Evening star., 1932-06-19
GLASS BANK BILL
ANALYSIS IS MADE
AT D. c. CONCLAvE
Federal Aid to Dep0sitors
Will Not Prevent Losses,
Lawyer Says.
LAUDS BRANCH AND GROUP
PROVISIONS IN MEASURE
Removal of Officials Disregarding
Sound Financial Practices Is Also
Held Wise Step.
BY EDWARD c. STONE.


In comprehensive discussion of the
merits and dement's Of the Glass bank
ing bill which he believes will be en-
acted into law in the not distant future,
Charles w. Collins, authority on bank
ing law. pictured before the District
Bankers Association at Hot Springs
seven fundamental principles contained
in the bill, as follows:
Cd The control by the Federal Re-
serve system of the use Of Federal
Reserve funds with respect to specula-
tion in securities.
90 The intensification of control of
the Federal Reserve Board over Federal
Reserve operations
go The protection of commercial
banks from the undue influence of cor
porations engaged in buying and sell
ing securities
'4 Supervision and regulation of
group banking through the mechanism
OF the voting permit.
90 A further extension Of branch
banking BY national banks
t6) general Tightening Of bank
supervision by the Federal authorities.
90 The creation of Federal
liquidating corporation to aid depositors
in closed banks
Powers to Halt Speculation.
Mr.. Collins analyzed every one Of
these seven points in highly informa-
tive manner. Giving the Federal Re-
serve Board power to suspend a men,
ber bank from further use of Federal
Reserve facilities. If it is found that
such bank is making undue use of bank
credit to finance speculation in secur-
tiles. is clarification of authority al
ready granted the board, he said. The
other leading Reserve Board feature
relates to closer open market super
vision of open market transactions and
recognition of the responsibility of the
board in negotiations with foreign
bankers on central banking policies.
Mr.. Collins then turned to the subject
of security afiliates which certain
metropolitan banks seek to amend. This
has been one of the most controversial
points in the bill. 1t is not of great in
terest locally. as no Washington banks
have any affiliateS and take no part in
the marketing of vast new security
issues. Turning to the vitally important
problems of group and branch banking,
the speaker said, in part:
Rules For Group Banking.
"The next major subject Of legislation
in the bill involves the supervision and
regulation of group banking. I think
it can be fairly said that these provi-
sions are satisfactory to the best type
of group banking in the United States.
Group banking as you know is carried
on through means of holding company
organized under State laws which con-
trols through stock ownership number
Of operating banks.
Since these holding companies are
not under the jurisdiction of the
Federal Government supervision over
them had to be attained through the
channel of the national bank act and
the Federal Reserve act by means of the
device of a voting permit. Under the
bill the permit must be issued by the
Federal Reserve Board. but as a condi-
ton precedent the holding company
must meet certain requirements set up
in the bill
Briefly stated these are first. submits
sion to examination by the Federal ex-
aminers; second, the publication of re-
ports of their financial condition as re-
Quired; third the establishment Of a
liquid reserve against shareholders
liability, and fourth, there is vested in
the Federal Reserve Board the power
to revoke any such permit for violation
of the terms of the permit.
Public Interest in Branches.
I'VE come next to the question of
branch banking, which has been for a
number of years subject of acute in
terest in the banking fraternity. 1t
seems to me it has been unfortunate
that the discussion Of it has been con-
fined almost entirely to bankers because
il is not primarily banking question,
but one Of general public interest, in
which business men and the depositors
generally have as much interest as the
bankers.
The Glass bill however. makes no
radical departure i'll branch banking.
The bill as now before the Senate
authorizes national banks under strict
Government control to establish
branches potentially to the extent Of
State boundary lines and so miles be-
yond in certain cases Of close proximity
of the parent bank to State line
Senator Glass indicated on the floor
of the Senate that he was willing to
favor an amendment withdrawing the
authorization for crossing State lines
thus leaving the strictly Statewide
feature.
Would Remove Unsound Bankers.
Fer long time there has been un-
Ger consideration a proposal to confer
upon the Federal authorities the power
to remove from office habitual Offend
ers of the banking laws and Of sound
banking practices. Several controllers
Of the currency have recommended such
a procedure and the proposition was
strongly supported before the subcom-
mittee which drafted the Glass BILL
This section is operative with re-
spect to all banks doing business in the
District Of Columbia and all member
banks of the Federal Rererve System.
This section appears to have the ap-
proval of bankers generally as vel! as
of Government officials.
Public Must Stand Losses.
The bill contains an emergency
feature designed to benefit depositors
in closed banks. This is the Federal
Liquidating Corporation. 1t may be
briefly described as an instrumentality
to hasten the dividends of depositors
IN closed banks upon their proven
claims.
From a public standpoint there is
some danger that the benefits of this
provision Of the Glass bill will be un-
duly emphasized particularly since it
The danger of this over emphasis is in
part due to the introduction of two
bills designed for a similar purpose but
each bearing the name of "Depositors
Relief Bill" The public should clearly
understand that neither of these bills
nor the provision Of the Glass bill pro-
viding for liquidating corporation is
designed to pay any losses which de-
positors may have suffered through the
Insolvency Of banks, national or State.
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