Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-09-01
BRANCH. AND CHAIN
BANKING INCREASES
Growth of Mergers Has Been
Steady in Recent Years.
Opposition Fades.
BY JOHN F. SINCLAIR.
ecial Dispatch to The Star.

was surprised last week when it woke
up one morning and found that the
Northwest had built UP, almost over
night, bank merger which included 81
banks in Minnesota, North Dakota,
South Dakota and Montana, with COM
blned assets of over $780, 900 900. These
banks were headed by the executive
officers OF the First National Banks of
st. Paul and Minneapolis.
THE most important and far-reach-
ing bank merger which has occurred
this year." one New York banker said
to me. 1T begins to show us where
American banking is going"
In this case of the first bank stock
corporation of Minneapolis and St Paul,
/ the holding company which is to con-
troll all these banks and others which
| 1t will add later, abSorbs powerful banks
in scores Of important cities and in four
different States.
Unit Bank Pan.
| If strong unit banks in States
| are available, why not other banks in
5, or 10, or 80, or 48 States? In other
words, what is more logical than a
| 81 100000 or S5,000,O00,O00 hold
ing company which will absorb banks
| all over the Nation?
For years bankers in the Northwest
| have seen their deposits drained into
|
the development Of the chain store and
other lines of national production and
distribution, headed largely in New
f, York. the Middle West saw that some
| thing had to be done to maintain its
own financial and banking independ-
ence.
At first loose tie-up was effected by
the First National of ST. Paul and Min
| neapolls, but is was soon seen that the
movement had to go much further. The
First Bank Stock Corporation is the
first attempt, outside of California. to
bring together the powerful economic
forces OF one section of the country into
a banking combine.
What merger! The copper and
lead mines Of Montana, the flour in
duStry of Minneapolis, the railroads of
st. Paul, the farming industry all tied
together in big community interest
Now turn to the East, where work is
proceeding on merger of the Old
| Colony Trust Co. and the First
National Bank of Boston. Old Colony
had resources of SPOT 100000 with five
Boston branches; First National has
| S403 100000 with IL branches in Boston,
one in BuenoS Aires and three in Cuba
If this merger goes through. it will
form unit bank with assets of SOLO,
| 100000, having % branch Offices.
DLncEeHCe III A1dHhS.
Now it is well to distinguish the diff
ference between chain banking and
| branch banking
Chain banking consists of a number
of independent units, which have the
| same controlling interest. But a person
doing business with a bank which be-
| longs to chain, is doing business with
| that particular bank. If he places
$1,000 on deposit, his deposit is pro-
tected only by the assest of that par
| ticular bank. The assets of the other
banks in the chain are no security for
| his deposit, because each one Of its
banking units are individual and stands
on its own financial feet.
| 1t is quite possible for one bank in
such a chain to fail while the other
banks in the chain remain solvent. 1t
| does not happen often, but it is possible.
A branch bank. on the other hand. Is
| unit bank. When person puts a
| deposit of 81 900 in a branch Of this
bank all the assets in all the branches
are back of the deposit. No branch
could fail in itself for it is merely one
member If one failed. all would fail.
1t has been stated that of the g.
600 banks in the United States 2o5 of
them control 70 per cent Of all the
commercial deposits in the country.
while the remaining number Of banks
control only 28 per cent.
Rudolph S. Hecht New Orleans
banker, says that already 10 Of our
| largest banks have combined deposits
of S10,OO0,O0o,0Oo.
But good banking is really not mat
ter of size.
"a properly conducted small country
bank can be just as safe as a large
city institution with branches" says
Mr.. Hecht.
Still it cannot be denied that the
old individualism in banking is giving
way in this era to new type OF or
ganization which ties up more expert
ence and more financial power in the
| larger unit.
| Craig B. Hardwood, president of the
American Bankers Association and
vice president of the First National
Bank of Chicago. is not vet convinced
that countrywide branch banking Is
desirable in the United States.
Mergers Continue.
at cannot bring myself to the belief
| however, that the INSTRUMENTATION OF
few unit bankers is sufficient reason
! for throwing over the banking system
that unquestionably contributed large
part to the prosperity of this country
and substitute in its place a system
under which bank policies are set up
| in a book of rules without opportunity
for broad judgment and business-build-
ing liberality."
| other American bankers have made
| similar statements in recent months.
| Bank mergers continue undated. ABOUT
| 40 of the recent bank mergers lnVolVe
| total assets well in excess OF Sl2,0Ou.-
/ 600 600, or more than One-SlXth OF all
| the banking resources of the country.
There are many unsolved problems
| that face the national banks. The heavy
Withdrawals of national banks from the
Federal Reserve system in recent years
| has been the important factor in the
agitation for a more liberal national
| banking act More liberal State bank
| ing laws have been responsible.
| movement is on now to make even more
| liberal the present national banking act.
Nevertheless, the trend toward the
larger banking unit is unmlstakable.
In 1921 there were 30,812 banks in the
| United States. Seven years later there
were 26,213. But the banking resources
of the country increased during that
same period from S45,000, 100000 to
more than ST. ,000,000,000.
Today less than l per cent OF the
| total number of banks in the United
| States hold about 35 per cent of the
| total deposits.
Attitude of Association.
| The American Bankers Association
| has adopted vigorous resolutions three
times during the past 10 years, con-
demning the spread of branch banking
] "in any form" But chain, rather than
branch, banking is now the order of the
| day.
1t is of peculiar significance that this
| movement-which has gained such mo-
mentum curing the last II months,
| while it is being watched with great
interest, particularly by country banks
is causing throughout the country as
whole, hardly ripple of opposition.
How times change!