Evening star., 1933-06-14
'UN|F led BANKING.
KEY TO GLASS BILL
Plan for One System May
Result in Success of Re-
form Measure.
BY DAVID LAWRENCE,

Every depression has given birth to
banking reform legislation in the United
States and there has been as q con-
sequence, return of confidence which
lasted until the next depression, or
rather until the banking system again
broke down, which has been a periodic
occurrence.
The new banking law may bring back
confidence and may last longer than its
predecessors for it has as an underlying
objective the making OF unified bank
ing system. Whether this can be ac-
complished depends upon the way the
several States meet the challenge OF
the new law.
Protection for Depositors.
Under the Glass -Steagall bill just
adopted, the insurance provisions to
protect depositors will apply after
January, 1886, to those banks which
have joined the Federal Reserve System
But in the meantime, will the States
sit by and permit their control Of bank
ing to be given up? Many Of them will
set up their own system Of insurance
of deposits. Virtually every guarantee
Of deposit plan has been failure when
tried by the States. Whether the Federal
Government can make 1t work remains
to be seen.
The new legislation overcomes one OF
the principal barriers Of the past with
respect to a single national system OF
bank supervision. 1t has always been
contended that under the Constitution
the State banks could not be forced into
the Federal Reserve system. But the
purpose of the new law Is to bring ABOUT
such an enforced entry into the reserve
system merely by public opinion. For
1t will be inferred by depositors that
without Federal safeguards and insur-
ance, other banks will not be as strong.
AT least that is the supposition OF the
sponsors Of the bill.
The momentum behind the passage
of the new law after weeks OF deadlock
was the desire of many members OF
Congress of both parties once more 70
instill faith in banks.
It is difficult to estimate the many
important consequences that will now
from the passage of the law. First, the
divorce Of affiliate corporations from
banks is final Second, the extension
of branch banking is permitted under
certain restrictions. Third, the de-
positors are assured Of better super
vision and a protection based on an in
surance plan.
Confidence In Postal Savings.
The remarkable confidence the people
have had in the postal savings system
is considered significant Of what may
come If a unified system Of supervision
is developed and the Federal Reserve
ACQUIRES control of the lending re-
sources of more banks. While In the
past the Federal Reserve has controlled
two-thirds of the resources 1t has not
had any direct power over more than
8 900 banks out of about $4,000. Many
OF the on-member institutions should
never have been started. On the other
hand. 1t Is wrong to assume that all
non-member banks have been weak,
for it is apparent that the Federal
Reserve System itself has had q sub
stantial proportion Of failures and
closings.
The evils Of State political influence
have been projected as the principal
reason for the variety Of banking laws
and the fact that AZ different systems
are In existence outside Of the Federal
Reserve. Now, with greater reSponsi-
bility vested in the Federal Government,
it will become even more important for
politics to be kept out OF the Federal
Reserve Board. Early in American his
tory a central banking venture failed
because Of political influence. So 1t all
depends on the administration Of the
new law whether banking reform Is
permanent or will last until the next
(Copyright, 1889