Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-03-09
CURB ON PRIVATE
BANKERS IS URGED
AIdrich of Chase National
Also Would Divorce Deposit
and Investment Accounts.
Nv the Associated Press.

Aldrich, who is head Of the Chase Ma
tional Bank, the largest in the world,
and Is brother-i n-laW to John D. Rookie
Teller. jr., proposed last night the most
drastic program Of banking reform that
has ever emanated from Wall Street.
Not only would it divorce deposit and
investment banking completely, but it
would 60 far beyond even the Glass BILL
which hitherto has met much dlsfavor
in Wall Street. One effect would be to
curb severely the activities and power
OF leading private banking firms, notably
J. p. Morgan & Co.
Denied DirectOrships.
It would forbid private bankers to take
deposits or to be directors of banks of
deposit Members of the Morgan firm
are directors of some of the largest
commercial banks of the country and
hold important deposits, foreign and do
nestle
There was feeling in some parts
Of Wall Street today that Congress
would give close consideration to the
Aldrich proposals. They adopted the
spirit Of the Glass bill. which advocates
the separation Of banks and security
affiliates and extended it further.
The program. designed to rid COM
mercial banking of any spirit of spec
ulation,'' astonished many in Wall
Street 1t involves the inclusion of all
commercial banks In the Federal Re-
serve System.
Power Would Be Reduced.
The New York Times pointed out the
suggested program would curb the power
of the large private investment banking
firms In three respects:
First, by depriving these firms Of the
right to accept deposits. 1t would make
it necessary for the private banks to OBJ
tain credit from the commercial banks
in financing their security Rotation
Second. by doing away with the Sc
curity afhliateS of the commercial banks
the proposed regulations would take
from the private banks outlets for the
syndicating of their securities which
have in the past been OF great impor-
lance
Third, by removing all private bank
ers from their positions as directors Of
the commercial banks. the changes
would greatly reduce the prestige, in
able to partners Of investment houses
at present.
Separated From Affiliate.
Aldrich. q comparative newcomer to
the banking firm, made his proposals In
connection with an announcement that
the Chase National Bank would divorce
its security affiliate. the Chase Securi-
ties Corporation. Similar steps are be-
ing taken by the National City Bank.
The Aldrich plan would necessitAte
further changes by his own bank. For
instance, among its directors are several
members of private banking houses who
would have to give up their director
ships. Aldrich advocated small boards
of 6frsctoFB for commercial banks
Chase National has 70 directors, one Of
the largest numbsgs Of any bank
Deats0sn4 lRs6
Ahnoh iaaHsd ~ following state
ment:
Il heartily commend The action Of
the National Qty Bank In taking steps
to divorce it, security amliate. the Ma
tional City Co. II = impossible to con-
slider the events which took place during
the past 10 years without being forced
to the conclusion that intimate connec-
ton between commercial banking and
investment banking almost inevitably
leads to abuses.
"For some time past the Chase Ma
tional Bank has been giving serious
consideration to the question OF sever
ing its connection between itself and its
security af{iliate. The matter was dis
cussed at the last meeting Of the d.
rectors and . subcommittee has been
appointed by the Executive Committee
to report as soon as possible upon ways
and means Of bringing about this re-
suit.
Il am entirely In sympathy with the
divorcing by law Of security afdliates
from commercial banks I do not think,
however, that the Glass bill goes sufiici
emily far in separating the business OF
commercial banking from that Of deal
ing in securities"
Additional Proposals..
The Glass banking bill would enforce
the separation of banks and their Sc
curity aff1liates over period Of years.
The additional regulations suggested by
Aldrich we're:
Il. No corporation or partnership
should be permitted to take depsits I'M
less such corporation or partnership Is
subjected to the same regulations and
required to publish the same statements
as are commercial banks.
%. No corporation or partnership
dealing in securities should be per-
mitted to take deposits even under
regulation.
"3. No officer or director, nor any
member Of any partnership dealing in
securities, should be permitted to be an
oficer or director of any commercial
bank or bank taking deposits, and no
ofiicer or director of any commercial
bank or banks taking deposits should
be permitted to be an officer or director
OF any corporation or partner in any
partnership engaged in the business of
dealing in securities
4. The boards of directors Of COM
mercial banks should be limited in num-
Der by statute, SO as to be sufficiently
small as to enable the members to be
actually cognizant of the affairs of their
banks and in a position really to dis
charge their responsibility to stockhold-
ers, depositors and the business COM
munity.'
Would Eliminate Speculation.
'"The spirit Of speculation should be
eradicated from the management of
commercial banks" Aldrich's statement
continued, and commercial banks
should not be permitted to underwrite
securities, except securities of the United
States Government and of States, Ter
ritories, municipalities and certain other
public bodies in the United States.
THE Federal Reserve System was
founded for the purpose Of serving the
governmental and commercial life OF
the country. think that all CONNER
cial banks should be members of the
system and that their management
should be actuated solely by the desire
to carry out such purposes in sound
and conservative manner. In my opin
ion, not until the reforms above men,
TONED have been put into effect will