Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-02-14
Young Reform for Banking
ArOuses National Interest

Possibilities Of improved banking for
the country are seen by some newspa-
perS in the suggestion from owen D.
| Young that commercial transactions be
centralized in the Federal Reserve sys-
| tenn, leaving fiduciary and savings fields
to the State banks. Comments indicate
a belief that uniform standards would
be in the interest of great stability.
There is bound to be controversy
whether the independence Of State
| banking should be destroyed" says the
Hartford Times, but there will be no
| disagreement that safe and conserva-
tive banking should be universally
established by law as far as law can
| operate to such effect. Responsibility
| is on the States to better meet their
| duties in that respect. This is mani
| fest in Connecticut, the Legislature of
| which is now moving to procure refor-
nations in the light of recent deplor-
| able lessons which have exhibited pre-
cisely the evils which Mr.. Young has
emphasized. Other State Legislatures
J may do the same kind of thing if they
will. If it were done the Nations bank
| ing system would be infinitely strength
| ened through removal Of class of COM
! petition which has been injurious to
beth the local and national financial
! structures"
AS to the question of forcing the
/ State banks into the Federal Reserve
| system" the youngstown Vindicator re-
calls that Others who have given their
views had deplored the present compe-
| tition between State and national banks
and the trail Of bank failures which this
/ competition has brought" The Vindi-
I Gator adds: Particularly during the de-
/ preston, five out of every six bank fail
ureS have been Of State banks, to which
| the national, unified control which Mr.
Young advocated does not extend Most
/ Americans will agree with him that it
! certainly is a great reflection on the
| American people that they cannot get
| a banking system in hand which will
! prevent such awful tragedies as we have
| witnessed in the last 10 years."
4
/ A warning that comes from the Rich
! mcnd News Leader is that the proposal
] must not be misread as an argument
/ that all banks outside the Federal Re-
| serve system are unSound" That paper
maintains that honest, intelligent man
| agement and rigid State examination of
banks, under courageous banking laws,
| give ample security to any depositor )"
| The News Leader continues: 1.-The pity
| is that the States which have stiff
| banking acts of their own should fall
into d1scredit because few States are
! shamelessly lax in their requirements
| Better State laws, enacted by the Leg
| islatureS at the demand of the deposi-
tors, and enforced by competent, nom
| partisan officials are almost as good in
surance for the depositor as member
! ship in the Federal Reserve system The
| figures will bear this out In each of
| q of the 43 States, less than 10 banks
| failed during the critical year $780, and
| n 10
| only one, at most, was forced to suS-
pend. On the other hand, in Illinois,
% banks associated with the Federal
Reserve system (so-called member
banks) had to close their doors last
year. In Iowa and in Arkansas the
number of closing member banks was Is
each, and in Texas it was IT, In the
country as q whole. non-member
banks suspended for every member
bank, but the total deposits of the sus-
pending non-member banks were only
80 per cent greater than those of the
suspending member banks. Of the
l,l38 non-member banks that closed
temporarily or permanently in 1880, a
total Of 625, or more than half the
whole, were located in the six States of
Arkansas, Illinois, Indiana, Iowa, Mis-
souri, and North Carolina"
1T may be argued" comments the
| G1dLA1 OGd1CI, JI1dG 1OuIlR 3
program of bank reorganization is I'M
necessarily radical; that other restric-
tons and regulations may be imposed
that will adequately protect the bank
depositor. But anything short of a
complete unification of our banking re-
sources in the Federal Reserve will leave
the banking system still considerably
short OF its greatest potential strength.
As long as banks in the same COM
nunity are subject to different codes of
regulation the process Of parrying for
advantages which has been under way
ever since the National Banking act was
passed will continue. And every time
the bars are let down either by the
Federal Government or by any one of
the States in order to make competitive
conditions more favorable, the oppor-
tunity of deviating from sound banking
practice will be broadened. After the
events Of the last HeaE On 90 ne naaN