Evening star., 1923-02-03
Determined Effort by Gov
ernment to Increase Mem
bership of System.
MANY BENEFITS ARE SEEN
Held as Cure for Farm Credit Ills.
10000 Institutions Are
Eligible.
BY DAVID LAWRENCE.

suade state banks to join the federal
reserve system.
The resolution introduced i'll the
Senate by Mr.. Mclean OF Connecticut.
chairman OF the Senate banking and
currency committee, which provides
for an inquiry into the subject, will
he adopted. 1t constitutes a frank
recognition by the administration
that state banks are needed in the
federal reserve system and that many
of the cures which have been pro-
posed in the various farm credit bills
pending before Congress would not
have been necessary IL the state
banks, especially those in agrIcul-
tural regions. had been brought into
the system.
08OO Banks ElIgfbIe.
Some idea Of the magnitude ot the
proposition and it's significance in the
field or agricultural finance may he
gained by studying he latest figures.
which show that nearly 10000 state
banks are eligible for membership
IL the federal reserve system. but
have rafrained from joining. The
number of national banks in the sys-
TEN ls slightly over 5000 and only
i.6ts state banks have joined In
In America which are rot connected
with the federal reserve system as
are in It. Also the average capital
and surplus Of the state banks which
are members of the federal reserve
system exceeds by Sf0o,000, ,00a the
national banks
The failure OF the eligible country
banks to become members OF the fed
sral reserve SYSTEM" says Eugene
Meyer. Jr. managing director Of the
War Finance Corporatfou. has deried
70 many agricultural ronmuuitics he
full benefits OF the system. The ex-
perienca of the War Finance Cor
poratton In administering the agri-
cultural credits act has demonstrated
eonclusively that, in times OF stress.
the non-member banks In the coun-
try districts are in great need OF ac-
cess to central reservoir Of credit.
approximately s. per cent OF the
banks to which the War Finance Cor
poratfon, has made loans are state In
stituttons and only about Is per cent
are national banks. In terms OF dol
lars the loans OF the corporation TO
state banks constitute so per cent Of
the whole. And these figures do not
take into account the large advances
made by live stock loan companies
which are organized under state laws
and are not eligible for membership
AdminIstratfon Problem.
MIR. Meyer IS one OF the men who
believe the problem CT persuadine
the state bankers to enter the federal
reserve system is one of 'administra-
tlon rather than of legislation" This
means an educational campaign. SEN
ator Mclean is taking the first step
with the knowledge and approval Of
the Harding administration. He pro-
poses an exhaustive inquiry by a foint
committee Of Congress. Naturally the
testimony given at hearings before
such committee will be helpful TO
the Federal Reserve Board itself in
making regulations which will be at
tracttve to state banks.
Both the Capper bill and the Len
root Anderson bill now have passed
the Senate Each endeavors to help
by giving him long-time credits but
nasicaIly the theory of constant gov
ernment aid, either through snch
emergency organizations as the war
FINANCE Corporation or by credit de-
partments in the federal farm land
banks, is not expected to be the best
way to deal with the AGRICULTURAL
nnance in the long run, and that a
system or government supervision
pius private capital and banking ar
rangements must be devised. That's
M MY aSI. men IKE Secretary Mellon and
reserve system be liberalized and
broadened instead Of resort.ne 70
temporary expedients.
Blame fer Farm Revolt.
TO the regulations made by the Fed.
eral reserve Board in 1920 In attrih-
rising which in the west nut ,nto
or1ce radical republicans and demo-
Gratis. Also the agricultural depres-
sion produced an agitation for a dirt
farmer" on the Federal Reserve
hoard itself, and such a member now
sits on the board. But Fundamentally
the lack Of contact between the Fed
eral Reserve Board and the agrIcul-
tural committees 10 now believed to
have been due In large part to the
great number OF banking institutions
which were not in the federal reserve
situations, therefore. could not be
brought to the attention of the Fed
eral Reserve Board as readily as IL
they had had voice in what was be-
ing done. The s.s7s state banks out
and surplus of $1.209. 100000 and ag-
gregate resources of $4,000 ,000, 900.
The national banks in the system
have more than double the capital
and aggregate resources. but the big
question To-Day Is "ne1HeT tne FGQSrQl
Reserve Board can possibly meet fu-
ture emergencies In the banking
world when fully one-third OF the
capital and surplus and resources ie
not included in the system.
Many Corn BELT Banks.
In the six corn belt states-Iowa, ILL.,
ncis, Indiana, Missouri, Nebraska and
Ohio-which produce approximately
4S per cent of the nations corn supply.
and which raise IS per cent OF all the
swine and rs per cent OF all the cattle.
other than milk cows. there are 3,621
banks which are eligible for member
ship in the federal reserve system. but
which have not joined. Illinois alone
has 1 ,037 eligible non-menber banks and
In Iowa there are TAO.
It was intended by Congress when
the federal reserve act Was passed to
servo all types Of commercial industries
and agricultural activity. In the mrs,
real test on agriculture the system was
found wanting. Hindsight 10 better than
foresight and now that the experience
Of the last two years of hectic financing
Of agriculture has focused attention or
the subject. the paramount defect IL held
to be the aloofness Of the state banks
What can be done to bring them In the
system? The administration wants tc
know the answer and will go out to the
country to And the facts.
Copyright, 1S28)