The midland journal. (Rising Sun, Md.) 1885-1947, 1931-07-10
DUAL BANK SYSTEM
FAVORED BY BANKER
State and National Institutions
Supplement Each Other in
Serving Country's Varied
Financial Needs

M In the United States be under Te.
eral jurisdiction, doing away with the
chartering Of banks by the various
states recalls the opposition to this
plan presented at the recent conven-
ton of the American Bankers Associa.
ton by r. s. Hecht Of New Orleans,
Chairman Of its Economic Policy Com
mission. Mr.. Hecht said:
There are just as good reasons why
there should be state as well as ma.
tional banks, as that there should be
state as well as a national government.
do not think that analogy is far
fetched. The states should not sur.
render all political jurisdiction to the
central government, and the local bust
ness life of the states should not be
made to surrender all control over
financial functions to national financial
instrumentalities. There are many va.
riations OF business conditions from
state to state and there are special
fiscal requirements Of the various
states.
SIT is entirely logical, therefore, that
the states should retain the right to
charter banks so as to mold and direct
their affairs in accordance with the
states governmental and business re-
quirements and keep them adapted to
localized sentiment and conditions.
"The argument is sometimes ad-
vaneed that the dual system jeop-
ardizes the life Of the Federal Reserve
System because under it there Is q
large group Of banks that are free to
remain out of or to withdraw from
the system. Facts and figures prove
that this is a specious argument.
"It is true that there has been some
shifting from national to state char
tiers especially In cases Of mergers OF
large national banks with banks op-
Grating under state charters. However,
the Federal Reserve System was not
weakened in this process because the
merged institutions almost universally
retained their membership In the sys-
tenn on q voluntary basis. Moreover,
the records show that state bank men,
bers 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 66
per cent of the resources of reserve
members, and state banks about IS per
cent, while in 1929, the nationals held
only so per cent and state banks 40
per cent.
Banking Systems Help Each Other
"Reciprocally the state and national
banks systems have helped each other.
II the national banking law has served
In some respects as something of
model code toward which state bank.
ing laws more and more have ap.
preached year by year, 30 have the
state codes developed valuable reforms
which have suggested improvements
for the national laws. A great many
undesirable competitive inequalities
have been wiped out by this mutual
evolutionary process and further prog
ress along the line of uniformity so far
as is desirable is anticipated.
However, do not believe that 1t is
Q disadvantage to have two banking
codes that differ in some respects. 1t
Is quite probable that the state bank
ing code in many instances represents
o closer adjustment to local conditions
than could be had under the national
banking laws, and this is q situation
that should be retained. There should,
however, not be competition between
the two banking codes. Competition
should be between banks themselves
and not between the laws under which
they operate. The effort to offer too
great allurements in one code as
against the other could lead only to
weak banking laws. But I do think
that there should be the alternative
opportunities that now exist which
banking institutions and local business
interests may choose, so that they can
] function or conduct their business re-
lationships under that banking code
which best meets the conditions of the
b4uCS duu VI tuC pl&Co nS tnSy see LuSlus
"This has been illustrated in both
directions. In states where such un.
sound measures as the guarantee of
deposits were operative state banks
had the opportunity to escape the bale
full effect of such laws. On the other
hand, when a court decision was
handed down in Worcester, Massa-
chusetts, which rendered uncertain the
position of trust assets acquired by q
national bank through merger with
o state bank, 1t was q real advantage
for national banks affected to take out
and operate under q state charter,
either on a temporary or Q permanent
basis, as circumstances make expedi-
emit.
"In my opinion. bankers, national az
well as state. should combat the
thought that conceives OF depriving
US of the vitalizing benefits Of our dual
system"