Nogales international., 1931-04-01
DUAL BANK SYSTEM
FAVORED BY BANKER
State and National Institu-
tions Supplement E a c h
Other in Serving Finan-
ciaI Needs

N banks in the United States be
under Federal jurisdiction, doing
away with the chartering of banks
by the various states recalls the
opposition to this plan presented
at the recent convention Of the
American Bankers Association by
R. s. Hecht Of New Orleans, Chair
| man of it's Economic Policy Com
mission. Mr.. Hecht said:
There are just as good reasons
WHY there should be state as well
as national banks, as that there
should be state as we'll as a ma
tional government. l do not think
that analogy is far-fetched. The
states should not surrender all po-
litical jurisdiction to the central
government, and the local business
life Of the states should not be
made to surrender all control over
financial functions to national IL
nancial instrumentalities. There
are many variations of business
conditions from state to state and
there are special fiscal require
ments of the various states.
st is entirely logical. therefore,
that the states should retain the
right to charter banks so as to
mold and direct their affairs in ac-
cordance with the states govern
mental and buciness requirements
and keep them adapted to local
lied sentiment and conditions.
Federal Reserve System
"The argument is sometimes ad-
vanced that the dual system jeop-
ardizes the life of the Federal Re-
serve System because under it
there is a large group O. banks
that are free to remain out OF OF
to withdraw from the system. Facts
and figures prove that this is a
specious argument.
1T is true that there has been
some shifting from national to state
charters especially in cases OF
mergers of large national banks
with banks operating under state
charters. However, the Federal
Reserve System was not weakened
in this process because the merged
institutions almost universally re-
tanned their membership in the sys-
TEN on q voluntary basis. More
over, the records show that state
bank members are just as good
members of the system as national
banks and the ratio of state bank
resources in the Federal Reserve
System is constantly growing. In
1922, national banks held about 60
per cent, Of the resources of re-
serve members and state banks
about 35 per cent, while in 1929,
the nationals held only 60 per cent
and state banks 40 per cent.
"Reciprocally the state and ma
tional banks systems have helped
each other. If the national bank
ing law has served in some respects
as something of model code to-
ward which state banking laws
more and more have approached
year by year, so have the state
codes developed valuable reforms
which have suggested improve
1oofi0no1 1oWc
great many undesirable competi-
tive inequalities have been wiped
out by this mutual evolutionary
process and further progress along
the line of uniformity so far as
is desirable is anticipated.
Two Systems Desirable
"However, 1 do not believe that
it is a disadvantage to have two
banking codes that differ in some
respects. 1t is quite probable that
the state banking code in many III
stances represents a closer ADJUST
ment to local conditions than could
be had under the national banking
laws, and this is situation that
should be retained. There should,
however, not be competition be-
tween the two banking codes. Com
petition should be between banks
themselves and not between the
laws under which they operate.
The effort to offer too great allure
ments in one code as against the
other could lead only to weak bank
ing laws. But | do think that there
should be the alternative Opportun'
tiles that now exist which banking
institutions and local business in
/ terests may choose, so that they
can function or conduct their busi-
! ness relationships under that bank
ing code which best meets the
conditions of the times and of the
place as they see them.
This has been illustrated in
both directions. In states where
such unsound measures as the
guarantee of deposits were opera
tive state banks had the oppor-
tunity to escape the baleful effect
of such laws. On the other hand,
when a court decision was handed
down in Worcester, Massachusetts,
which rendered uncertain the posi-
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