Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-04-13


come the chain or group bank. Chain
banking, representing the personal con-
troll of several or many banks by one
or several men, has been known for
some years In America. And, paren-
thetically, it may be stated that the
weakness, bad Judgment or dishonesty
of the men at the head of such chains
often has resulted in the collapse
simultaneously of from 6 to 80 banks
bringing misery and ruin to thousands
Of depositors or commercial borrowers
| in scores of communities.
Group banking, on large scale, is a
development of the last few years in
America. The banking group is formed
by the purchase Of bank stock sufficient
to give control of widely scattered banks.
The stock Is held by corporation which
is not itself in the banking business
yet practically owns and controls scores
or thousands of banks. Thus the presi-
dent, chairman or directors of Della
ware holding company may control the
business life of a California city. a
Minnesota village or a farming COM
munity in Georgia. The depositors and
customers of the Minnesota bank may
not even know that control of their"
bank is vested in a few men In New
York City or Chicago; yet, as a matter
of fact, the local officers of the bank
are mere employees, subject to the will
and direction Of men, great f1nancierS,
whom they have never even seen.
What have described Is condition,
not theory.
Control Of 800 Banks.
There is already in existence. for
instance, a single banking group, or
holding corporation, controlling nearly
300 banks. 1t represents concentra-
e
than $2,500,000,000 of resources. An
other holding company controls nearly
100 banks, with assets of about $780,
| 900 900. 1t dominates the banking Of
large group Of States. There are
various other groups Of this nature
all tending to GENERALIZATION, perhaps
monopolization Of the banking facilities
Of our people.
These banking groups are prosperous;
they bring efncient management to even
small town links in their chain; they
produce profits for the owners of hold
| ing-company stock. Whether they are
beneficial to the communities in which
| their banks are located, whether they
represent an element of grave danger
| to our whole economic life, are QueS-
lions to be determined by the study
my committee now has under way.
| Certainly there would seem to be danger
| In permitting such a concentration OF
banking control and resources as would
eventually give half dozen men COM
plete unrestrained domination Of the
credit and money of all America. Yet
that might come to pass II present
tendencies ere followed to their logical
conclusion.
Where there were five banks once,
there now may be but one, under con-
troll of a holding company board OF
directors in another State. Where there
were a dozen banks, there may now be
but four, under control of two great
holding companies. Conceivably, there
NAV be some understanding between the
heads of these holding companies so
that in not only one, but many COM
munities, there virtually Will be no
competition whatever in the banging
business. Certainly there could be no
private monopoly more dangerous, more
disastrous, than a monopoly OF money
and credit. The business OF banking
has been a competitive commercial en-.
terpriSe, like any other business which
makes a profit through the redition OF
service to the public. 1t should con-
tinue to be such.
There are other dangers, besides pos
sible monopolization, in chain ana
group banking. The controller OF the
currency of the United States, who has
supervisory charge OF the national panK
examiners, recently said:
Conditions Much Obscured.
"Where a group is composed of both
State and national banks, as well as
of other types OF dnanclal nstitutloEs,
it becomes practically impossible 1or
any supervising governmental ofnc1al
to ascertain authoritatively and &C
curately the financial condition OF the
group as a whole"
Thus, eventually, a whole chain OF
banks, operating in hundreds OF COM
munities, in dozens of States, may fail
through the mismanagement, poor
Judgment or dishonesty Of few men
in control of a bank stock holding
company. The result would be a ma
tional catastrophe. 1t may be said. In
defense Of the group or chain banking
system, that good results flow to all
parts of the system from etnclent
SUPERINTENDENT at the center. But
1t should not be forgotten that there
Is no guaranty of continuing honest,
intelligent, public-spirited management
in the center of such system. Dire,
evil results can flow from selfish, mer-
cenary, plutocratic management.
Despite the fact that every intelligent
person realizes that the prosperity of
America can be maintained and broad
ened only as the roots of that pros
perity, In the thousands of small towns
and on the hundreds of thousands OF
farms, are amply sustained, the whole
present trend Is to cut of those roots.
Even mems contemplation Of death
produces a form of Capitalization of
the country'S funds. Into New York
city flows billions Of dollars of insurance
premiums, garnered from every part OF
the country. Only few weeks ago
another New York insurance company
passed the billion-dollar point in the
amount Of its resources. It alone has
more than $500,000000 invested in
stocks and bonds Another New York
country, has more than $500, 600, 600 in
vested in stocks and bonds under the
direction Of few men in the financial
centers Of America.
Centralizing of Money.
Chain store systems, giant manufac-
turing, power and other business con-
solidations tend toward a centralized
money and credit control. Already
these presses have brought to the
Federal Reserve Bank of New York q
gold reserve Of approximately $780,.
100000. This Is nearly one-third of
the gold held by all IL Reserve banks
combined. Under the control of this
single bank is one-twelfth of all the
monetary gold in the world.
Such resources, so controlled, are
often poured into questionable specu-
lative foreign nvestments-while our
own people are made to pay unreaSon-
ably high rates Of interest or denied
loans that would contribute to the up
building Of American agriculture and
industry. It is proposed, for instance,
to use Americas funds to finance Ger
many's reparations payment to her for
mer foes; to foist upon the American
public billions of dollars of questionable
foreign securitieS-so that Europe's cur