The Birmingham age-herald., 1912-06-07
NEW YORK CLEARING HOUSE COMMITTEE IS VERY POWERF u Hearings in Money Trust Probe Are Resumed in
 New York SHERER CONCEDES NEED OF REGULATION Committee of New York Clearing House Yields Immense Power Over Banks of the Country.
 Violations Charged

power wielded by the New York Clear ing House association over the banks of the country's financial center and arbitrarily lodged in the hands of five men should be placed under Judicial regulation, it was conceded by William sherer, manager of the association, on the witness stand today.
 Mr. sherer was the chief witness at the first hearing held by the House committee on banking and currency in- vestigating the so-called money trust" The committee came to New York to- day to take such testimony as its pow CTS will permit, pending the passage of the amendment to the banking law i now in the Senate. under which the committee hopes to be able to enforce from the bankS its demands for the information which 1t expects to make the basis of remedial Legislation.
 Five Men Control Banks While today's inquiry was charac- terized by Chairman Pujo as "collat- eral' to the main scope of the inquiry, Samuel Untermyer, special counsel for the committee developed. through MT. Spencer. testimony to the effect that the destiny of practically every finan- cial institution In New York was po- tentially at tho mercy of the mere whlm determination or order" of the five men who composed the New York clearing house committee"
 The clearing house committee. conn posed of Frank A. Vanderlp, president of the National City bank, the largest in the country, James G. Cannon, pres ident of the Fourth National bank Walter E. Frew. president of the Corn Exchange bank Richard Delafield. president of the National Park bank, and Otto T. Barnard, president of the New York Trust company, had full power over the, admissions to menlbef- ship. according to inc witness. and the power of suspension
 Then it rests with these five men as to whether they can keep com petitor out of the assoeiation2' in- quired MT Untermyer. Don't you think that is a monstrous regulation for an institution doing an interstate busi- ness2"
 Banker Has Moral Status
 "The average banker has a moral status to maintain" replied MT. Sherer. fi6 fedllAcS lidl Ht taH ihoNt hCtA money by walking straight than crooked. I have never known honor able men who are able to fulfill tho financial requirements for admission to be refused. If the committee took the narrow view of keeping out com petltor 1t would react against them. Merchants and business men who are the banks largest customers would never stand for unjust discrimination
 q am not speaking of motives" pur- sued tile attorney, but of the unbridled and unlicensed power or these men, Don't you think this power should be subject to judicial review and con trol?"
 Mr. sherer then explained that the Clearing House association was vol untary institution, similar to private club, and that no court would hold that voluntary institution could De compelled to accept as a member any one who could not comply with it's reg ulations.
 Needs Judicial Control
 "But you know that this great power ex- ists. should 1t not be Judicially con trolled?f'
 "I agree with you" finally conceded Mir Sherer. Where there is a wrong t should be corrected
 And this mere whim, determination or order, whatever you are to call 1t, to stop clearing for non-member banks don't you think that that is too great power without judicial reyiew?'
 The witness again gave an affirmative answer but asserted that in the exercise of the power "it is not so bad as 1t looks, citing a recent instance where the com mittee's power was exercised to prevent an inst,tutio whose officers were not Of good character from tN aiming member shp by buying out and merging with clearing house bank.
 Good character often depends upon which group of banks you belong to, does it notg' queried MT. Untermyer
 "Oh, I don't admit that" said the wit ness.
 Interstate Commerce Laws
 MT. Untermyer raised Il question Of the viciatlon of the interstate commerce laws when he brought out from the witness that by taxing the collection of checks on out of town banks the New York clearing house institutions levied on the country tribute" of over SIS. .o0o. GOO annually. This tax, first imposed by the clearing house in 1909, amounts to one-quarter of l per cent, or one-tenth of 1 per cent, accord ing to the territory from which the check originates, MT Sherer said, and any bank charging q less amount Is subject. ac- cording to the rules. to expulsion after a second offense
 1OT you IfdtiLt ludl tHt tOiltttlDn Ol out of town checks In this manner Is In restraint of trader" asked Mir. Unter- myer, after pointing out that 1t was i'm possible for the clearing house banks to compete with each other for a customers account by offering, for example, to col lect their checks for nothing.
 Mir Sherer admitted that the clearing house was an important factor in lnts,- state commerce. but again pointed out that it was purely voluntary organiza- tion, and that a bank not caring to pay the tax imposed, he said, 10 cover the cost or collection, could withdraw. After Mir rptermyer had read into the record evi- dence that the cost of collecting checks in Poston was only cents on sl0Oo. com pared with the charge in New York of from s1 10 s2.5o per s1oce, he remarked:
 Can Close Banks
 Banks have been obliged to close up because their clearing house privilege has been withdrawn, haven't they?n
 "Yes." said MT. Sherer
 Just a rumor that it Is 10 be ex- pelled will cause a run on the bank. won't it7"
 That is liable to be true
 "wer, then, the idea of bank al-