The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1933-01-13
BILL RELEASES
FUNDS TIED IN
CLOSED BANKS
DepoSItorS Would Be Paid
OFF Promptly Under Glass
Measure.
This IS the final article in a series BY
nav Tucker, discussing the Glass bank
ing bill, now before the senate.
BY RAY TUCKER
United Press Stan Correspondent

BY RAY TUCKER
United Press Stan Correspondent
WASHINGTON, Jan. IS. .- The
interest Of the depositors in thou
sands Of closed banks in the Glass
banking bill, being debated in the
senate today lies in the fact that
1t sets up federal liquidating cor
poration for prompt payment of
such depositors.
AS Senator Carter Glass Dem.
va, the bills author points out
IN his majority report to the sem
ate, about $2,5O0,OOO000 of depos-
It's are now tied up in suspended
banks.
The record shows that approx
mately 30 per cent Of these assets
eventually is recovered, but the
process Of liquidation under pres
ent conditions is slow and painful.
Vast amounts of credit and pur-
chasing power are frozen over a
long period.
The projected liquidating corpor-
alton would have capital stock of
about $50 100000 contributed by re-
serve banks to the extent of one
quarter of their present surplus.
Member banks shall subscribe to
4 of l per cent Of their total out
standing time ad demand deposits.
In addition, the government shall
contribute S125,0000OO of paid-in
surplus, and the corporation shall
have authority to issue notes, bonds,
ETC., to a sum not more than twice
the capital and government-ap-
propriated money.
Provides Larger Reserves
The corporation is to be managed
by the controller of the currency, a
federal reserve board member and
three individuals chosen annually
by the governors of the twelve re-
serve banks
Although this proposal falls short
of the bill guaranteeing deposits
that has passed the house, it has
drawn heavy fire.
Western seatorS fear it may lead
to lax management that will cost
the taxpayers a great deal of money,
while large banking interests say it
will have a deflationary effect by
increasing the gold reserve.
Another provision designed to
strengthen the banks position re-
quires that larger reserves be held
against deposits. The present law
provides that 3 per cent reserves
shall be held against time de-
posts by member banks, and 13 per
cent against demand deposits by
the central banks in New York and
Chicago. The bills figure is 10
per cent for banks in reserve cities
and Z per cent for country banks.
Criticised as Defationary
AS demand deposits move in and
out of the vaults with greater
velocity than time deposits, the re-
serve against the former class is
made higher A study has con-
WINGED the committee, however, that
some banks evade this safeguard by
classifying demand deposits as time
deposits, thus lowering the reserve
requirements.
The bill meets this by providing a
gradual increase in reserve require
ments so that by 1888 the ratio of
reserves to both classes of deposits
shall be the same. They will be-
come 7, 10 and IS per cent, re-
spectively, in country banks, in
stitutions in reserve cities and in
those in New York and Chicago.
The latter two are known as
central reserve banks.
The federal reserve board fears
this provision vii contract credit
without regard for business con-
ditionS. 1t is criticised as deflation-
airy on the ground it will increase
reserve requirements by $4,000 900
and add $3.50 100000 to the gold re-
uuirements of federal reserve banks.
But the bills sponsors contend it is
necessary to safeguard depositors
and keep the banks in liquid con-
dition.
Remove Treasury Secretary
In a far-reaching step the meas
ure gives the board control over re-
lationships between American and
foreign banks.
There has been considerable criti-
cism of alleged secret conferences
between officers of New York re-
serve banks and representatives of
central banks 7broaC, with the
charge that American interests have
been sacrificed to those of the con-
tinent.
The measure gives the board SUI
pervision over such meetings. None
may be held without federal per-
mission, a board member may be
present, and written report of
the transaction must be filed here.
With the boards authority eX-
tended and strengthened, the bills
trainers thought it necessary to re-
move it further from outside influ-
ence. It often has been charged
that recent secretaries of the treas
ury has dictated decisions because
of practical or political consider
ations. So the secretary of the
treasury is removed as an eX-ofdcio
,,1pr1b her