Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-01-27
Small Bank Failures
Shown to Be Serious

From the st. Louis Globe-Democrat.
The controller Of the currency, Mr..
]. w. Pole, in his annual report, Just
issued, gives. very serious consideration
to the problem of the country bank.
He calls attention to the fact that in
the past nine years approximately 5000
banks, nearly all in agricultural COM
munities, have closed their doors, while
there have been no important failures
among banks in the larger cities. In
States, he says, over 40 per cent Of
all the banks in existence In 1920 have
failed, and in 6 States between IS and
40 per cent, while there has been loss
of over 10 per cent in 26 States, more
than half of the total number.
That many country banks have been
unable to weather the difficult condi-
tions Of these years Is well known. The
mortality in Missouri has been plainly
evident, and indeed there are only s
States that have suffered as many losses
of this nature as in Missouri, where
GAG banks have failed In the period
indicated, practically all of them being
what the controller classes as country
bankS-Sman banks In small towns serv-
ing agricultural communities. It Is,
therefore, no news that there is q
country bank problem, but the con-
troller's maSsed figures make it more
more acute in some of the agricultural
States Of the Central West, 1t is, in
fact, a Nationwide problem. And it
comes down to this, as Mr.. Pole ex-
presses 1t, that whereas the depositor
In large city bank, whether a wage
Garner or a business man, has had full
protection, the depoSitor in the small
country bank has suffered severely from
the inability Of the banks to meet their
deposit liabilities" That is a disad-
vantage to the smaller, and particular
ly the agricultural, communities that
obviously ought not to exist. But what's
to be done about it?
The idea Of the State guaranteeing
bank deposits had a considerable vogue
some years ago, but it Is fundamentally
unsound, and experience, where 1t has
been tried, has proved 1t to be so. The
remedy would seem to lie in stronger
banking organizations and In the past
year or so there has been, in many
parts of the country, a movement for
combining number Of banks in coun-
try communities into single operating
group under central bank or holding
company. This is q progressive move
nent, but the controller Is of the opinion
that "theSe holding companies are at
tempting to do under the sanction of
existing laws, which are crudely adapted
possible in o simpler manner by new
legislation" and he evidently favors the
specific authorization of branch bank
ing, which, he thinks, would obviate
the need for such combinations of local
groups.
The Federal Government, however,
has Jurisdiction only over banks or
ganized under Federal law, but in view
OF these conditions he recommends an
amendment to the national banking
code permitting national banks Ito es-
tablish branches within the trade areas
OF the cities in which such banks may
be situated" Under such system of
branch banking, he says, there would
gradually be extended to the agricul-
tural communities from the large city
banks safe and sound system of bank
ing which would render remote the
possibility of bank failures" Branch
banking is by no means a new idea. 1t
has been in practice in Europe for
centuries, and there has been consider
able development of 1t in this country
where the law and the circumstances
permit. For some years 1t has been q
subject Of discussion at meetings of
bankers, and there are probably few in
that vocation who do not understand
It's principles at least. Naturally, there
Is opposition to its extension from many
independent banks In the fields It would
penetrate. Whether it Is the best
remedy for the situation we do not pre-
tend to know. 1t Is q matter that doubt
less VIII have full discussion In the
finance committees of Congress II an
amendment in line with the controllers
recommendation Is introduced. But I'M
questionably the farming communities
should be provided with banking
facilities that are safe.