Evening star., 1924-05-11
McFadden Banking Bill Aims
As Vie,Ued BY Its Aduocates
Salvation of National Banks and Preser.
ration of Federal Reserve System
Stressed-ReUieaU of Situation.
BY 1. A. FLEMING.


Salvation of the national banks Of
the country and the extension and
preservation of the federal reserve
system.
These are the real objects of the
McF'adden bill, enanating from the
hanking and currency committee of
the House, a few days ago. Repre-
sentative McFadden, author of the
bill, is chairman of this committee
and the measure is thus known
throughout the country.
If adopted it is believed that the
amendments proposed will stop the
shifting of charters of national in
stitutions to state banks and trust
companies-that is. of the larger ma
tional banks, many Of the most i'm
portant having taken this action that
they might have privileges denied
under the national banking act, but
permitted by state charters.
No Immediate Danger.
Not that there is any immediate
prospect of such wholesale surrender
Of national bank charters as to prac-
iically eliminate tho system, but the
threat was considered sufficiently
serious in this respect 10 Justify the
appearance of the controller of the
currency before the banking and
currency committee where he address
ed the members in support OF the Nc
Faddcn measure pointing out the IN
crease in state banks and trust COM
nanics and the decrease in national
banks, especially among the larger and
more important institutions, many hav-
ing surrendered Their charters that
they might better be prepared to do
broader business
State banks and trust companies op-
crate on much more liberal charters,
being permitted to engage in many op-
erations that are denied to national
institutions
Anything that would destroy the ma
tional banking system would be moth
ing less than national calamity, for
the federal reserve system is dependent
upon and predicated on national bank
ing.
1t has frequently been pointed out
that the financing of the world war.
SO far as this country was concerned
and practically of the allies as well,
would have been next to impossible
without it.
We might have been under the ne
cessity OF using printing presses after
the manner of Germany, probably
not TO the same extent. but instead of
the most stable currency and a pros
porous nation, we would have had
the reverse, nor could we have made
the loans totaling m&ny billions of
dollars to the allies.
Possible, Hut nlawfui.
There are "donts" in the national
beating around the bush, the chiefest
OF these being the edict against
branch banking. oEe of the most
potent topics of discussion in finan-
cial circles of the present day.
But q national BAN, may, indirect
lE, and Yet d:rectly-aCCuir a saw
iuga bank with many branches. secure
q charter for the same under the ma
uonal banking act, ana then may
merge with the other national bank
b"&nCne.
It is proposed - tae McF4dder
measure to permit national banks to
have branches. bL. only in the city
where The main ONE u located.
II is believed this feature will re-
move most OF the objections CT the
element opposing branch banking.
and at .he same i:nse will avoid the
evils and danger o. So-called chain
banking. which haze been the
cau> OF serioU5 losses again and
again.
Foreign ;ran2h Banking.
Branch banking of the Canada Il
and European variety is very Diff
tlrent rron chaia banking as i. has
been known in Tie United States. and
yet. through its very greatness, the
parent banks having enormous cap
ital, II has been safe.
At the same time there great in
stitutions anG their numerous
branches have s.ilIed and actually
Killed Off competition, to such AN ex-
tent that ieT great banks have a
monopoly OF the business.
Numerous state Banks.
There are todGr OYER 10000 banks
In the United States. $500 of which
arc operating unde- the national
bank act. 2l.00O state Institutions and
1000 trust companirs.
One of the rc&son@ Tor the sur
render of nationGt banH charters has
been the large mount of cash that
member banks must carry Us reserve
with their regiondI reserve institu-
tion, upon which they receive no in
tcrest. The latest available statement
of the reserve system shows that
about s1.457,SO0,0o6 is reserved in the
regional banks vaults. varying as
bank deposits OF member BANKS in
crease or decrease. Reserve of 10
per cent on demand deposits is re-
CURED or all national banks. while
the state institutions and trust COM
panies generally carry their reserves
where they can and do receive inter
est thereon.
Doubt Wisdom of Interest Charge.
The McFadden measure does not
provide interest on reserves, as the
nest banking opinion is not favora Bile
10 imposing this on the reserve sys-
tenn, but many member banks have
recently argued for larger payment
or dividends on the stock of tba
twelve regional banks than the per
cen now paid, the entire stock being
subscribed by member banks
However, the federal reserve sys-
tenn is not making the money TODAY
mat IL did year ago, two years ago
or during and after the war, when
lhey scored enormous profits
General business is using less cash
ana the banks not finding such an
SctlVe demand for loans are not re-
olScounting freely
Rates too, are lower than thew ware
two years ago
In the past year bills rediscounted
decreased from $3.50, $40, 600 to s447-
Ioe,o0o indicating a slowing down in
general business and large decrease
in the activities of Wall street.
reserve banks employ their assets
as best they can, even if they are
obliged to go into the open market
ana BUY low rate paper A recent
statement, the holdings of certif-
Gates of indebtedness shows an in
crease In one year of S24, 100000 and
or Treasury notes by s120,000.O0o.
~hlie the kind of paper desired by
me system was rot availa BILE so that
mere was decrease of $150,000, 900
in this item.
Bankers Back the MeFadden Bill.
Bankers of the country as well az
in the cities are behind the McFad-
den bill in great numbers. evidenc-
ing their satisfac ction with the prfvil-
eyes of the reserve system and their
desire to further anything that will
aid it,
Representatives have had their ears
TO the ground, or rather they have
timent perfectly, practically assur-
in