Evening star., 1932-09-10
UNITY IN BANKING
FIELD PROMOTED
Action of Chicago Institution
Held Argument for Gen.
trail System.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, September 10.-The an
| nouncement that the Continental Illi-
nois Bank & Trust Co. of Chicago is to
be 'nationalized" is the greatest gain
to the Federal Reserve System that has
been accomplished in years. 1t brings
into the national banking system one
of the country's largest institutions,
whose prestige may be expected to react
favorably on non-member banks that
have been impressed by the splendid
functioning of the Federal Reserve in
! the II districts Of the United States
| during the banking crisis of the past
| two years.
There is considerable significance In
! the fact that Of 3,643 banks that sus-
| pended in 1880 and in 1881 nearly 5000,
or about 80 per cent of the total were
| not members of the Federal Reserve
| System. To date this year there have
been about 1000 suspensions, of which
rs per cent were among non-member
| banks.
See Unified System.
The step taken by the Continental
| Illinois Bank g. Trust Co. Is frankly an
admission that the trend of American
| banking Is toward a unified system
closely identified with the Federal Gov
ernment. In fact, the announcement
states that the plan for nationalizing
this bank was suggested by recent leg
islatiVe proposals regarding the bank
| ing system of the United States, all OF
which indicated distinct trend in the
direction of a more unified national
structure, strengthening and controlled
| by the Federal banking authorities.
i The effort was made in Congress last
Winter to include in the Senate banking
| bills section compelling all banks In
the country to enter the Federal Re-
serve System. 1t is highly probable
that another legislative drive in the
same direction will be made in the next
| Congress.
| After the Federal Reserve System was
established numerous banks and trust
companies withdrew from 1t, believing
that under State authority they could
/ operate along more liberal lines. Dur
| ing the last few years there has been
very little increase in Federal Reserve
membership.
Another recent development Of some
| significance is the proposed retirement
of Controller of the Currency John W.
Pole. 1t is understood that friction be-
tween his department and the Federal
| Reserve Board has been steadily IN
creasing and that wide differences OF
opinion have prevailed between the
two, especially in the past year In the
matter of adjustments in the bond ac-
counts of the national banks. In this
| the Federal Reserve Board has shown
more sympathy for its members than
has been credited to the controllers
department. In some instances there
| has been wide variation in recon-
mendations as to policy respecting bonds
> that have suffered severe deprecia-
ton. In the light of subsequent mar
ket events, the judgment Of the Federal
Reserve authorities appears to have
been wiser in specific instances than
that Of the department dealing directly
| with bank examinations.
The next call for the condition OF
| banks is expected to be made in about
| three weeks. The situation now differs
| greatly from that when the last reports
were published as of June 80. At that
| time there had been modest improve
| ment in bond values from the low aver
| age at the end of May. This helped
banks then struggling with a deprecia-
ton item that seriously involved their
surplus and capital accounts.
Rise in Junior Rails.
During July and August the rapid rise
| in junior railroad mortgages especially
gave much relief to these banks. While
| today many of them still show a sub
stantial paper loss on their investments
compared with cost rrices, the gains
since the end of June, together with
some increase in their deposits, have