The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1930-04-23
Group Banking Up Again

Group Banking Up Again
Group banking in a way has come about by growth and
evolution and as a natural development Of a situation
demanding mutual security and financial cooperation.
It rather ~justifics itself by the very fact Of its existence.
It OVERRIDE no economic laws In its birth. It admittedly
Is serviceable, has in itself the elements Of protection and
by its magnitude is fitted to operate on a regional scale
as well as continue community activities.
The only arguments against it are fear that it may
develope abuses, on the ground that in vast power there
is tendency to tyrannise and to arrogate privileges not
for the common welfare but for selfish ends.
There i.as. therefore, been criticism that the new bank
Ing Is "un-American," as though big things were contrary
to the spirit Of this nation and this people, or as II fed
GRAFTON Of units into the unity of many in one also were
q hcresy Of Americanism. The opposite is, of course, the
truth Of the matter. Group banking has American pre-
cedent in the very formation Of the union, In the vast
ness Of It's territory and the numbers Of its people and
In the gigantic enterprises, especially Of industry, on
every side.
The case of group banking was argued last week before
the house banking committee by the heads Of the two
great Northwestern finance gripus Of recent formation,
Lyman E. Wakefield, Of Minneapolis, speaking for the
First Bank Stock corporation and Z. w. Decker, head Of
the Northwest Incorporation, for that Organizations
view Of its soundness In an economic sense.
IL USlCISC ny CIlCS UCU vCd4SO W1ldL VAlCIc -
a tendency to forget, now that q formerly acute condi-
ton has passed from the situation. and this is the lesson
of ten years-1e2o- 1929-inw which 1917 banks In the ninth
federal district Of the Northwest closed and l~iquidated
with losses to more than 100000 depositors-obviously q
symptom Of ~faultiness with q banking system Is then
existed, If only from its Siameseltke connection with an
unsafe economic system, In this case the shot gun and
horseback style Of agriculture which prevailed in the
frontier Northwest and weakened the whole structure Of
its finance and industry.
The Northwest has been described rs having too many
banks and still being under-banked in the period Of stress
between 1920 and 1929. The drouth years and the de-
flation period that Immediately followed proved too great
q strain for the financial fabric to uphold. There had
been too great an initiation Of land values. which had led
to overissue Of loans. These became the frozen assets
which benumbed many struggling rural banks and then
~paralysed and destroyed them. The suffering entailed
on farmers by this situation is so recent that it should
not be necessary to review 1t.
Out Of this condition Of stress the group bank system
has been evolved. providing for the communities covered
the most beneficial features Of branch banking without
imposing the faults and disadvantages. Branch banking
implies central control-control outside Of many Of the
communities served. Group banking preserves the bene-
fits of local control and provides regional unity, the two
insuring greater security to d~epoeitoes while assuring
borrowers increased fuidity and f~lexibility Of credit.
Both security and credit can be shifted like troops on q
UdtG6 1IO0ts ~ SuppAAcu WHcIc tIE OecO u ClC0e1 is
most essential.
MI. wakefield in arguing the group system As justified
said that lin adopting the group plan we Get up the only
machinery that was available to us. Critics have alleged
that it is but an evasion Of the ban on branch banking.
It is probably true that branch banking might be more
economical in some instances. Our operations to date
have shown that there is . size Of community which is
too small to justify the maintenance Of = separately cap
ttalised and corporately stated bank OF its own and
which the group cannot enter with : unit bank. On the
other hand, those towns want some form Of banking con-
venience. A branch Of . larger bank with perhaps .
single officer In charge could take care Of them, while
the larger central bank would provide greater security
and better service than the small Independent unit"
Group banking, therefore, is to be accepted for the
present as q healthy Development Of finance and credit
with promise Of benefit penetrating to every corner.
With arrangements left locally in home hands It ought
to thrive without abuse. It Is not essentially centralized
finance. that bogy Of this country from the time Of An
drew Jackson. Anyhow It can be tested and tudged by
results, and there is hardly any doubt that these results
viii be the product Of integrity in unit management
teaming with regional administrative wisdom.
Probably radio fans will consent to the proposed world
radio trust II 1t will only do something about the static.