The Ely miner. [volume] (Ely, Minn.) 1895-1986, 1931-04-10
DUAL BANK SYSTEM
FAVORED BY BANKER
State and National Institutions
Supplement- Each Other In
Serving Country's Varied
Financial Needs

y
ersl 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.
I 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.
at 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.
1.-THE argument is sometimes ad
vanced that the dual system jeop-
ardizes the life of the Federal Reserve
System because under it there is a
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.
1T 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 OPP
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 a voluntary basis. Moreover,
the records show that state bank mem
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 So
per cent of the resources of reserve
members, and state banks about 80 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 a
model code toward which state bank
ing laws more and more have ap-
preached year by year. so have the
state codes developed valuable reforms
which have suggested improvements
for the national laws. A great many
undesirable compel tive inequalities
have been wiped cut by this mutual
evolutionary process and further prog
ress along the line of uniformity so far
az is desirable is anticipated.
However, do not believe that 1t Is
o disadvantage to have two banking
codes that differ in some respects. II
Is quite probable that the state bank
ing code in many instances represents
q closer adjustment to local conditions
than could be had under the national
banking laws, and this is a 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 do think
that there should be the alternative
opportunities that now exist which
banking institutions and local business
function or conduct their business re-
lationships under that banking 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 IN
sound measures as the guarantee Of
deposits were operative state banks
had the opportunity to escape the bale
ful effect of such laws. On the other
hand, when court decision was
handed down in Worcester, Massa-
chusetts, which rendered uncertain the
position Of trust assets acquired by .
national bank through merger with
Q state bank, it was real advantage
for national banks affected to take out
and operate under a state charter,
either on a temporary or permanent
basis, as circumstances make expedi-
emit
in my opinion, bankers, national as
well as state, should combat the
thought that conceives of depriving
Us Of the vitalizing benefits of our dual
system"