Evening star., 1932-12-08
GLASS TO CALL UP
BANK REFORM BILL
Virginia Senator Is Awaiting
Disposal of Philippine In
dependence Bill.
(continued From First Page,

(Continued From First Page.)
of the bill which they consider too
drastic. The Glass bill, in addition to
providing for branch banking on q
greater scale, undertakes to prevent
"the undue diversion of funds into
speculative operations" and to do q lot
Of other things, some of which bankers
think tread on their toes too much:
If Senator Glass becomes Secretary
of the Treasury in the Roosevelt CAD
met. as has been predicted IN some
quarters. undoubtedly many OF the prln,
ciples laid down in his pendin2 DILL VIII
be incorporated into the program OF
that administration for banking re-
form. 1t may be impossible TO persuaue
the Virginia Senator to leave the pen,
ate for a cabinet office, which he heid
once before. But whether he goes into
the cabinet or not, undoubtedly ms
voice will be potent one in framing
the program.
Secretary Mills In his annual report
to Congress yesterday urged that ae-
ton be taken to provide the Natlon
with a safer banking system:
At the same time he asked that Con-
oress not extend the provisions OF the
S;lass-Borah amendment to the nome
loan banking law. This permits ma
tional banks to issue currency 1or tnree
wears backed by Government securleles;
THE Secretary said already natlonai
banks had thus expanded their currency
by Sl25 600 900 and they could issue a
total of $500 000, 900 in new notes unoer
the law. .o,-
nomic conditions" the Secretary said'
ssthe power of banks to issue sucn an
amount of additional notes would Sc
riously interfere with the Federal Re
serve SYSTEMS contact with the mar
Ike. and ability to influence creoit con-
The Secretary urged that Congress
consider pending banking leglslation
with view. to prompt lormuta.l1n 1,,u1 lion
remedy the fundamental weakness OF
our banking structure"
Points to Defects.
.The DEVELOPMENTS OF the last dec
ade have uncovered unmistakable de-
fects in the American banking sTuc-
ture," the Secretary said. They con-
stitllte a source of weakness In our eco.
nomic life. and have been an impoftant
factor in the present depression. Tney
call for fundamental reforms.
aThe outstanding facts are as foi-
lows: soa NTH
1920 there was an enormous increase IN
tine number of banks. In 1900 there
were about $4,000; in 1920, over S0,00O.
In 1900 there was one bank Ior eveIy
$500 of the inhabitants OF the Unlteo
states: in 1920 one for every S,ooo: ~.
s.2. This excessive growth IN tne
number of banks was due in part to
our dual system of State and national
hanks. and to laxity resulting
from its competitive feature. There Is
no doubt that both State and national
authorities have In the past granteo
bank charters too freely, condition 10
which the controller of the currency
directed attention as early as 1927. -.
"3. During all of this period unit
banking received every encouragement,
while branch banking was discouraged
and for the most part prohibited
Failed to Meet Test.
a. The banking system OF the
United States as thus developed did
not successfully meet the test OF ad-
have been over 10000 bank failures, or
over one failure for every three active
banks in the country In 1920. These
failures have involved deposits aggfe-
eating nearly SIS ,000, ,000, 900. They
have brought untold hardships to
countless individuals, and have intens1-
fled the economic depression. The con-
troller of the currency has in recent
years repeatedly pointed out weaknesses
In our existing system.
"It is true that during the period In
question the banks have had to strug-
gle with extraordinarily difficult eco
nomic conditions. This was particu-
larly true in the agricultural regions
where sharply reclining prices, ac-
companied by rapid depreciation in
land values succeeded rapid increase
during the years prior to 1920, cfe-
ated unusual difficulties for the farm
ers and the banks that served them.
Various studies that have been made
point to unacceptable conclusions. The
mortality rate is much greater among
small banks than among the banks
with larger resources. The earnings
of most Of the smaller institutions over
the period of the last few years have
been entirely inadequate, making it i'm
possible for them to build up reserves
The cost of operation, and consequently
the cost of the community which II
serves, bears a direct relationship to
tllc biHc VI tIlC DuI1h 4DC 1OooCo oNo
tanned by the smaller institutions have
been relatively greater and it Is un-
questionably true that a great number
of the small banks have been unable
to secure proper management.
Size Not Guarantee.
This does not mean that mere size
will of itself guarantee good banking
or a sound banking structure. These
facts, however, do indicate that the op-
Grafton of vast number of inde-
pendent unit banks under such condi-
tions that it is difficult for them either
properly to diversity their assets, to
make earnings, to procure competent
management, or to command adequate
resources, is a definite source o.
weakness in the American system Of
banking,
Our dual system and the divided
control which exists have tended tt
relaxation in banking law and regu'
lations and to the development of un'
sound practices in the management o.
the banks Moreover, recent events have
disclosed as never before the extent tt
which many banks with deposits pay
able on demand have allowed too largl
a proportion of their assets to becom'
tied up directly or indirectly in capita
commitments. Furthermore, tn somt
instances the functions of commercial
and investment banking have becom
merged under the same management
to such an extent as to present diff
ficult and important problem calling TO