“Old Bill” Suggests—
A law was passed on the Illinois statute books in 1921 making it a criminal offense for a newspaper to reflect on the solvency of a bank.
The law is still on the books, and how much harm it did in 1929-1933 will never be known, for one can only guess at whether any paper would have had the courage to warn the public in time. Certainly anyone who had done so would have taken the chance of going to prison, and even if events had proved him right he would have stayed in prison. He might even have been blamed for the crash. That is a good deal of a chance to take for the sake of other people’s money. A year in the county jail is no joke.
If the banks had been closed promptly no harm would have been done, for the deposits “frozen” when all the shaky institutions finally crashed amounted to only 6 per cent of the normal deposits of the city. That is the plain fact which anyone can verify. If the loss had been shared, in theory everyone would have gotten 94 cents on the dollar at once. In actual practice even doubtful banks could have paid 73 cents.
What caused all the suffering and heartbreak that banks were kept open until all the wise guys had their money out and only the suckers had theirs left in. It was exactly that which the state and national officials were supposed to prevent—and all we saw them do was wait idly until banks closed voluntarily because after borrowing up to their eyebrows and pledging everything they could carry to the pawnshop they couldn’t raise another nickel. Some closed when they had only 5 per cent of their withdrawable deposits left—and those depositors naturally got nothing.
The next time somebody passes a law that something cannot be talked about, we have a strong inclination to start a paper with no assets and no capital (so the experiment cannot injure anyone else) and gamble the chance of a nice warm jail cell that the law was passed because a situation existed which urgently needed a little fresh air and sunshine.
ROYAL F. MUNGER.