Evening star., 1933-11-29
BANKING REFORMS
URGED BY ALDR|CH
Would Divorce Investment
Branches and Bar Stock
Pool Participation.
By the Associated Press.


Legislative reforms, ranging from
mandatory and complete enforcement Of
investment and commercial banking TO
restrictions forbidding reserve member
bank officers to participate in stock
pools. were recommended today by
Winthrop w. Aldrich, president Of the
Chase National Bank.
Testifying before the Senate Stock
Market Committee as 1t prepared to end
its investigation of his bank, Aldrich
conceded that some "indefensible trans
actions" had marked banking before the
depression. but added:
Bankers have enough to atone for
without being held responsible for orgies
of gambling upon stock or commodity
exchanges or for the rapacity of indi-
viduals who seek to gain inordinate
financial profits by reckless speculation.
undertake to condone no improper
practices, but do suggest that a proper
sense Of perspective Is necessary"
The committee asked Aldrich for his
suggestions, and he had worked for
weeks on his 28-page statement. Some
of the things he urged were interpreted
as applying to activities Of his bank
before he became its president.
Tunnel Inquiry Begun.
Before Aldrich testified. evidence
that promoters of the Det roit-Csnada
tunnel received stock wort S5,4e2 500
for what was described a. a bonus
was placed before the committee.
Judson Bradway. former president OF
the tunnel said the
stock in the tunnel company for SerV-
ices in acquiring property rights and
for other work.
large group received part of the shares,
but said he was given 10000 as promo
ton stock"
The list of recipients, placed in the
record by Ferdinand Pecora, committee
counsel, included Gov. William A.
Comstock of Michigan, former president
of the tunnel company, 10000 shares
Guardian Detroit Co, 226,0l0 shares
Chase Securities Corporation, ITS $50;
engineering firm of Parson. Klapp,
Brinckerbof & Douglas, 10000.
Aldrich's Proposals.
Among the changes Aldrich proposed
in the 1888 banking act were:
A direct or indirect connection with
investment banking should disqualify
rector of a national or State Federal
Reserve member bank. with similar re-
strictions applying to offlcership or con-
nection with two commercial banks in
the same community.
Executive officers of reserve member
banks and the directors and executive
officers of reserve banks should be for
hidden to participate directly or indi-
rectly in syndicates which are offering
securities to the public. or in trading
accounts or pool operations in securities
which are dealt in publicly"
All executive officers of reserve men,
Der banks should be required to report
to their directors their be- cwings above
nominal sum from any source the
law requires only reports on loans OBJ
tanned from other banks.
Executive officers should be required
to tell reserve member bank directorateS
about outside financial interests or in
comes.
Would Exclude Groups.
The term "affiliates." from which
member banks must be separated by
June 16, 1884. should be SO defined as
to exclude corporations or businesses
which shall be controlled by bank ir
d
shall have been acquired in connec-
tion with the Salvaging Of bona flde
loan"
Member banks should be permitted
% to continue securities affiliates long
enough to liquidate their assets pru-
IDENTIFY or (2) to take over the assets
and hold them until prudent dispo-
sition" could be made.
New policy" loans made hereafter to
individuals because of a connection
with a depositor should be reported to
the depositor.
Securities dealers should be forbidden
to accept member bank funds for de-
posit even. as is permissible now, with
Feder-l Reserve Board approval.
Congress-, Aldrich said. intended a
complete separation Of commercial and
investment banking. even to barring in
terlocking arrangements. and likewise
wanted to prevent interiocking manage
ments between commercial banks oper-
ating in the same area.
Finds New Law Short.
The objective was not achieved by the
1888 banking act, he continued, because
one person can be a director of any
number of commercial banks so long as
none of them is a national bank; be-
cause the Federal Reserve Board may
permit an individual to work with a
national as well as two other banks;
because the Reserve Board may let one
in investment banking serve member
bank.
The banking act of 1888" he said,
"in section 81 tA) ID prohibits uncon-
ditiOnally an investment banker from
at the same time engaging in CONNER