Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-10-04
GROWTH OF BRANCH.
BANKING is NOTED.
Association at Cleveland
Finally Gives Approval
to New Method.
BY PRESTON S. KRECKER.

Special Dispatch to The Star.
NEW YORK, october 4.-Sentiment
of bankers, long opposed to branch
banking, is swinging around the other
way, as proved by the adoption by the
American Bankers Association this
week of resolution favoring the crea-
ton of branch systems. The associa-
ton, while adhering to the view that
unit banking has its place ir the COM
munity, at last recognizes the economic
benefits of the branch system.
There is no doubt that the series of
catastrophe failures of small unit
banks throughout the West, Northwest
and South in the last few years was
largely responsible for this change of
heart. Many reasons have been adj
vanced for those failures, which cost
the public hundreds of millions of dol
lars loss in rural communities, but it is
realized more and more that at the
bottom of the trouble was the fact that
country banks made bad loans to farm
ers with the money of farmers, with
the result that entire communities suf-
Tered almost irreparable damage
Had the business of the country banks
been diversified and had there been at
their disposal resources of a strong
mother institution, the financial de-
bacle would not have occurred. Bush
ness men are beginning to realize that
such diversification would have been
provided by branch system and that
combined resources of the branch
banks would have saved individual
members of the system which had be-
come embarrassed.
Too Many Small Banks.
One of the defects of our present
banking system is that during periods
of prosperity too many small banks are
created, often by men of limited bank
ing experience. Banking resources are
spread out thinly instead of being con-
centrated. What is more unfortunate
is that inept management is apt to cp-
crate such banks. All may go well
until a time of stress comes, but then
the weak and poorly managed institu-
tons go to the wall. The country has
State and Federal bank supervision,
but experience has proved that neither
suffices to prevent disastrous bank fail
ures.
The advantage of combining numer-
our small unit banks into branches of
a soundly managed large institution are
quite obvious. The branch system thus
created has the benefit of the COM
branches of the system, as we'll as of
the broader vision and experience of
the central management. Such a COM
bination makes for stability, which, of
course, is the end desired.
1t has been objected that branch
banks in small rural communities,
operated by ysome large institution re-
moved some distance from the seat of
the small bank, cannot serve the needs
Of q 40 L. -
OF understanding and sympathy That
objection could be overcome by creation
of local advisory boards which under
stand the needs of the small town and
the rural community surrounding it.
Probably the largest branch bank sys-
tenn in the country is operated in Cali
fornia by the Gianinni interests. The
practice of those bankers, when they
absorb local banks into their system, is
to place local men in charge of the
branch and create local advisory boards
OF directors, who actually represent
community business. The plan is said
to work perfectly, giving each COM
munity the benefits of a strong banking
organization but without the disad-
vantages of absentee ownership.
Unit Bank Dominates.
While branch banking has been max
ing notable progress in the last decade
the unit bank still dominates the bank
ing business of the country. The latest
authoritative statistics available show
that approximately 21,824 banks, or
about three-fourths of the entire num-
Der in the country, are operated as
units. independently of chains, groups
and branch systems. Groups and chains
embrace 2,103 banks, while 822 large
banks operate 3,547 branches.
Copyright, 1900