Evening star., 1926-03-07

4
| that take millions Of dollars Of assets
| from one system into the other.
Takes Up Branch Failures.
He attempted to prove that the
! large number of bank failures in re-
| cent years were due to the lax pro-
| visions of the national banking law
with respect to the limit OF loans by
| national bank to one individual,
firm or corporation, but his testimony
on that subject has no bearing on the
proposed legislation, because of the
| total number of bank failures during
| the past five years only a relatively
small number were national banks,
/ and the largest number were State
banks, which are not controlled in
their lending policy by Federal law.
He did not include in his statement of
bank failures the amount that has
been charged off to profit and loss dur
ing the past five years by all the
banks.
If that information had been in
cluded it would have shown conclu-
sively that bank failures in recent
| years were due to economic Condi-
| tions resulting from the readjust-
ments that have been going on since
the end Of the war When che state.
ments and the statistics of DIR. Willis
are carefully studied it will be found
| that they have very little bearing on
the proposed legislation embodied in
the McFadden bill. He admitted that
they were gathered for the purpose
of defeating the bill.
Longer Loan Period Likely.
The provisions of the bill giving ma
tional banks the right to lend part
| of their savings deposits on the se-
| curlty of real estate came under the
scrutiny Of the committee, but there
were no good reasons brought forward
to indicate that this practice of lend
ing savings deposits on real estate Sc
curity, as banks are permitted to do
now, can not be reaffirmed with per-
feet safety with the further permis-
sion that loans may be made for a
period of five years instead of one
year as provided by existing law.
For many years national banks act
ing under that provision of the ma
tional bank act which permits them
to lend money on notes, bills of ex-
| change and other evidences of indebt-
ednesS have been buying and selling
what are known as investment Sc
curtieS.
The proposed provision of the Nc
F'adden bill with respect to that prac-
tice is really a limitation of existing
practice, because it gives the con-
troller authority to determine by regu-
lation what are investment securities
and thus prevent banks from tying
their money up in unmarketable, long
time, speculative bonds and deben-
lures. especially real estate notes that
are put out under the guise of bonds
and debentures. 1t is further limita-
ton on existing practice because it
restricts the amount of tne obligations
of one debtor that a national bank
may buy to 25 per cent of the CAPT
tai and surplus. so that the proposed
amendments on this subject are Il
great improvement over the existing
practice and will tend to make that
feature of banking business safer
than it has been in the past.
Fullest Hearing Given.
The subcommittee of the Senate
banking and currency committee
which conducted the hearings on the
McFadden bill was very patient
showing a desire to give every one
who had anything to say all the time
he needed, and there is no doubt that
Senators will know considerable more
about the McFadden bill and its eff
feet on the national banking sys.
|, tenn and indirectly on the Federal
Reserve System as n result of these
hearings than they knew last year.
1t is believed by those who are
familiar with the subject that when
the bill comes to a vote in the Sen
ate it will be passed by that body
with very little change, an dthat
eventually legislation satisfactory to
every one, except Il few Statewide
branch bankers who want to make
the Federal Reserve System the
background for their system of bank
ing, will be put on the statute books