The Washington herald., 1913-09-03
POLITICS FEARED
in RESERVEPLAN
Bankers Have Doubts as to
the Proposed System Of
Distribution.
HEARING IS GIVEN THEM
Financiers, Delegated by Recent Chi
cago Conference, Appear Before
Senate Committee on Banking.

| Inc bankers OF the country are AFRAID
that the owen-Glass administration bill
for reorganizing the banking system Of
| the country, as adopted by the Demo-
cratic caucus in the House, will permit
of political influence in connection with
the distribution of reserve funds, unless
the number of regional reserve banks is
| reduced.
The fears of the bankers and the
amendments they propose to the pend
I ing bill were made known to the Senate
Committee on Banking and Currency
| yesterday bp the committee of bankers
appointed at the Chicago conference of
the American Bankers Association. At
the request of the bankers. a public
| hearing was granted yesterday by
Chairman owen Of the Senate commit
tee.
James B. Forgan, president Of the
First National Bank of Chicago, devoted
his arguments exclusively to the desire
of the bankers to centralize as much as
possible the control OF the reserve funds
| Of the country.
Sol wexler, vice president OF the Whit
ney Central National Bank of New Or
leans, the other witness heard by the
committee, argued in favor of admit
ting State banks and trust companies to
the Federal reserve bank system and
for reduction of the amount of stock
OF the regional reserve bank which a
member bank must subscribe for, al the
same time urging that such subscription
to the stock OF the regional reserve bank
should be optional and not compulsory.
as now provided In the bill.
Scramble Causes Panic.
whenever there is financial stress"
said Mr.. Forgan, the banks scramble
for money, and in that way promote
panic. Banks must get their money from
other banks No regional reserve bank
could increase its reserve of lawful money
without depicting the reserve OF some
other regional bank. In times Of fnan-
cial stress, when each regional reserve
bank would endeavor to protect its own
dependent institutions serious embarrass-
ment might result"
Mr.. Forgan stated that II there were
but one reserve bank for the entire
country, the total reserve funds would
stand as an offset to the liabilities in
the statement of the bank. but that IL
there are a number of regional reserve
banks and the reserve funds of one are
depleted to assist another regional bank,
the statement of the bank with the de-
pleted reserve might cause trouble.
Senator Shafroth OF Colorado wanted
to know IL Il was not a fact that the
Bank of England and all European CEN
tral banks did not permit active bank
ers on their boards of directors. While
admitting that the Bank Of England did
not permit any directors OF chartered
banks on its board, Mr.. Forgan stated
that there are six directors OF the Bank
OF England. who are representatives of
some Of the largest private banking in
stitutions OF the world. This discussion.
which arose in connection with Mr.. For
Fhaf fha han lrar hnGtF
three of the seven places on the Fedeal
Reserve Board, was pursued by Senator
Shafroth until Mr.. Forgan admitted that
he did not know much about the Euro
pean banking conditions.
Arouses Ire of Owen.
Mr.. wexler aroused the ire of Chair
man Owen when he declared that the
discrimination against one section of
the country, or one regional bank, to
help another might be the result of
political influence. He referred to the
section of the pending bill which au-
thorizes the Federal Reserve Board to
compel one regional reserve bank to
transfer reserve funds to another re-
gional reserve bank.
Senator Hitchcock OF Nebraska
ELECTED from the New Orleans banker
the additional argument that IL would
OF the country the capital which the
bill as it stands would require. Mr..
wexler stated further that the bank
capitalization in the South and the far
West is inadequate, and that, while
the deposits of the banks have been
increasing. the capitalization has not
been increasing proportionately. al
though the surplus has increased at
greater ratio.
Question of Directors.
Aside from the amendments reducing |
the number 70 regional reserve banks, |
decreasing the capitalization requirement. |
and making membership in the reserve |
banks optional instead of compulsory, |
the only change proposed by the bank |
ers which was taken up yesterday was |
one affecting theNclass ''B" directors of |
the regional reserve banks, who, accord |
ing to the bill as ii now reads. must be |
representative of the commercial, agricul- !
tural and industrial interests Of their !
respective districts.
The bankers propose that these class |
'B' directors shall not be removed at /
the discretion of the Federal Reserve |
Board if it should appear that any such |
directors did not represent the interests |
which the bill requires him to represent. |
The hearings will be resumed this |
morning.