The Washington herald., 1917-10-13

the intent to persuade state-chartered
banks to become members OF the
Federal reserve system. For there
cannot be the highest efficiency and
the most satisfactory concentration
of the money power and banking
strength unless substantially all OF
, the banks OF. the United States, Stale
and national. are members Of the
Federal reserve system. Neverthe-
less these appeals have been until
now little needed and there Is pre-
cedent for the indifference or even
antagonism of state-chartered banks
to a Federal system.
Set In LincoIn's Time.
That pre- cedent was established
soon after congress, in President Lin
coins administration, which authoriz-
ed the creation Of a national banking
system. There were at first not many
applications for charters under which
banks could operate as national IN
stitutions. The State banks held
aloof. At first It was found neces-
sary to organize new institutions and
] these speedily established some COM
petition with the State banks. es-
pecially as long as the State banks
| had the right to issue their own
notes as circulating medium. Con-
gress~ at last was very reluctantly
persuaded to impose tax Of 10 per
cent upon State banks notes. not for
the. purpose of gaining any revenue
but solely with intent to compel the
banks to withdraw their circulation.
The Washington authorities at that
time were persuaded that II two or
three of the larger State banks oil
, the country, especially two in New
Yok. could be induced TO take out
national bank characters then the
example thus set would be speedily
followed by many other State IN
situations. But in order to do this
1t was necessary for the law to DC
so modified as to permit the bank
OF Commerce of New York and the
American Exchange Bank. OF New
York. to become members OF the ma
| tional banking system while still re-
tanning certain advantageous features
contained in their State charters
Thus tempted these two banks, then
among the leading Institutions Of New
York. did become members OF the ma
tional banking institution. and the
example thus set was speedily follow
ed by many others.
Corn Exchange Bank In.
Probably II was this precedent
which Congress had in mind or OF
which 1t was informed, which led that
body to authorize the admission OF
State chartered institutions into the
Federal reserve system while still re-
tanning advantageous features that
were contained in their State-giFen
charters. Probably had it not been
for this permission the Guaranty
Trust institution would not have felt
justified in applying for membership
in the Federal reserve system. In
other parts of the country State-char-
tered institutions which are OF Inn
portance were among the first to ap-
ply for membership in the Federal
reserve system. The largest State
chartered bank in New York City, the
Corn Exchange Bank, early applied
for membership and was gladly re-
ceived into the Federal reserve fam
lily. Now, it is thought probable that.
following the example set by the
Guaranty Trust, many Of the larger
State-chartered institutions through
out the United States will apply for
membership. and when this is done
1t will be especially gratifying to w.
p. g. Harding. OF the Federal Reserve
Board at Washington. who has Ueen
earnest and consistent from the be-
ginning in his appeals to State-Char-
tered institutions to come into tire
Federal reserve system. We are
about, therefore, to see established
real concentration Of substantially all
the banking strength of the United
states, under the control OF the Fed
eral Reserve Board at Washington.