Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-03-14

impOrtant financial measure ue.oi
Congress. Writing on the MGR duuei
Bill and Real Estate Loans, IN tn'
United States Investor, he Says IL
part: III,
1.-THE McFadden national bank plil
now pending before Congress. "iiel
PASSED, will greatly strengthen th'
Federal reserve system by SNlhe ia
tional hanks. members of the reserve
system powers which will allow then
10 compete on an equal basis VIII
state banks. The national bank &C,
was sdopted in 1864 and the Federa
reserve act in 1918. These two acts
are the laws under which natlona
ba nks now operate, and as the coun
,ry has expanded conditions nave
changed and additional Legislation has
become necessary to enable nationa
hanks to meet modern business con
ditions The enactment or the NC
Fadden national bank bill is esse u
tia, to the continued successful oper"
ZION of the Federal reserve system
which has proven of incaicuiapl'
value TO the United States, by pre-
venting panics through the m"nlAt'
~ raserves. and which stood the tes'
IF tho war strain, by making poSSlhE
tho successful tiotation and dlslriou
.ion Of the Liberty loan issues.
Will Equalize Conditions.
Estate banks have been able TO Sc
cure the necessary laws from thei'
state legislatures to enable thein 70
meet modern conditions, but III oiuei
that national banks may meet com
nat;tion II has been necessary to in
cornorate in the MacFadden bill pro
cham like mowers.
This bill will not give natlona
hanks greater powers than thelf
state bank competitors. but simply
anlalize conditions. 1t is by no means
a complete revision Of the national
bank act but is only an addition &c
and a modernization of certain pro
visions of the national bank act.
"One of the most important pro.
visions Of the McFadden national
hank bill Is the amendment to section
% of the Federal reserve act. TINS
section empowers national banks 10
make first mortgage loans on, improV-
ed CITY real estate, for period not
RI exceed one year, in amount not In
excess of so per cent of the value OF
the property. and the authority OF
national banks to make these loans
Is limited to one-third of their time
deposits. These limitations have made
Il exceedingly difficult for national
banks to comprehend in the large
but in the smaller cities-with state
banks which can make loans on real
estate for the customary periods OF
three to five wears. The McFadden
bill so amends this section that ma
tional banks may make loans on this
class of property for a period of five
years las a maximum) up to so per
cent OF the appraised value of the
property and in aggregate amount no.
TO exceed so per cent of their savings
deposits.
Better Returns to DepOsitors.
During recent years there has beer
q tremendous growth in the saving
deposits of national banks. AT the
present time there are approximate,
II .OOO, 900 Individual savings deposit
ors in national banks with total de
posits Of about S500,000,0 900. or about
one third Of all the savings depos1tors
in the United States and about one
fourth of the entire savings deposits
of this country. 1t is customary &c
paw not less than 3 per cent on saw
ings deposits. In many parts or the
country the rate is considerably
higher. AS the profit on the turn
over of commercial deposits In ma
tional banks is comparatively small
when safety of the investments the
bank is required to make Is consio
erred il is essential that national
banks be given this authority 10 ioa1
on real estate where the interest re
turns average 6 per cent, in order that
the savings deposits Of their clients
NAV be invested In gilt-edged secur
tiles and with a rate of return sufti
Gent to enable bank to pay the
denositors the savings rate of interest
"As the Federal reserve system is
the backbone Of the financial system
of the country, so the savings de
nos,ts are the backbone of the bank
ing system of the country, and this
nrovision serves the dual purpose OF
making savings funds available fol-
the increased development of each
community, and at the same time
nroviding the vast army OF savings
denositors with an absolutely SAFE
securitv at a rate of interest not
univ adequate but high enough tc
induce continued savings.
washington Is Example.
"This provision will prove pecu-
,;arlv beneficial to the moderate
sized cities throughout the country
washington affords a striking ex-
ample. 1t has been necessary. as the
result of increasingly congested traf-
fic due to growing use or aut0mo
hiles. more than ever before to de-
velop community centers. each witt
it's own banking requirements. The
relatively small merchant and bust
ness man in each center. seeking
that adequacy of safety afforded by
the Federal reserve system and Gov
eminent supervision, constantly
meets the necessity of applying tc
his national bank for accommodates
on real estate security, which here
tofore it has been powerless te
afford. A.,
the office of a national bank, In
community section more or less re-
mote from the business center. IN nc
way detracts from the success Of a
state bank in that center. On the
contrary, the State bank has pros
pered as we'll as the national bank
and the community has been properly
served and has developed more
RAPIDLY, as the national bank has
been able to carry it's strength and
service and the judgment of its expert
enced officers into the community
center, without injury to the State
pank and for the betterment of all
concerned.
'As a concrete example, one Of the
growing community centers in Wash
ington is located at Fourteenth street
and Park road northwest. In this
location the Riggs National Bank
established a branch office on June
10, 1922, through the purchase of a
small savings bank and it's ultimate
consolidation with the Riggs Ma.
tional Bank. In this community was
also located the Park Savings Bank,
q State bank, doing a savings and
commercial banking business. Both