The Indianapolis times., 1935-07-19
Trends
Rural Banks Much
Concerned With
Banking Bill.
BY VINCENT LYONS,
Times Financial Editor

ME OMNIBUS banking Dill, a
i malignant disease in its orig
inal form as far as many bankers
were concerned, supposedly is
within a few easy steps of being
enacted into law, according to the
latest word from Washington. Yet
it is doubtful that the measure
will pass without at least one
more revision in its battle-scarred
form.
The blue pencil apparently will
be used in connection with the
underwriting section of the act,
the provisions of which have
brought out a harangue from
President Roosevelt. Under the
section, which has been written
into the bill by Senator Carter
Glass and his conferres On the
Senate Banking and Currency
subcommittee, national banks
would be accorded the privilege of
underwriting and originating Sc
curity f1otations.
~ DClSOll0 N1lONC
have faltered in an attempt to
keep up with the rapid-fire pace
of financial legislation it should
be pointed out that earlier in the
New Deal regime banks were
forced to relinquish either their
investment business or their de-
posit business. The phrase in
vestment BUSINESS" was used
loosely for the banks did more
than invest; through their af1li-
ates. they underworld and dis
tributed security issues.
FINDER the argumentative Sec
~ ton any national bank in the
country could assume the role of
originator and syndicate manager
of a new issue. Proponents of the
measure cite as an asset the fact
that no one banks participation
in the underwriting syndicate can
exceed 20 per cent of the issue or
10 per cent of its own capital and
surplus.
Oddly enough the banking fra
ternity itself is rather cool to the
section as written. The American
Bankers Association has gone on
record as being unoppoSed pro-
vided that neither originating nor
merchandising is permitted. In
veStment bankers, who now en-
Joy a monopoly in the underwrit-
ing eno, would like to see the new
capital market made freer but at
the same time would not care to
have some of their profits taken
away from them.
Rural bankers see the section
opening the avenue to a good deal
of mischief. Ordinarily small insti-
tutionS. they are fearful lest their
much larger metropolitan CORES
pondent banks force them into
underwriting syndicates and thus
share in the risks. They are par
ticularly scary of the cumulative
liabilities under the Securities Act
of 1888.
THAT is the way the situation
l. stands today. Rep. Steagall,
chairman Of the House Banking
and Currency Committee, un-
doubtedly will attempt to force
some kind of compromise next
week when his group goes over
the bill. 1t will not be a new
role for him as he has found him
self in disagreement with Sem
ator Glass on other occasions.
Then, too. feeling toward the dis
puted section is such that little
difficulty should be experienced in
getting Strengthened out on this
one provision.
The expectation is that the bill
will emerge finally in such shape
that the privileges Of the national
banks will be limited to what is
called the true or English type
of underwriting. Under the
meaning of this phrase a bank
would be restricted to undewrit-
ing-agreeing to purchase for its
own account a set proportion of a
new issue in the event that in
veStors fail TO absorb the securi-
ties.