Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-01-03
McFADDEN FEELS VERY CONFIDENT
BANKING BILL WILL BE PASSED
Measure Soon to Be Reintroduced in Congresses.
lient Points Elucidated by Author-Only Slight
Changes Made-Wide Support Claimed.

banks. There are on deposit today
in the national banks a total OF saw.
ings deposits to an amount or about
IS, 600, 600 800, which Is about one
fourth of the entire savings deposits
in all banks In the United States.
There are about 100000 individual
savings depositors in national banks.
constituting about one-third of all Of
the persons carrying money in saw
ings deposits In all banks. These
figures do not include commercial
time deposits.
Although the State banks and
trust companies are permitted to
make loans upon the security Of real
estate for considerable periods of time,
the national banks may not make
such a loan upon the security of
first mortgage upon city real estate
for O longer period than one year,
and they cannot lend in this manner
a total sum in excess of one.third of
their time or savings deposits, al.
though they may make loans upon
improved farm property for q period
Of five years. This restriction to one
year Is a serious handicap to the ma
tional banks, especially to those To-
Gated in the smaller cities. A first
mortgage upon properly appraised
city real estate makes as safe a loan
as can be made, and where the funds
so loaned are limited to savings de.
posts there is every reason to en-
courage the development OF this char.
acter of business by the national
banks. In fact, II the national banks
are not permitted to compete in this
field with the trust companies it will
prove disastrous to the national bank
ing system. The present policy of the
law is not only to disqualify national
banks from engaging in this construc-
tive economic activity. but also to
compel many small banks to seek
outside investment, about which they
know very little. for their savings de.
posts. It penalties the national banks
by preventing them from taking ad-
vantage of the best security that
many of their customers have to
offer, thereby causing them to lose
such customers.
THE bill, therefore, extends the time
which a national bank may make
loans upon the security of first mort
cages upon city property from one
year to five years and permits a total
sum TO be thus invested equal to one
half Of the savings deposits. Each
such loan is limited to so per cent Of
the appraised value of the property.
This, | think. is one of the most com
Other sections of the bill deal
With technical questions Of banking.
Some of them remove archaic reStric-
lions and repeal obsolete provisions
OF law. Others are designed to clarity
the law as 1t exists at the present
time. Among these is the provision
Tor the regulation of the investment
security business of national banks.
This is recognized modern banking
service concerning which the national
bank act needs adjustment
Since the bill was originally intro
duced there has appeared from time
to time some objector to certain pro.
visions. but invariably upon close
analysis and explanation of the pur-
pose OF the bill the objection disap-
peared.
Branch Banking Problem.
80 far as the terms of the bill ara
concerned the opposition has dwindled
down to one Section-Section (Which
undertakes TO express a national policy
on tho subject of branch banking by
prohibiting the further extension OF
statewide branch banking in the Fed.
eral reserve system. This opposition
comes from a small group of State
oranch banking systems and their SYM
pathizers. They believe that branch
banking system of the United States.
similar to the European system. This
Is the system In vogue in Canada. and
we are more familiar with branch
banking as carried on there than on
the other side. In Canada there are
ONLY II banks. and these are located
IN the two cities of Montreal and To.
ronto. They operate about 5000
branches over the vast territory of
the dominion, extending from coast TO
coast ~
II shall not attempt to become here
involved in a discussion Of the pros
ana cons of branch banking. but deem
IL sufncient to say that Congress is
not ready to give it's sanction to a
policy which will lead directly to the
determination of our system of unit
banks. large and small. through the
services of which there has been
erected a system Of finance without
equal in the world for strength.
vitality and adaptability to local needs.
In this section of the bill, therefore
the House took the position that the
time had come for Congress to eS
press it's dfsapproval of Statewide
branch banking by enacting appro-
PIRATE legislation with reference to
the two financial Observation-Disclosures
national banking system and the Fed
eral Reserve system In section &
OF the bill, national banks are pro-
hib1ted from engaging in State wide
branch banking and in section Q
the same restriction is put upon the
state bank members of the Federal
Reserve system.
An Emergency Measure.
There is another group which has
opposed the bill as a whole, upon the
ground that 1t has been formulated
without previous exhaustive scien-
tif1c study by a commission Of econ.
omists and bankers. They apparently
wish to see a bill introduced which
would have for its purpose the solu-
ton of all of the banking problems.
Federal Reserve, National and State.
winch are before the country TODAY
In this connection, I desire to take
this opportunity to say that the pres
ent national bank bill is not an at
tempt at a scientific codification of
all OF the banking laws over which
the Federal Government might have
Jurisdiction. There may be a need
for some such codification and there
are, no doubt, many unanswered ques-
lions of banking Of which the Federal
Government could take cognizance but
which are not covered in this bill
This bill is an emergency measure.
1t takes no great amount of de-
liberation by scientific body to COM
prehend what 1t proposes to do.
Zach section Of it Is an amendment
to some particular section Of the ma
tional banking laws. After a most
exhaustive study by the office of the
controller of the currency and by the
House committee on banking and cur
rency 1t was decided to center upon
these particular amendments at this
time in order to give to the national
banks immediate relief from certain