Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-02-14
BY CHAS. Z. SHAEFFER.

The most important piece of fnan-
ctal legislation in the last decade, the
McFadden bill, IL. X. 2, amending
the National Bank act and the Fed
eral Reserve act. will be given hear
ings next Tuesday before stlbcom-
mittee of the Senate banking and
currency committee to determine
whether it shall he reported to the
Senate in the same form ii was
passed by the House on February T.,
last Members Of the subcommittee
consist of Senator Pepper of Penn
sylvania, Senator Edge of New Jer-
ssy and Senator Glass of Virginia.
Hearings are. expected To last
throughout the week.
The measure can fairly he de-
Scribed as Il compromise between the
extremists. II maintains the status
ot branch banking within municipal
limits in States where branch bank
ing is allowed, but prohibits amy
member bank from establishing
branches outside of its home city
Due To the Importance Of the bill
aud lis effect, il passed, upon the
culture financial structure of the Ma
ton. the complete digest and cluCda-
ton of the measure j. herewith given.
phraS"d Wi,h particular thought to
the lay mimi.
Changes Declared Needed
The National Bank act WAS passed
In 1868 ana although il has betu
amended several times its reStric
tons prevent national banks rem
derinS the service demanded by mod
ern business conditions. The bank
ing laws Of many of the states are
more In harmony with the trend of
business than the National bank laws
and the result is that the number
and the power of National banks are
very much less than the number AMI
power of State banks due TO the
conversion OF National banks into
State banks in order TO serve their
customers and hold together the
business they have built up.
When the Federal Reserve act was
under discussion in Congress in 1918
1t became apparent that the system
could not be founded upon voluntary
membership of either national banks
or State banks. In order TO make the
Federal Reserve system a certainty
rather than u theory the law pro :
viieS that all National banks must
be members of the system and supply
certain amount of fixed capital and
assets according 10 the size of each
bank Although State banks have
been invited for several years To be-
come voluntary members of the Fed
eral Reserve system, only 400 of the
10000 state commercial banks and
trust companies in the United States
have accepted the invitation. This
shows the wisdom of Congress in
making the National banks the chief
foundation of the Federal Reserve
system.
Such banks cannot leave the syS-
TEN at will and they must continue TO
nc members az long as they remain
national banks. On the contrary,
State banks may come in and go at
will, and there are many state banks
enjoying the benefits of the Federal
Reserve system coming in direct com
petition with National banks and per
forming many functions both profit
able and serviceahie, that National
banks are not permitted to perform.
1t is Il question whether a Federal
Reserve system made up of voluntary
members would be as effective as one
that is composed of the compulsory
membership of National banks. which
are under the authority of the Federal
Government and can be required to