Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-04-20
BY BENJAMIN HAGGOTT
BECKHART,

Assistant Professor Of Banking at Columbia
University.
A S abhorrent as the thought of
" branch banking is to many
~ legislators and bankers, as
4 4 radical departure as its adop-
ton seems, the fact is frequently
lost sight of that at the time of the
establishment of the Union, branch
banking was sponsored by the fathers
of the country. The first bank of the
United States, incorporated by an act
approved by the fathers" had as many
as eight branches, radiating from the
head Office in Philadelphia.
Even those who later opposed the act
on the ground that it was unconstitu-
tional did not oppose the branch bank
ing provisions per sc or claim that these
were "un-American"- statement fire.
quently used by opponents of branch
banking at the present time. PreSum-
ably the fathers" would know what
was and what was not an "un-Ameri-
can" concept.
The second bank of the United States,
organized in 1916, with its head office
also in Philadelphia had at one time
or another as many as ~ branches,
located in such commercially important
but remote centers as New Orleans and
Portland, Me. In point of travelling
time these were farther apart then
than New York and Toxic are at the
present time.
Not only did these two banks estab-
lished by Federal law have a Nation
wide network of branches, but many
Of the banks chartered by special State
enactment, such as the Bank of the
State of Indiana and the Bank of Mis-
souri,, had branches within their re-
spective States. The tendency before
the Civil War was quite definitely in the
direction OF branch banking.
National Bank Act Quoted.
The national bank act, as passed
originally in 1868, the so-called "Sher-
man act" provided that the business
of the banks should be transacted at
banking Offices located at the places
specified in the certificate of association.
The plural was used, and it was the evil
dent intent of the trainers of the act
that national banks should be possessed
Of branches. After years experiment
with the new system the controller of
the currency, Hugh McCulloch, who
had been head of the Bank of the
State of Indiana, branch system, sug-
gested a number of alterations, with
the result that the act was completely
rewritten and repassed. In the revised
act the singular of the word Office
was used. This was probably an mad
vertence, since no mention or advocacy
Of such change is to be found in the
debates in Congress on the measure or
in the recommendations set forth by
Mr.. McCulloch.
The tendency toward branch banking
which was so evident before the Civil
| War was thereby checked. Owing to
the heavy tax imposed on their note
issue privileges the State branch bank
ing systems found 1t more profitable to
surrender their State charters and the
various branches entered the national
banking system as unit banks. The
arresting Of branch banking and the
consequent establishment of the indie
pendent unit type of banking system
| impeded the free flow of funds from
section to section and occasioned the
necessity for the Federal Reserve Banks,
which are themselves allowed to estab-
lish branches and have as many as Is
through the United States.
Law Is LIberaIized.
On many occasions, by amendments
to the act and by administrative rul-
ings, the national bank act has been
liberalized in the direction of granting
national banks greater freedom in the
matter of establishing branches. The
first of the amendments was adopted In
/ 1855 and the latest were incorporated
in the McFadden act in 1927. AS the
the national banking system, or State
may retain such branches as were In