Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-01-03
BY CHAS. p. SHAEFFER.

I OF Congress, will shortly be introduced
again, with passage virtually assured
| in the belief Of Its author, Louis L.
McFadden. chairman Of the House
| committee on banking and currency.
| The measure, commonly known as
| Mr.. McFaddens "foster-child," will
shortly be reintroduced in the House
, In substantially the same form 1t pass
ed that body last year. The only ma:
| terial difference in the House bill and
the bill as reported to the Senate, is
in the disagreement over the prohi.
| bition upon Statewide branch banking
| In the Federal Reserve system, made
| by section 8 Of the House bill. This
seton was struck out by the Senate
committee. but the other 16 sections
are the same in substance in both
bills. with one or two unimportant eX-
ceptions.
Mr.. McFadden's proposed measure
! can be fairly said to meet almost uni
yerSal approval in banking circles. No
| important organization or influential
| financial body has as yet been able 10
detect a flaw in the prepared bill.
which is recognized as one of the most
important set Of amendments ever
| conceived TO the banking structure of
the country. This being the case, the
following summary prepared by Mr.
issue of the Bankers Magazine. a we'll
known financial publication, will ia
miliarize every one interested with the
salient points of the proposed meas.
ure.
House Passed Measure.
mo financial mea sure within recent
years has been given closer study by
the writer and members of the COM
mlttee on banking and currency. For
several years past the iced for Ger.
tain amendments to the Banking laws
has become increasif Gy apparent,
and last year Congrens became i'm.
pressed with the nece sity for imme-
dite action. After many conferences
with the controller Of the currency,
and after very exhaustive investiga-
ton by that official into the technical
aspects of the need for new legisla.
ton. bill was finally drafted, intro.
duced in the House and referred to
the committee on banking and cur.
rency. This committee not only held
public hearings on the bin but gave
every section the most careful study
In executive session. This measure
was favorably reported to the House
and after debate of several days was
passed on January IA. 1925. 1t is not
| necessary for me to enumerate the va.
J.
has been before the public for more
than q year and has been extensively
discussed by the banking fraternity.
l may say, however, that the main
purpose of the bill is to remove GER
tain outstanding handicaps from the
national banks, which now stand in
the way of carrying on q full-fedged
and efficient modern banking bust
ness.
Amendments Declared Needed.
The national bank act has been on
the statute books for more than half
century and has not been sufficiently
amended within recent times to ac-
cord with some Of the more modern
demands for banking services. This Is
not true of many of the State banking
codes.
Since the trust companies are now
engaged in carrying on a commercial
banking business and are in imme-
date competition with the national
banks in this field, in addition TO the
other banking services which their
State charter powers permit them TO
render, the national banks find them
selves at a serious disadvantage. More
favorable State banking laws have
enabled the State banks and trust
companies to develop forms of bank
ing service which the public has come
to recognize and expect from a bank
and which, in fact, from an economic
and governmental standpoint. have
been demonstrated to be sound.
Congress has already recognized
this situation in part by permitting
national banks to exercise trust pow
ers and thus have an opportunity
to get their share of the very profit
able trust business which is being
built up by the banks as a regular
banking service This bill simply goes
a little further in the same direction,
but proceeds with the same con-
servatism and caution in expanding
the powers of the national banks.
After this bill becomes a law, and /
have no doubt that 1t will be enacted
into law at the coming session, the
national banks will not be permitted
to exercise any charter powers or
which a conservative banker can rea-
sonably disapprove.
The Charter Question.
For example. the national banks
are at a disadvantage by having their
charter powers restricted to a term Of
years.
CAS- time passes the period of the
life of the charter grows less and less
until Il time is reached when the char-
ter expires by operation OF law. NO
such charter limitation affects the
State banks and trust companies IN
practically all of the metropolitan
financial centers. This has direct
hearing on the trust business Of a
bank. How can a national bank with
limited charter accept the admins
tration Of a trust which is perpetual
in its nature or extends over longer
term OF years than the charter term
of the bank? This question Is OF con-
siderable embarrassment to the ma
tional banks and has been the cause OF
several national banks giving up their
national charters In favor of State
charters. These perpetual trusts IN
the nature of educational and scientific
and charitable foundations are becom-
ing of increasing Importance, and the
national banks should not be deprived
of the opportunity to administer them
Consequently. the bill gives to ma
tional banks the right to hold their
charter powers for an indefinite length
of time subject at all times to the Will
of Congress and to the operation OF
the laws relating to liquidation and m
solvency. When this provision be
comes a law the national banks will
be upon the same plane, as to the con
tinuance Of their corporate existence
as are the State banks In Arkansas
Connecticut, Florida, Illinois, Ken
lucky, Maine, Massachusetts. Mime
sofa, Nebraska, New Hampshire, New
Jersey, New York, North Carolina
Ohio, Oregon. Rhode Island. South
Carolina, Tennessee, Vermont, Vir
cinia and West Virginia. 1t will be
noted that these States include the i'm
portant cities of New York, Buffalo
Boston, Chicago. st. Paul, Minneapo
| lis. Cleveland, Cincinnati, Louisville
Omaha, Providence, Nashville, Rich
mond and a number of other lesser
, financial centers.