readers of The Outlook will not doubt that The Outlook heartily indorses this position as sound and conservative.

Governor Hughes on the Questions of the Day

The subjects of Governor Hughes's Message, which was read to the New York State Legislature on New Year's Day, may be considered under two heads those which peculiarly concern the State and those which are of National as well as of local or State interest. Those of his recommendations which refer to matters of State policy deal with Canals, Highways, Rearrangement of State Institutions, Agriculture, Harbor Administration in New York City, the National Guard, Forestry, Pure Food, Salaries of Judges, and Race-Track Gambling. Of these purely State matters the subject of race-track gambling is the one upon which there will probably be the greatest contest at the State Capitol. The Governor points out the inconsistency of the present laws, which practically permit betting and pool-selling at race-tracks, while punishing them as penal offenses when indulged in elsewhere. He recommends that the laws on public gambling and bookmaking be made uniform and more stringent. The gambling interests will not let this commendable recommendation pass without vigorous opposition, and the Governor will need the support of an aroused and well-organized public opinion. The topics on which the whole country will be interested to know the Governor's opinions (although in this Message he applies them, of course, to State affairs only) are the following: Banks and Trust Companies, Insurance, Regulation of Public Service Corporations, the Debt Limit of Great Cities, Ballot and Election Reform, and the Development of Water Powers. These are subjects which come up for legislative discussion and action not only in the individual States but some of them in the administration of the Federal Government. Governor Hughes believes in a stricter and more

uniform control of banks and trust companies. He justly says that trust companies doing a banking business should in the transaction of that business be subject to the identical restrictions and conditions that are imposed upon banks. The law should apply, not to the name of the institution, but to the kind of business it does. He advises the Legislature to proceed with extreme caution, if at all, in modifying the laws regulating life insurance, as there is "no business more closely related to the welfare of the people, especially to the thrifty and provident, and none which should be more carefully safeguarded." He advises that the telephone and telegraph companies should be put under the control of the Public Service Commissions, which now regulate the railway, gas, and electrical corporations of the State. As to the borrowing power of great cities, he recommends that bonds sold to build public works that produce an actual net profit to the city ought not to be considered in estimating a debt limit. This is in accordance, it appears to us, with an ordinary wise business procedure. The Governor recommends simplification of the ballot and the printing of candidates' names thereon under the office for which they are nominated and not under a party emblem. He also urges direct nominations and an official primary ballot. He commends the purpose of the Commission which is now investigating the undeveloped water powers of the State, and urges that "no grant should be made of water power privileges without compensation and under restrictions which will properly protect the rights of the public from whom the privileges are derived." The paragraph on water powers is one of the briefest in the Governor's Message, and yet it strikes us as one of the most significant. In the next ten years there will be accomplished a very remarkable development throughout the entire United States of water powers for producing light, heat, and manufactures through the medium of electricity. The rights of the public in this electrical development must be recognized, preserved, and protected. And the principle here enunciated in the Governor's Message is equally applicable to street-car,

telephone, telegraph, electric lighting, and railway franchises. Both in his executive action and in the clear statement of sound political principles in his messages, Governor Hughes has entirely justified the confidence of the people who chose him for Governor because of his character rather than because of his proved statesmanship, at a time when they were apparently more interested in defeating his opponent than in singling him out as their special choice.

Government Insurance

The Outlook has received, from time of Bank Deposits to time, for many years, written and printed communications from various correspondents advocating State insurance of bank deposits. At first regarded with derision as the visionary notion of extreme believers in government paternalism, it finally began to be considered by bankers, and we have in our possession, sent to us last November, the draft of a bill prepared by C. F. Allis, Vice-President of the Second National Bank of Erie, Pennsylvania, providing for a scheme of insurance of National bank deposits through the Comptroller of the Currency. Mr. Allis's plan arranges for an annual assessment of National banks of a fixed sum of money ranging from one hundred to four hundred dollars, according to the capital of the bank, until the sum of six million dollars is amassed as a guarantee fund. Then the assessment shall stop until payments to depositors shall deplete the guarantee fund below five million dollars. Mr. Allis, however, expressly provides that National banks be forbidden to announce or advertise that their deposits are insured by the United States Government-thus defeating, it appears to us, the chief moral effect of the plan. It has, however, remained for the young State of Oklahoma to put the theory of State insurance of bank deposits into operation by an Act passed on December 17 last, which becomes effective on February 15 next. All banks organized under the State banking law of Oklahoma are required to pay to the State Banking Board, consisting of the Governor, Lieutenant

Governor, President of the State Board of Agriculture, State Treasurer, and State Auditor, an assessment of one per cent of their daily average deposits for the year preceding the date on which the law becomes effective. The object is to create a guarantee fund which shall amount to one per cent of the total deposits of the banks subject to the Act, and means are provided in the Act for increasing this guarantee fund whenever it shall be depleted by payments to insured depositors, or whenever the amount of the deposits throughout the State increases. All State banks for which this insurance is provided are subject to rigorous and immediate examination by the State Banking Board. For instance, "any officer of a bank found by the Bank Commissioner to be dishonest, reckless, or incompetent shall be removed from office by the Board of Directors of the bank of which he is an officer, on the written order of the Bank Commissioner." On the suspension or failure of any State bank controlled by this Act, depositors shall be paid immediately in full, and when the cash or quick assets are not sufficient for this purpose, the State Guaranty Fund is to be drawn upon. Banks that conform to this Act in all its particulars may publicly advertise that their depositors are insured by the State of Oklahoma; and National banks within the State, which are, of course, exempt from State law, may enjoy the advantages of this insurance, provided they conform to the State Banking Act. The result is that the National banks, eager for the commercial advantage which such insurance would give them, are appealing to the Federal Government to know whether they may be permitted to conform to the State law. It is also said that banks in the neighboring States of Kansas and Missouri see the pressure that will be brought on them by the proposed increased security of banking in Oklahoma, and are beginning to agitate for the insurance of deposits by their own State Governments. This is a radical experiment, but we are glad to see it tried in Oklahoma, which is doing a good deal of interesting experimentation in popular government.