The Birmingham age-herald., 1923-11-13
SMALL BANKS FEART HUGHES HANDS OFF
 RESERVE SYSTEM ON CHESTER GRANT
Witnesses Point Out That City Correspondents Pay h.
 terest To Small Banks

DALLAS, Texas, Nov. 12.-(By As
 sociated Press )-Belief of state bankers In the smaller communities
 that they arc served better by their city correspondents than would be possible by the federal reserve bank and prejudice on the part of some
 against the federal reserve system
 were given as two reasons for the l failure of non-member eligible banks to enter the system before the joint congressional committee here today "The non-member country bankers think the federal reserve board should re-shape its affairs so it could pay interest on reserve deposits the same as correspondents at central points," G. w. Riddle, president of the Commercial State bank of Dallas, said.
 "They depend upon their city cor respondent to take care of them in time of need and some of them think of the federal reserve system as CO.,
 oppose Par Collection.
 MT. Riddle said 1t was his belief that some bankers were staying out of tho system because they thought there should be a greater distribu- tion of the earnings of the system and that they should be permitted to charge for the collection of checks
 In this connection, statistics were presented by members of the com mittee to show that during normal times the earnings of the federal reserve system were nominal.
 J. A. Pontrom. president of the City National bank of Dallas. told the committee that he thought 1t
 would be desirable, but not essen tisl," to have all eligible banks In the
 The "antipathy" toward par collec- 1 tons, hs said, was one of the prln- cipal reasons that some country banks remained out of the system
 while other reasons, he said, were
 what the country banker thought too rigid and exact regulations and the fact that city correspondents couIo
 re-discount paper that could not pc | handled under the federal reserve
 regulations. .,, P. l.. Thornton, president of the Mer- 1 cantiie Bank and Trust company oi Dallas, one ol the most important or | which was 6 misunderstanding Of the
 functions of the federal reserve bank,
 under which the country banker eN- pected 1t to compete with the larger | city banks.
 Prejudice Against System.
 The other reasons he gave were prejudice against the federal reserve system, the fact that state banks must ray for federal examination and that such A small amount of their paper was eligible for re-discount with the federal reserve bank that they were forced to make large rse of their central correspondents.
 "I believe that membership In the federal reserve system makes bank ing safer" Mir Thornton said, be cause previously many banks were not sufficiently exact in obtaining statements of assets and determining the soundness of paper which they discounted"
 A similar expression was made by J. G. Barrett, president of the First National bank of Winfield, who added that by requiring the person giving
 note to make it ssfe for re-dis- count, the federal reserve system had been "the salvation Of the country l bank"
 Members of the committee will leave late tonight for Houston, where the hearings will be resumed tomor- row.