Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-05-05
ICOMpR Extensive PLANS MADE
FOR RETIREMENT OF BANKING
National Association Economic Policy
Commission Presents Second
Section of It's Report.
Special Dispatch TO The star.

Special Dispatch TO The star.
NEW YORK, May S.-A compre-
hensive program for banking better
ment both by management reforms
from within and legislative and SUI
peryisory measures from without, Is
presented in the second section Of the
report of the American Bankers AS
Sociation's Economic Policy Commas
sion, made public here by the chair
man, r. S. Hecht, president Hoernia
Bank q Trust Co., New Orleans.
The Nation Is now IN the e, bottom tom
business cycle" the report says.
"Sooner or later q new period OF ex-
pansion and prosperity will develop.
we have before us the fresh lessons
Of the mistakes and Encouragement
that brought the last period Of pros
perity to an end In one Of the greatest
economic disasters of the country s
history. Banking cannot adopt a
pharisaical attitude ana say that we
did not sin, as other business oo,
against sound economic principles.
banking also made its mistakes. The
first step in creating q period OF pros
perity, aounder and more enduring than
the laSt-one that will use the vast intel
lectual resources and the full potential
tiles of business leadership OF the coun-
try, as we'll as its physical resources in
the construction of the next business
cycle along more rational lines-iS to
recognize and correct the errors OF the
past. Although we are thus willing to
confess the errors Of banking. we do
not believe that their correction calls
for drastic legislative measures or for
any revolutionary changes In banking
practice.
Summary Of Improvements.
under the latter category of i'm
proved bank management specific i'm
proyements we might summarize in
this field are liquidation by consohda-
ton Of banks where changed local eco
nomic conditions render this desirable;
wider afiliation among State banks with
the Federal Reserve System; develop
ment of limited branch banking where
economic conditions and legal authority
make this expedient; more general
practice, especially lacking among coun-
try banks, to analySe the cost Of carry
ing accounts and other operating de-
tails and the establishment of proper
service charges to make all classes OF
function profitable; more general ap-
plication of the theory and practice OF
secondary reserves; avoidance by banks
of undue borrowing merely to increase
their own profits by relending at higher
rates or to overexpand credit to local
business in order to increase their own
business: cooperation among bankers
in local communities through city,
county or regional clearing houses, so
as to promote mutually beneficial con-
ditionS and practices; inslStence upon
higher educational effort and qualihca-
tons among employees, especially those
to be trusted with executive duties.
These are some of the major internal
lines in which there has doubtless been
banking weakness in the past OF general
factor in the business. There are some
external measures along moderate leg1S-
lative and supervisory lines that we also
believe would help strengthen banking.
Among these are broadening in the
States of branch banking laws where
conditions warrant an extension OF this
type of banking service to the public;
establishment Of sound minimum capital
funds under which banks will be allowed
to operate, which should be materially
higher than now prevails in most States
specifically, the minimum capital with
which any new bank shall be chartered,
whether state or national, should be at
least $4,000; provision Of funds ana
regulations to keep the oficial STATS OF
all bank supervisory departments up to
a level of ability and integrity which
will universally inspire confidence among
bankers whose activities they are en-
powered to review and supply real added
defenses to the public interests they are
appointed to protect
I'm connection with the policies OF
bank chartering departments, we rec
ommend that, even to a greater extent
than is now the practice, the greatest
care and moderation be exercised In
granting new charters, so as to guard
against banking or the launching
of new banks by unqualified persons,
which have doubtless been serious fac
tors in the bank failure situation In
the past.
Should Examine Banks Freely.
ALSO, referring to Federal Reserve
practice not requiring legislation, we
believe that the Federal Reserve Banks
should exercise more freely their rights
to examine banks, and use their dis
cretionary power to refuse redlScount
facilities to banks INDUCING In ob1ec-
tionable banking methods.
I'VE emphasize that the bank success
history under the difdcult conditions OF
the past year was far more impressive
than the bank failure history. Although
l,345 banks suspended, with deposits of
1855 ,000, 900, the far greater number OF
23,285, with aggregate deposits OF $64,-
AIS 900 900, were not involved and con-
tinued to render safe, efncient services
to their depositorS and their communi-
ties. In other words, nearly 80 per
cent of the banks and more than SO
Der cent of the deposits were not in
volved in the bank failure episode OF
$780,"
Nevertheless, the commission declares,
there Is a serious problem that organ
lied banking must meet, and the asso-
citation Is devoting great deal OF time
and energy to it, and Is making dennite
progress II progress has seemed slow,
it says, reforms in q business OF the
size, long established methods and FAR
scattered distribution of banking cannot
be brought about overnight, and the
association Is made up Of great diver
sity of bankers with differing viewpoints
and interests, so that 1t is Impossible
to strike of, out of hand, q rigid state
ment Of reforms or remedies that Will
win the approval Of the whole or
great majority. The action Of the 1880
convention, recognizing the necessity OF
moving our position on branch banking
a step forward, in keeping with chang
ing conditions. and the earnestneSs with
which bankers are cooperating in de-
veloping a universal improvement in
bank management. guarantees that
bankers are determined to do all hui
CFTnTH AIn d.