Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-12-27
SENATE TO PROBE
BANKING SITUATION
Special Committee, Headed
by Glass, Is Assembling
4 Data on Subject.
toOntlnued PROM RIrst Pace

is not yet available but It Is known
that national bank failures in that IL
months were 81, with other failures
probably at a corresponding level.
For the calendar year Of $780, the
suspensions and failures have been esti-
mated TO run above 1000, with some
thing over 100 national banks involved.
The December report of the Federal
Reserve Board shows, for the frst II
months, 98l suspensions, which means
closed to the public permanently or
temporarily" This included Ill national
banks, all of which are members of the
Federal Reserve system, and ID State
bank members. This figure is tentative.
in so far as it includes the November
totals, of 236, when IS national banks
were listed as closing
System Was Blamed.
Early in the present decade there was
a tendency to lay part of the banking
ills of the country to insufhciency of
the national banking system.
AS result, in 1928 H. NJ. Dawes, then
controller, instituted survey that was
responsible, three years later, for the
McFadden act, which broadened the
charter powers Of the national banks
and, according to the records, brought
about some improvement in conditions.
but which, according to the last re-
POIb u AOIlJEOtlCK y. w. E0AGs HAS UOL
accomplished its purpose of bringing
about parity between the National and
State systems.
In 1927, when he reported S31 fall
ureS, including 142 of national banks,
j. w. Mcintosh. then controller, said;
IT believe that failures of many
banks could have been averted and
would be averted If the directors would
give closer attention to affairs Of the
bank"
Again he said: "A large number of
failures in the years 1924 to date have
been In some measure due to the too
liberal policy of granting charters, espe-
cially during the imitation period"
This question of superfiuity of banks
also was touched on elsewhere in
controller report when it was said that
applications for charters showed that
there Is too often a desire to organize
new banks in localities where the COM
munity Is amply served by present
banking facilities, and which would not
support new institutions with nkeli-
hood Of fair measure Of success"
Praised Act in 1927.
In his report for 1927 Controller Nc
Intosh sounded an optimistic note over
the operation Of the McFadden act, then
in It's infancy, saying it had checked the
drift into State banking systems of
national banks which sought a field
where the charter powers are broader
and, consequently. offered more lucra-
tive prospects. Because, however, the
national banking system, inferential1y,
offered more stable foundation, this
new legislation was deemed by that
much to have aided the general finan-
cial structure of the country.
The following year, however, j. w.
Pole, the present controller, was grow
ing skeptical of the results of the Nc
Fadden law, his report indicated, and in
1929 he fatty said it needed amend
ment.
Proceeding on the premise that the
rural banking system Is the weak sis
ter" in the financial structure of the
country. Controller Pole said that he
would attempt no detailed analysis
movement away from large number
Of independent local utility and indus
trial operating units toward q stronger
and more centralized form Of opera
ton in the large cities has curtailed
the opportunities Of the country bank
for diversity and extension Of bust
ness while broadening those orportu-
mites for the large city bank"
Suggested Amendment.
This suggested to him the advisability
of amending the McFadden, act Ito per-
NIT national banks, with the approval
of the controller Of the currency, to
establish branches within the trade
areas of the cities In which such banks
may be situated.
"These trade areas may in some cases
be coextensive with the Federal reserve
district lines" he said; Gin other caSsS
they may be of a more limited extent,
but in my Judgment they should not
extend beyond Federal Reserve district
boundaries, except to take care of few
exceptional cases where a trade area
may extend from one Federal Reserve
district into another, nor should bank
be permitted to establish a branch IN
another city in which there is a Fed
erel Reserve bank or a branch thereof.
Under such a system Of branches
there would gradually be extended to
the agricultural communities from the
large city banks safe-and-sound sys-
tenn Of banking, which would render
remote the possibility of bank failures.
There would, however be no cornpulsion
upon unit banks to enter branch or
ganiZation.
These suggestions for branch bank
ing are made not with the intention
primarily to deal with the question If
the decline in the number Of national
banks through detection from the ma
tional to the State systems, but rather
as q remedy for what appears to be
serious and fundamental weakness in
our systems of banking, both national
and State. Such grant of power to
the national banks woAld, however, give
them such an outstanding operating
advantage that it would seem reason
able to expect that the exodus of banks
from the national system would prac-
tically cease, and that many now under
State supervision would return. to the
national charter which they have for
saken."
No Action Taken. M
Nothing, however, has ever been done
In this connection.
An interesting commentary on the
powers of the Federal Reserve Board
also was incorporated In this report
There have been no general finan-
cial panicS in this country since the
war-thanks to the Federal Reserve
System he said.
ANY bank can have access, directly
or indirectly, to the benefits of the Fed
eral Reserve System to the extent Of its
sound. commercial and business loans
and the decline of the country banks
has taken place Notwithstanding the
assistance rendered by the
Federal Reserve System. A Federal Re-
serve bank Is not charged with the re-
sponsibility Of preventing bank failures.
It Is beyond the power of, the Federal
Reserve System, as 1t Is beyond the
power of any governmental agency to
stand between these banks and in
solvency."
TRADE UPTIIRNS EARLY