Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-06-06
PANIC PROTECTION
FOR BANKS URGED
Washington Body's Work Is
Pictured at District
Group ConClaVe.
BY EDWARD C. STONE,
STAFF Correspondent of The Star.

STAFF Correspondent of The Star.
ASHEvILLE. N. c. June 6.-An adj
= dress OH The Stock Market Pane OF
1929 and It's Lessons" by Robert v.
Fleming. president of the Riggs National
Bank and an address on Economic
Restraint" by Oscar Wells former
president of the American Bankers AS
Ssociation. were among the highlights
of the District of Columbia Bankers
Association convention at the second
days session at the Grove Park Inn
here The work of Washington Chap
9r, American Institute of Banking, was
Elso pictured during today'S program.
'Lanier P McLachlen, first vice preS1-
dent. presided, and prayer was offered
by Rev. Louis J. Bour, pastor OF st.
Lawrence Catholic Church, Asheville.
Mr. Fleming made powerful plea for
the better protection of banks and their
customers in times of panics. He re-
viewed the conditions leading up to the
crash of last November, considering
financial indigestion" of an enormous
number of new securities one of the
chief causes. He noted the rise in
brokers loans to something around
$500, 100000 and the increase in stock
trading until 1t reached the climax with
trading l6,4lO030 shares in a single
day.
During this period" Mr.. Fleming
continued, 1.-The splendid support and CO.
operation of the Federal Reserve System
made 1t possible for member banks to
take care not only of their own clients
but, in turn, allowed many State insti-
tutions dealing with member banks to
care for their clients. The Federal Re-
serve system stood the acid test and
the officials should receive the highest
praise Without this support hesitate
to predict what would have happened
The country was also most fortunate in
having as its President during this crisis
a man who thoroughly understood eco
nonic conditions
Lessons Banks Should Learn.
Gas to the lessons We should learn
from what we have passed through,
consider the outstanding one is the
need for the banker at all times to keep
his institution liquid to meet the I'M
expected demands arising from causes
and conditions beyond his control, for
the banker has a definite duty to
his community; he must be the bulwark
OF safety and yet be liberal enough to
stimulate the growth of his community.
With respect to collateral loans,
think We should require diversif1cation
and marketability in the collateral
taken and insist also upon a wide mar
gin of safety In determining this
judge than the customer. Such policy
Is best for the bank and best for the
customer, but can only be sustained
through the full cooperation of the
banks in the community.
las to the question of liquidity. let
me stress the desirability of every bank
building a proper secondary reserve.
Whether the bank be a member of the
Federal Reserve System or a non-mem-
Der State institution, it would be well,
In my Judgment, to build up an ade-
uate secondary reserve of Government
bonds, commercial paper eligible for re-
discount and well selected list of high
grade bonds of short maturity.
Another lesson Is the necessity of
making a study of the character and
form of the note which the banks have
been using in making collateral loans
The form OF these notes should be such
as to give the most liberal course of
action to the bank in case the customer
either disregards the requests for more
margin or is unable to meet the legiti-
mate demands of the bank The COM
mittees of this association are giving
careful study to this matter, and I feel
sure that their deliberations will result
In form of note which will embody
all the necessary principles for the pro-
lection Of both the bank and the Gus
toner.
Customers Character Held Vital.
81 think experience has taught us the
desirability of looking carefully into the
diversihcation of our investments, both
as to loans and securities. close study
of general conditions in our own COM
munity as we'll as those throughout the
country is very desirable and will put
the banker in a position to recognize
the clouds that may be gathering.
In making loan the character of
the individual or members of the cor
poration to whom you are lending
should be of the first consideration.
The banker should not be swayed by
an abundance of collateral, if the in
tegrity of the borrower is not of the
highest"
While believe that officers should
be given pretty wide latitude in the
granting of loans, in order that they
themselves may develop and the bank
give prompt service to its clients, I
recommend that larger loans be passed
on by a committee: likewise that a
periodical review be made of loans pre-
Wously made by the committee, with
careful check-up during the life of the
loan by well developed credit depart
ment.
"Scrutinize every loan If it is an
unsecured one. be certain that 1t is not
for capital purposes, which makes the