The Mt. Sterling advocate., 1922-10-10

ing elasticity in a way that was long
necessary, but IL also created a diff
ference between different kinds OF
good paper. Before the system was
established paper was judged on its
merits; IL was good or bad according
TO the worth of the maker and the Sc
curtin back of IT, There was no dis
tinction between different kinds of
good paper. But now good paper is
classified either as good rediscount-
able paper or good paper that is not
rediscountable; and bankers are con-
sidering their loans, even where they
have no intention of using them for
rediscount purposes, with regard to
the requirements of eligibility. We
must not overlook the fact that, while
the system has greatly enhanced the
desirability of eligible paper, II has
correspondingly decreased the desir-
ability OF non-eligible paper, even
though that paper may be satisfac-
tory in every respect from the stand
point of security"
Mr.. Meyer urged. that our national
Dlicy should not only look toward
the further development Of the fed
eral reserve system, but that II should
recognize the fundamental import
ance of welding into a closer and
more harmonious unit the different
elements that go to make up our
banking structure. I'VE are at a
parting of the ways" he said, "and
now is the time for us to determine
the direction in which we are going.
We must decide whether we shall
continue the more or less haphazard
development of our banking machin-
cry, or whether our action shall pro-
ceed along lines based upon a COM
prehensive view of the needs of the
ountry, bringing our entire banking
structure and resources into a more
harmonious and unified organization.
Notwithstanding the fact that
more than 1000 state institutions
are now eligible for membership in
the federal reserve system, only
about 1000 have joined And yet in
times of stress the non-member
banks are in greatest need of access
to a central reservoir of credit. This
is conclusively proved by the expert
ence of the War Finance Corporation
during the past year. Approximately
S5 per cent of the banks to which the
corporation has made loans are state
institutions and only about Is per
cent are national banks. In terms of
dollars, the loans of the corporation
to state banks constitute 80 per cent
of the whole. And these figures do
not take into account the large ad-
vance made to livestock loan compa-
MES, which are organized under state
laws. The fact that two-thirds of all
the banks in the country, represent
ing 80 per cent of our total banking
resources, have no direct relation to
the federal reserve system is un-
doubtedly responsible, in part at
least, for some of our recent Difficult
ties
Though many state banks have
remained out of the system because
they object to it's supervisory powers,
yet they do not hesitate to advocate
a rediscount system operating with
funds furnished directly or indirect
ly, byt the federal government, ignor-
ing completely the fact that any such
system will necessarily carry with il
the banking supervision of the feder-
al government.
THE state banking laws freuuent-
ly permit practices which national
banks cannot legally engage in. This
is creating competition between the
two systems which cannot be regard
ed as wholesome and may lead to
the gradual weakening of both. Some
OF the states permit branch banking
on an unlimited scale AS a result.
agitation is now gonig on for an
amendment to the national banking
a|t TO put national banks on a par
with state banks in this respect. |
Branch banking may be good or il |
NAV be bad. 1t may be god IL car
ried on in limited way: and bad if |
permitted on an extensive scale. But |
it is good or whether II is |
bad, branch banking should be con-
sidered on it's merits and should not
be the product of competition in the |
endeavor to exPand either the state |
Or the national banking organiza- |
tions. The competition that exists at |
the present time between state and |
national banks canpOt fail to remind |
one of the competition that prevailed |
a generation ago among the various
banks seeking to become domiciles |
Tor corporations-a competition that |
was based upon the laxity of the |
laws governing incorporation. Moth |
ing could be more disastrous than
between the state and ma
'nnal banking groups based upon |
in laxity.
while banking supervision i'm
some states is quite unexceptionable,
IN others experience has shown that
I is on low level of efficiency. And
here is one important class of ananc-
ng institution that is not subject to
any banking supervision whatever,
either state or national. I refer to
livestock loan companies, which in
numerous cases have made advances
'anging from ten to twenty times
heir capital N oerason is apparent
Why such financial institutions should
lot be subjected to supervision SINH
ar to tina. imposed upon state and
rational banks"
Describing briefly the work of the
War Finance Corporation, Mr.. Never
stated that up to September Is, 1922,
he corporation had authorized near
y 1000 loans, aggregating $183, ,O0O,-
700, to approximately 4,400 banking
Institutions in the agricultural sec
ions of the country; $50 loans, total
ng $72,000,000 to livestock loan com
'anies. and advances aggregating