Evening star., 1922-10-21
Finance and Trade Conditions
By Roger ". Babson---
Every Saturday this writing readers Of


The Star an arttolo interpreting Il
WELLESLEY HILLS, Mass, Octo-
Der 21.-There has been much discus
eio1l regarding branch banks at the
annual convention of the American
Bankers Association which was held
last week In New York. Owing to
the controversy which this discussion
has developed. Roger w. Eabson to-
day was interviewed regarding the
probable outcome.
"Of course. the discussion is the
natural outgrowth of the establish
nent Of the FEDERAL reserve banks.
Before the days of the federal re-
serve system. RVS NJ. b.uso : a
branch bank organization practically
scious and invisible organization.
For instance, the small bank in In
diana took orders from its corre-
spondent bank in Indianapolis and the
Indianapolis bank took It's orders
from a still bigger bank in New York.
The heads of a few of the New York
banks would hold a conference at the
home of the late J. Pierpont Morgan
or at the home of Mr.. Baker of the
First National Bank and decide upon
along to the large banks Of Boston.
Chicago, Philadelphia, Indianapolis.
ST. Louis. New Orleans and other
large cities. The banks in these large
cities would, in turn. pass the same
policy on to the small banks in their
districts. There were no contracts or
stock control existing between the
banks. but there was an invisible
control which was very powerful.
With the organization of the fed
| erai reserve banks. the clearance of
| checks at par and the legislation
against interlocking directorates.
this control was given tremendous
| jolt. No longer 10 1t much of an
object for country bank to keep
! deposit with the large city bank.
ing away on the part Of the country
| banks from the city banks. The
! large cities have become more inde-
pendent of New York and the country
banks have become more independent
OF the large cities. AS long as the
money rates We're high this did not
| worry the city banks. but during the
past year, when money rates have
| been declining, the large city banks
have distinctly felt the loss of their
! ing around for some plan to get their
country following back again.
1 Reserve System Making Good.
! There is no hope Of breaking up
the federal reserve system. which is
;functioning very satisfactorily. The
men connected with the federal re-
serve banks are active and ambitious
They are building permanent and
substantial banking houses and are
accumulating great resources. They
are issuing reports and other publi-
cations which appeal greatly to the
country banks: The larger city
this and are looking for some other
means for recouping their prestige.
They first turned their attention to
foreign trade organizations. Foreign
trade was the key note at the Amer
lean bankers convention two years
ago. The foreign trade business,
however, has not panned out as well
as the banks had hoped 1t would and
our recent tariff has given almost
deashnloI ,loS . to Ssm wha' r, e ,ss ne 80 or; :;
hopes in this regard are not very
| saneuine at the moment Another
attempt has shown itself in the or
| ganization of separate investments
{ companies and separate acceptance
ICED by many of the larger banks and
most of them are operating success
fully. Banks are finding these in
vestment companies more profitable
at the moment than their foreign
trade adventure.
THE banks are gradually coming
to the opinion. however. that they
can recover their influence with the
country districts only with organiza-
| on ~ branch banks. Hence. there
is q drive at present to have the
national bank laws amended so that
a city bank can own a system Of
/ branch, banks in the surrounding
cities and towns. whether or not
this is in line with democracy is q
very debatable question. but the
drive is on and my guess is that such
branch banks are as inevitable as
the chain store:
! Bfanek Banks In Europe.
"An the banking systems of Eu-
lrope are developed on the branch
bank idea. The big banks of Eng
Hand, France and Germany have their
towns. One of the finest branch
systems in the world exists in Can
ada, Just over the United States line.
In Montreal there are several big
banks. and each of these have from
100 to- 800 branches in different Ca
madam cities and towns. AS already
| stated; doubt seriously whether the
branch bank system is as good for
the. country as the present system.
|! the present tendency of eliminating
this small: farmer and substituting
| tha renter in place Of the owner is
not for the good of the country. The
development of chain-store systems.
which are slowly crowding out the
! individual retailer, is not good for
the country.
| "One Christmas Mr.. Henry Ford
sent me an autographed photograph.
on which he wrote these words:
| Eliminate absentee ownership and
| industrial problems will solve them
selves He is correct in that absentee
! ownership is present difficulty with