Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-10-01
NATIONAL BANK ACT
CHANGE DISCUSSED
Delegates to Convention Con-
cerned Over Shrinkage in
Systems Resources.
BY JOHN r. SINCLAIR.
pecial Dispatch to The Star.

special DlSpatch 10 Inc StAr'
SAN FRANCISCO, Calf. october /.
What's wrong with the national bank
act? Why have the aggregate resources
Of the national banks of the United
states gone down from rs per cent of
the total banking resources In 1884 to
less than 40 per cent? -.
This is the question which occupied
the best thought Of the bankers in con-
vention here. 1t was thought out that
in total resources the national banks are
trailing the State banks in most OF the
large cities of the country-notably IN
New York, Chicago, st. Louis, Cleveland,
Detroit and San Francisco.
1t was further brought out that Tor
brief time and Just prior to the passage
Of the McFadden bill national bank re-
sources shrank and State banks gained
In excess of two and one-fourth billions
of dollars. For a time the McFadden
act stopped this flow, but 1t was only
temporary. 1t began again about year
ago. Since then no less than 85 large
banks have given up their national
charters for State charters, resulting in
loss Of more than $4,000, 900, 900 to the
national banking system.
One of the most important addresses
on the subject was made by George II.
Hamilton, vice president of the Fourth
National Bank, Wichita, Kans.
You cannot sell merchandise by Of
fering something almost as good" said
this Kansas banker, in referring TO the
increased power suggestions have been
made to meet the difficulty. So far all
of them are merely suggestions. All
agree. however, that two important
cases decided by the United States Su-
preme Court have had much to do with
the present situation"
The first case referred to Is the
Macalien case. Here the court decided
that an excise tax measured by income
was unconstitutional where part Of the
income used as a measuring stick was
the income from tax-eXempt bonds.
Now national bankers everywhere
have been urging State Legislatures to
pass a law taxing the bank on rea-
Sonable excise basis. This is being done
| in order TO escape from the burdensome
taxes which have been heaped upon
| them in the last few years.
When the Macallen case decision was
announced, 1t paralyZed all effort in
| this direction. AT the present time the
problem of now to tax national banks
| has not yet crystallized. Still, this
| makes for confusion in the field OF ma
| tional banks taxation.
The other case also arose in Massa-
chusetts-the Worcester County Ma
tional Bank case. In this case the
court decided that, in the event OF a
merger of a trust company with the
! national bank under a national char
| ter. the national bank could not sue
coed to the trust business Of the State
bank without qualifying under the
State law, separately with respect to
each trust.
Now, il a national bank cannot
qualify without appealing to the court
when it takes over the business OF the
State bank in this very important mat
| ter of trust, a national bank charter
becomes much less desirable. The I'M
certainty which has resulted with ref
erence TO the merging and f1duciary re-
lations under a national bank charter
! is a very hard blow to the development
Of banking in that field;
The national bank division passed a
| resolution yesterday dealing with this
very important matter. 1t declared that
anything which retarded the free
| growth Of the trust departments OF the
national banks reflected at once In q
! Iessened favor for national charters.
This decision strikes a blow at the
| succession of fiduciary powers held by
| a trust company which consoltdates
with a national bank under national
| charter" SAYS the resolution. by hold
| ing that the consolidated national bank
| does not succeed to the fiduciary APP
pointments held by the absorbed trust
company, a hiatus in the administra.
ton of the trust is created. Failure OF
the power to pass to the national bank
requires it to apply anew to the court
| for appointment"
Then it continues: Clearly this is
deterrent to the operation Of such con.
solidated banks under Federal laws. II
| is one of the influences mitigating
against the retention Of the national
| charters"
| (Copyright, 1929. by North American News
| paper kiilance.)