Evening star., 1932-04-26
WALCOTT PRAISES
GLASS BANK BILL
Senator Predicts improved
Conditions as Result
in Radio Forum.

Improvement in banking and credit
conditions, reduction in the number 'ol
bank failures and tendency towarc
greater sterilization 'in the country's
entire economic life" were visioned as
results to be expected from passage Of
the Glass bank bill by Senator Walcott
Republican, of Connecticut, speaking
last night in the National Radio Forum
arranged by The Star and broadcast
over a coast-to-coaSt network OF the
National BroadcaSting Co.
Outlining the provisions of the finan-
cial reforms measure developed after
two years study by a Banking Sub
COMMITTEES of the Senate. headed by
Senator Glass. Democrat, of Virginia
Senator Walcott said that three prin-
ciples are sought to be effected:
First, to improve the actual man.
agement of the banks; second, tc
strengthen the authority of the Federal
Reserve System and, third, to facili-
tate and expedite payment to depoS-
itors at banks that are closed or Will
close in the future.
Among the regulatory provisions OF
the measure, which has been intro
duced into the Senate, is that curbing
use of bank funds for speculation.
Banking Reform Needed.
Senator Walcott's address follows:
Need for banking reform, which
may have been of interest to
only a small number of people
until recently, has been brought
home to the entire country so forcloly
in the last two years that no argument
is required to prove it. 1t is universally
~ hn
needs of the country. This recognition
has come not only from the fact that
during the past decade one-third OF
our banks. or about 10000, have had to
suspend payments and have tied up
several billions of deposits for many
millions of depositors and left many
communities without any banking serv-
ice. 1t has also arisen from the popu-
lar belief, which Is certainly based on
fact, that the banks have played part
in fostering the boom and the wild
speculation which engulfed the entire
country and eliminated in the crash
in the Autumn of 1929, from the effectS
of which we have not yet recovered.
ITO avoid, in SO far as this can be
done through legislative channels, the
recurrence of such events a subcom-
mittee of the Banking and Currency
Committee of the United States Senate,
under the Craftsmanship OF Senator
Carter Glass of Virginia, co-author OF
the Federal Reserve act Of 1913 and a
former Secretary of the Treasury, has
worked for nearly two years, and has
finally introduced a bill that, it is
hoped, will bring about salutary re-
forms in our banking structure. In
drafting this bill the committee has
been handicapped by the fact that the
banks of the country, working as tney
do in part under Federal law and in
part under the laws Of 48 States, have
engaged for years in competition IN
laXity, and that a law applicable only
to national banks or to banks that are
members of the Federal Reserve system
can always be evaded by giving up ma
tional charters or membership in the
Federal Reserve system. Fundamental
banking reforms, therefore, cannot be
accomplished until all the banks in the
country that receive deposits are placed
under uniform national supervision.
But this will take time. In the mean
while much can be accomplished within
the existing conditions greatly to i'm
prove the management OF the banks
and to protect depositors and the coun-
try in general from such misfortunes as
they have suffered from the banks IN
the past 80 months.
'sTo do this the committee proposes
Cd to improve the actual management
of the banks, (2) to strengthen the au-
thority of the Federal Reserve system,
and (3) to facilitate and expedite pay
ments to depositors at banks that are
closed or will close in the future.
Iioujdatinp Corporation,
"To start with the last point, provi-
sion is made in the bill for the estab-
lishment of a Federal hquidating cor
poration, which will make it possible
for depositors of closed banks to receive
part of their deposits much more
promptly than Is possible at present
under a receiver. The Importance OF
this measure to the general public can
not be overestimated. When your bank
closes and you suddenly find that the
money on which you have counted Tor
one purpose or another suddenly be-
comes unavailable, it Is serious matter.
The bill establishes a corporation to
which the United States Treasury, the
Federal Reserve banks and member
banks turn over fund that will enable
the corporation to convert into cash at
least a part of the closed banks good
assets and to turn the funds over to the
depositors. When the assets are finally
liquidated by the sale of investments or
through the collection of loans, the cor
poration will be reimbursed for its out
lay and the remainder will go to the
banks creditors, including its depoSitors.
The corporations money is, therefore,
a revolving fund, and should be avail
able permanently 1t will consist OF
SIPS 100000 from the United States
Treasury, about 65,0o00 900 from the
Reserve banks and about the same
amount from the member banks. In
addition the corporation can issue about
$500 600, 900 Of debentures, so that it
will have ample funds to do the i'm
portant work for which it has been
created. The benefits of this corpora
tion apply only to banks that are men,
bers of the Federal Reserve System.
Non-meT ber banks, however, can OBJ
tain advances from the Reconstruction
Finance Corporation, which has $780,
100000 for that purpose.
I'm order to improve the condition
of member banks the proposed bill pro-
vides certain safeguards about the
character and amount Of investments
the banks can make, limiting the
amounts that they can invest in the
obllgatlonS OF any one company, so that
they may not run the risk of having
all their eggs in one basket or of divert
ing too large proportion of their funds
into enterprises in which directors or
other persons influential in the affairs
of the bank may be interested.
"a great evil that has developed in
the banking system in recent years has
been connected with affiliates, particu-
laTlv SO-called security affiliates rom :
panies organized to sell stocks and
bonds in competition with private in
vestment banking houses. These COM
panies. often owned and managed by
the same people as the banks. are
nevertheless independent corporations
and since they don't receive deposits
zzznEan n