Evening star. [volume] (Washington, D.C.) 1854-1972, 1920-05-09
PROTEST ON PAR
CLEARANCE CHECKS
Bankers Urge Against En-
forcement Efforts May
Cause New Legislation.

Cause New Legislation.
Prominent bankers from twenty
four states met in Washington this
week for the purpose of completing
the permanent organization of the
National and State Bankers Protec-
tive Association and to take action to
combat the efforts of the Federal Re
serve Board for the enforcement OF
universal par clearance of out-of-town
checks.
This organization. which was first
formed at a meeting in New Orleans
held last February. is direct out :
smaller banks of the country against
the par clearance ruling of the fed
tral reserve.
1t is acknowledged by both the
bankers and the reserve board tina
the great majority of state banks are
opposed to the PAIRING of checks.
The association, within the past two
months. has mailed a questionable to
All banks in the country. and a COM
niiation of the replies. covering many
thousands of banks. shows that ~
per cent of these banks which have
acquiesced in the par ruling have
done so unwillingly. while there are
three thousand banks which have re-
fused altogether to comply
Ihat these figures are correct. menu
bers OF the new association say. is
corroborated by the statement made
by Gov. Harding of the Reserve Board
on Wednesday during the course of
hearing of the bankers grievances
by the board that over 10000 banks
In the country had opposed the par
movement.
The bankers association was grant
ca hearings. not only before the
board. but before two committees of
the House. those on rules and on
banking and currency. Bankers from
all sections of the country testified
at all these hearings.
Before the committee on rules evil
dence was introduced to show that
agents of the federal reserve system
had used coercive measures to COM
pei compliance by country banks with
the boards ruling.
On Wednesday, when Gov Harding
was called before the committee, he
denied that the board at Washington
had knowledge of the acts. Other
witnesses said the various reserve
banks quoted orders from Washing
ton when asked about these instances.
and that official letters from Off
Gals of the reserve banks had used
coercive language. A letter from the
reserve bank of Atlanta, the sixth
district was introduced, which in
formed all banks in that district that
if they did not accede to the par rul-
ing the bank would regret to employ
other means of collection which would
prove embarrassing. annoying and
expensive to you" A letter was also
included in the testimony from the
bank at Richmond. which made the
direct statement that the course pur-
sued was on direct orders from the
Reserve Board at Washington.
Ask Imuartial Hearin1a.
In this letter. Mr.. Harding asked
that proper steps be taken to. secure
from Congress a fair and impartial
hearing of the entire controversy. Mr..
Harding stated that the constant fric-
ton between the system and the state
banks of the country, resulting from
this matter, was fast becoming un-
bearable and that the future of the
entire federal reserve system depend
ed upon satisfactory settlement.
He urged that If. after the hearing.
Congress should decide that the
charging of Exchange" by banks for
the service rendered in transmitting
funds to cover out-of-town checks
was just charge that Congress so
amend the act as to allow member
likewise asked that. should Congress
decide against the charging of ex-
change. they amend the wording of
the act to make it's intent clear be-
yond question, and thus remove the
entire cause for controversy.
To this course the bankers agreed.
in so far as their complaint in ref
srence to par clearance is concerned.
Say EarninEs Were 10 Per Cent.
Many of the bankers testified be-
fore this committee. and it was
brought out that the earnings of the
reserve banks, by their own state
ments, had been 10 per cent during
1919. This huge profit, the bankers
oontended, should partially be return
ed to the member banks of the sys-
tenn, which provide the capital for its
operation.
Figures introduced by the bankers.
taken from the replies received to their
QUESTIONABLE. indicated that many
members were advising non-member
hanks to remain out of the system;
while so per cent of the replies stated
that the bank in question would gladly
Join the reserve system were its meth
DDS liberaiized SO as to make it at
tractive to the member banks.
Describe Action Taken.
Interesting developments of the par
clearance issue were described. chief
among which were a suit which has
been instituted in the courts in the
sixth district, and the passage of a
state law in Mississippi which makes
the charging of Exchange mandatory
on state banks.
In the Atlanta court case the coun-
try bankers applied for an injunction
) estraining the reserve bank from the
enforcement of par collections. tenn
porary injunction was granted by the
state courts, but Judge Beverly D.
Evans of the United States court for
the southern district of Georgia ruled
in favor of the reserve bank at re-
cent hearing. A supersedeas has,
however. been granted. pending an APP
peal. and the restraining order is still
In force.
In Mississippi. il is stated. the effect
of the state law has been to success
fully prevent the par collection of
checks by the reserve bank.
In the organization of the associa-
ton the bankers elected Charles Deb.
Claiborne, vice president of the Whit
ney Central National Bank of New Or
leans. president. and l.. X. Adams. sec
retary-treasurer of the Bankers Trust
Company of Atlanta, secretary. In
addition. four vice presidents were
chosen. one each from Nebra ska New