Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-02-04
YOUNG SEES BANK
AMENDMENT NEED
Constitutional Protection for
Public Urged if U. S. Cor
receives Fail.
BY the Associated Press.

| BY the Associated Press
Amendment of the Constitution to
protect the American people from a
recurrence CT present unstable banking
! conditions was held today by Owen D.
| Young, New York financier, to be the
only recourse if it is found the Federal
! Government has no authority" to apply
| corrective measures.
| A requirement that all commercial
deposit banks be members of the Fed
eral Reserve system also was held by
Young to be essential in the develop
| ment of a more sound banking system.
| Testifying before the Senate Banking
Investigating Committee. Young said:
I'VE have seen thousands of bank
| failures, and it is a great reflection on
the American people if they can't get
protection against this condition. And
this is period of prosperity-of dis
turbed economic conditions, true-but
of prosperity.
Amendment as Way Out.
"If it finally is decided that the
Federal Government hasn't authority to
correct this see no way out except
through amendment to the Constitu-
ton.
I'VE should try the first step. and if
found not effective, the second. The
country can't go on this way"
Young said the powers of examiua-
| ton by the Reserve system of all MEM
! bers should be clear and it should have
certain powers to see that banking
practices inimical to the safety of de-
| positors should not be INDUCED in by
member banks
That would mean" he said, that
when the words member of the Fed
! eral Reserve system were put on a
banks window there would be in fact
some such responsibility on the Federal
Reserve system as the public now as
sumes there is
/ AS for savings banks and those for
i the administration of trusts or other
! special time funds, he said these should
/ be State banks outside the national
banking charters.
! Combination Undesirable.
! He held it undesirable to combine
! them in the same institution, because
| any bank having demand deposits can
never invoke a time notice on savings"
IF it does" he added, lit stimulates
Withdrawals Of demand deposits and
postpones the savings deposits, which
are the most sacred of all, to the least
desirable assets of the bank Every
thing will be sold first to meet demand
deposits"
The reserve system, he said also
should have power to examine and dis
cipline all its members
1T should have power" he added, ito
, limit or refuse rediscount, even of
eligible paper, or suspend oth.r priv
! ileges of membership, If the banking
practices of any particular bank were,
in its judgment, unSound. and therefore
| subjected its depoSitorS to unreasonable
risk either as to liquidity or security"
'One of the weaknesses of the system
at present" he continued, "in addition
to the competition between the govern
| mentS for charters, Is the natural hest
| tation of the Federal Reserve banks, in
the absence of clearly expressed powers,
to require the correction of undesirable
practices, within the law, in State banks
particularly lest they withdraw from
/ the system and thereby weaken its re-
sources and general influence"
Californian Testifes.
| Establishment CT a fund in the Fed
eral Treasury for use in paying of de-
| posters in banks which fail was pro-
posed yesterday by Henry M. Robinson
California financier, as means Of
speeding up liquidation OF such institu-
lions
! Robinson, the chairman of the Sc
curity First National Bank OF Los An
! gees, told the Senate Banking Investi-
eating Committee it was terrible" the
| way liquidation of defunct banks was
delayed.
He said he often had wondered" If
fund should not be given the con-
| troller Of the currency to pay depositors
4 up TO the limit of the assets CT the
bank IN difficulty
| While he did not elaborate, it was
| assumed by committee members the
| witness would have the treasury REIN
bursed after liquidation was completed
! Robinson served on President Hooyer's
| National Drought Relief Committee last
year. He was the first Western banker
/ to testify in the banking investigation.
/ The Californian said economic con0i-
/ lions generally were slightly better in
the Pacific Coast region, as compared
/ with the East and other sections He
! added the percentage of banl. failures
( also was lower there, but he did not at
tribute this to better banking.
Uniform CharterIng System.
Robinson opposed adding too many
restrictions in event the National bank
ing laws were changed but said some
notifications might be wise.
It probably would be advisable, he
said, to raise from $4,000 to $50 900
or even 100000 the minimum capital
requirement of a bank applying for q
national charter, 10 discourage opening
of too many small banks, which have
! difficulty in earning a living"
Asked If he would advocate a uni
form chartering system in place of the
existing 40 separate systems in opera
ton throughout the country, Robinson
said anything that reduced the Serious
competition" between State and ma
tional systems would be good"
He agreed with previous witnesses
that the capital gains tax served to
build up artificial values and said he
was favorably impressed with the
trade area" branch banking proposal
of j. w. Pole, controller of the cur
rency, to extend branches from COM
mercial centers to rural communities.