Evening star., 1932-10-29
BANKING SITUATION
GREATLY IMPROVED
Statement of Association
Notes Strengthening of
u. S. Institutions.
Special Dispatch to The Star.

SpeCIaI DlSpatcn 10 The Star.
NEW YORK, October 29.-It will he
cheering news to the countless thou-
sands of depositors in banks that have
suspended. or have gone into 7ay,rf,,0
liquidation in recent years. to learn
from a statement issued Dy the Ameri-
can Bankers Association that "a
stronger banking structure has been do
Veloped through tle elimination Of 'un-
economic units numbering nearly IN
000" ''
1t will also be heartening to stock
holders in this large number of institu-
tlons who have lost all. or nearly all OF
thelr investment to realize that the
process Gf "a Salutary elimination of
undesirable elements" has resulted in
a strengthening of the banks that are
lett and a raising of the now nreyail-
ing standards of character and sound
ness as measured in terms of average
capital, resources. available volume of
business and qualities of management.
Government Reports Watched.
For months emphasis has been placed
IN the reports of the Feueral Reserve
Board and in those given out by ad-
mlnlStratlon representatives in Wash
ngton on the striking decrease since
last Winter in the number of bank clos
hgS. IL had been supposed that the
eholng OF the banking panic and the
caImer attitude Of bank depositors. re-
nected IN the return of boarded money
10 the banks, was one of the mott en-
couraging features Of the current re-
covery. Consequently. it will be a sur
prise TO many to hear that large num-
Der OF the banks that went down in
the financial crash apparently could not
justify their existence and that the en-
tire banking situation is healthier. now
that they have succumbed to economic
pressure and mismanagement. than
when they were regarded as a necessary
and sustaining force in the life Of
hundreds Of cities and small COM
munities
Since 1921. according to the survey
published today by the American Bank
erS' Association. the total number OF
banks in the United States has been
reduced from 10000 to 19,50O. The in
dlVldual tragedies involved in this con-
traction. which have occurred in prac-
tically every State. are apparently not
to be considered when the light of sta
tlStlcal facts is applied to them. 1t is
conceded that the country 10 years ago
was 'overbanked." The average insti-
/, STATES.
the activities of only $500 persons as
the basis of its business. Now. under
the emergency readjustment, the re-
naming 1880 banks have an average
unit OF 5000 persons. 1t is not pre-
sumlng too much to say that there are
many thousands of the depositors of
1921. IS well as of 1881. who TODAY are
OF TO value to the remaining banks. as
they nave not enough left to meet the
minimum deposit requirements of the
average institution.
viii not greatly raise the mental
attltude OF the ruined bank depositor to
learn that, through the elimination of
over 10000 financial institutions in
about 10 years, these readjustments
nave gone far in bringing the banking
plant IN line with sounder relation
snip 10 the actual needs of the country
tnan mas existed in over a decade" Nor
VIII there be much satisfaction in know
ing that "overcOmpetition among too
many banks and dispersion of capital
among too large a number of small.
hlgh cost units have been largely re-
Sponslble in the p3st for unsatisfactory
banking developments.
Abnormal Conditions.
1t would be difficult to disprove the
TACT that, Of the 1926 banks that failed
IN this country in 1880 and 2,290 in
1881, as we'll as about 1000 so far this
year-or nearly half of all of the banks
gong out of business since 1914 ma
lorlty went down under the pressure of
abnormal conditions which did not
spare the strongest. and that in fully rs
per cent of the total of about 300
t3,346) an effort was made by their cor
respondents, by the National Credit Cor
poratlon and by the Reconstruction
finance Corporation to preserve their
integrity in spite of the fact that they
may have been "uneconomic units" in
the banking system.
The transition has brought the aver
age Of bank capital funds up from $685.
600 to S420,000 and has doubled the
deposit average from the earlier figure
of Sl,250.000. Whereas total capital
funds of 10000 banks in 1921 were So
360,000,000. they are today approxi-
mately S8,500 100000. after having been
$4,000, 100000 in 1880. These figures
may again professionally prove the
case for the elimination of over 10000
separate agencies for assisting the busi-
ness life of communities. They are,
however, of but academic interest now
to the dispossessed depositors and stock
holders in majority of the institutions
that have during that period under re-
view come to tragic end.
Copyright. 1927