Evening star., 1920-01-31


piled to a Senate resolution recently
adopted asking if it, or any of the
federal reserve banks has used CO.
ercion to compel state banks to join
the federal reserve system. fatty
denying that any coercion has been
used so far as it knows. and has at
tached to its reply statements from
the various federal reserve banks
denying also that they have used CO..
ercive methods to force state banks
to join the system.
The Senate resolution was intro
duced by Senator Norris of Nebraska,
and the charge has been made that
the Kansas City Federal Reserve
Bank has adopted a plan of accumu
lating checks drawn upon non-mem
ber banks and presenting them all at
to these non-menlber banks and also
might result in placing small,
country bank in a serious position il
these checks were held back d con-
siderable time and presented for such
a large amount that the bank did not
have the ca Sh on hand. 1t is charged
that this practice has been adopted
by the Omaha branch of the Kansas
City Reserve Bank with respect to
some of the state banks in Pierce
county.
Only One Way to Collect.
In its reply to the Senate resolu-
ton the board points out that under
the law federal reserve banks are
not allowed to pay charge for the
payment or collection of checks and
drafts and remission therefor by ex-
change or otherwise, and the banks
are not permitted to make such a
charge. Therefore. where non-mem-
Der banks refuse to pay checks at
par when sent to them for collection,
there remains only one way for the
federal reserve bank to collect in ac-
cordance with the law: that is, to
present the checks to the non-mem-
ber banks over the counter and OBJ
tain payment. This is done through
an express company or some other
agent. Non-member banks who are
willing to make payment at par on
the checks are permitted. under the
law to become clearing members of
the federal reserve bank; that is. to
avail themselves of the privileges of
the check collection system upon the
maintenance with the reserve bank
of d deposit sufficient to offset items
in transit, without becoming regular
members. This provision of the law
was intended primarily for those non-
member banks which were ineligible
for membership either because of
lack of capital or for some other rea-
son.
Great Benefit to Banks.
The system of clearing and check
collections at par which has been
built up by the Federal Reserve Board
and the federal reserve banks is de-
great benefit to the banks and to
the people. Checks on approximately
26.0 of the 10000 banks of the
country can at this time be collected
expeditiously and at par for the
banks and through them for the pub
lie by this system.
1T has been alleged" says the
board in it's reply. that some Of the
reserve banks have Intentionally held
up items drawn on non-memoer
bank for the purpose of presenting
them in bulk and demanding payment
in cash. so as to embarrass the
drawee bank and thus compel it to
remit at par. In order fully to ad-
wise the Senate on this particular
matter. the board telegraphed each
be advised whether such methods
had been employed"
The board called the attention of
the Senate particularly to the answer
it received from the Kansas City Re
serve Bank. This bank denied that
it had attempted to coerce any nom
member bank to join the system. 1t
said that ii had had trouble with
banks in Pierce county. Neb., where
the banks have stubbornly resisted
and treated with contempt our eff
forts to carry out the provisions of
section 13 of the act as it relates to
the collection of items at par.
Accumulation OF Checks
1T is not our practice to accumulate
any specific amount or to hold checks
over even for a day when sending
them out for collection by mail or
express" says the bank. but where
it is necessary to send messenger
11S miles from our branch al Omaha
the cost of such visits warrants us in
accumulating several days checks
for collection at once. assuming. of
course. that any payee bank that
preferred to pay checks on it over
the counter in cash than to remit ex-
change at par for the same would
always be prepared to liquidate such
demands in that way
The bank insisted that the bankers
in Pierce county had, by intimidation
and otherwise, prevented the use Of
common facilities, the express agents,
in the collection of the checks. This,
it said, made it necessary to send a
messenger by automobile to make the
collections.