Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-12-27
Investigating Bank Failures.

Announcement that a special sub
committee of the Senate Committee on
Banking and Currency, under the
Craftsmanship of Senator Glass Of Viz
ginia, will proceed to an investigation
of bank failures and suspensions will
not evoke much enthusiasm from those
who believe that only harm can result
from rocking boat that is already re-
ceiving enough buffeting from the nat
ural storm of depression.
But many others will take the view
that the worst can be no worse; that
with the suspension of 9Sl banks be-
tween January and December l of
this year, among them Ill National
banks and eighteen State institutions
affiliated with the Federal Reserve Sys-
TEN. only good can come from de-
termined effort to place finger on the
trouble and seek remedy.
The isolation of contributing causes
may not be difficult, although there OBJ
viously would be many. In widely sep
arate communities some of the bank
failures have been attributed to such
natural conditions as excessive ipfia-
ton of real estate. In others the
drought and failure of farm crops have
produced simple explanations. In
others poor management and the nat
ural tendency in times of prosperity to
take chance on. paper that has de-
preciated with hard times can be
blamed. Whether these and other
causative factors lend themselves to
legislative corrections remains to be
seen. Such proposals as the further
broadening of the provisions of the
McFadden banking act will, of course,
receive consideration
The popular question in connection
with the rising tide of bank suspensions,
however, relates to, the adequacy of the
systems of bank examinations. and how
banking institutions, subjected to sup
posedly rigid supervision at all times,
find themselves going down under the
unusual stresses and strains of period
of depression such as now exists. The
purpose Of bank examinations, of course,
is theoretically to prevent that very
thing. Without speculation as to wheth-
er any laxity has developed in this con-
nection. the Senate subcommittee will
naturally make it one Of It's first tasks
to find out.
The bank suspensions during the
fiscal year 1881, which ends next July,
promise to exceed the high mark set
in the fiscal year 1924, when 915 banks
went under. The next highest mark
was reached in the fiscal year 1927, with
S31. The present condition, of course,
is relatively serious. But there has
been rather steady increase of failures
since the fiscal year 1921, with the
number Of suspensions gradually rising
through d series Of ups and downs The
number dropped, for instance, from S31
in 1927 to 484 in 1928, rose to 551 in
1929, and while the figure for 1880 is
not available, the failure of 81 National
banks in that period will probably bring
the total of State and private institu-
tons slightly above the number for
1929.
Mr.. Glass subcommittee has been
given plenty of range. The resolution
authorizing the inquiry provides for
an investigation of the Federal Re-
serve System "and all related matters"
The majority of bank failures, of
course, have been among State insti-
and subject only to State supervision
Some OF them, however, are members
OF the Federal Reserve System, and
National banks are among those that
have become insolyent. A constructive
approach to the problem should bring
valuable suggestions to the committee
Of inquiry which may find practical
application.
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