Evening star., 1920-06-05

Bankers Are Heard.
In the closing days of this session
Of Congress several hundred country
bankers. including the presidents OF
bankeEs' associations in various states
OF the Union. were given hearings be-
fore the banking and currency com
mittee, on the par check clearing sys-
TEN. The presidents of these state
bankers associations contended that
che federal reserve system should
not insist upon checks being pared
at state banks.
Representative Nelson, who has been
country banker for many years, and
who Is now president Of two state banks
in the rural districts Of Wisconsin. one
OF which banks Is a member OF the fed
eral reserve system, believes that these
witnesses have not looked at this Ques-
ton with sufficiently broad and forward
vision. He hes served notice on the
committee and on Congress that he in
tends to work earnestly for nation
wide par check clearing system when
Congress returns. He mas already re-
ceived the hearty Endorsement Of fed
eral reserve officials and of the republi-
can leaders both in the House and Sen
ate.
2,167 Banks to BE Affected.
Representative Nelson points out that
there are 10000 banks in the country
national, state and private. The Federal
Reserve Board reports that there are
2.167 banks tmostly in the south
Carolina. $50; Alabama, 1893: Tennessee,
143; Florida, 1872. etc) upon which the
federal reserve banks cannot collect at
par. The representatives of such banks
in the hearings contended that these
banks should be allowed to charge 81
per s.. 900 for clearing checks.
The progressive banking and finance
students in Congress say that they are op-
posed to any bill or amendment that will
direct all the banks Of the country to go
back to the old exchange charge system,
which they call "a bad practice begun
many, many years ago. when conditions
were far different from today" They
say this would be a dangerous step
backward in the United States banking
business. They see only two possible
solutions:
First, for the less than 5000 non-mem-
ber banks to Join the other nearly $4,000
banks in the par check clearing system
and place the entire banking system OF
the United States on the par list.
Second, for all banks. both member
and non-member banks (national, state
and private) to mako a certain sched-
uled exchange charge.
Say 1t Il Owed to Public.
Representative Nelson and his suppor-
ters, who include practically all these
recognized as banking experts. contend
that the banks owe it to the depositing
public. whose interests they primarily
should serve Gas well as their stock
holders) to make all checks clear at
par. They say But we must insist on
square deal for all banks, and treat
large and small banks, city ana country
banks, alike
These students OF the financial sit
uation explain that the total actual
money circulating in this country now
is about seven billion dollars. The total
deposits in the national banks OF the
United States are about 16 billions, in
the state banks about 20 billions-the
grand total deposits in all the banks Of
the country being about $37,500. .000. 900.
They point out that tho checks upon
bank deposits constitute more than five
sixths Of the circulating media OF the
country.
These checks they contend should cir
culate without any charge as freely as
possible and anything that can be done
to annihilate time and distance and cost
in the transfer OF funds between points
in this country is real and great ser
vice to our commercial and economic
life The marked increase during the
past year in the volume and amounts
of checks cleared through the federal
reserve banks, shows that member banks
are depending more and more upon the
banks. They say that the federal re-
serve system has made distinct step in
advance as to the check clearing pro-
gram.
Take One-sided View.
After careful study Of the hearings
given to the country bankers. Rep
Nelson and his supporters
pointed out that these bankers had
taken a narrow and one-sided view of
ka cit nj a
said:
'.Many of them do not seem to ap-
preciate that they are quasi-public in
that the people are depos-
iting money with them and in making
their checks and sending them all
over the country are creating what is
called in the banking business tre- |
mendous float and all the time these |
bankers are lending these deposits
out at 6. and 8 per cent, while the |
checking accounts do not draw any
The proposed clearing district plan
is that in any city where any con-
siderable number OF bank accounts
are kept that the banks Of that city
will cooperate with the federal re-
ing district and by use Of the tele- |
graph make their clearings nightly at |
the federal reserve bank of that dis |
trict. Representative Nelson has fg- |
ured out that this would save from |
one to three days on the checks In !
this float" He feels that this would |
lift a great burden from the federal
reserve banks in the operation Of |
their transit departments.
When such reform had been ef- |
fected, every city bank should be COM |
pelled to credit on receipt and col !!
iect at par all items sent to them be-
cause the city banks can utilize the |
federal reserve system in their clear |
lngs and ought to participate in the |
advfces.