Evening star., 1935-03-23
BANK BILL HOLDS
FINANCIAL STAGE
D. c. Bankers Keep Ears
Attuned to Testimony
Before Congress.
BY EDWARD C. STONE.

WASHINGTON bankers continue to
listen in closely on the hearings be-
fore the House Banking Committee on
the proposed banking act of 1885.
Much progress has been recorded
during the week now closing. While
some local bankers express fear that
private banking may be doomed to
pass out of the picture and become
wholly under Government control,
others are less worried about the out
look, especially after Gov. Eccles Of
the Federal Reserve Board testified
that he favored retention of the
present system, with certain changes.
The testimony of T. jefferson Cool
idge, Undersecretary of the Treasury,
was also reassuring. He told the COM
lnittee that the proposed banking act
Of 1885 is designed to adjust the bank
ing laws to meet new conditions which
have developed since the creation of
the Federal Reserve System. He added
that the banking bill was not aimed
to assist the Treasury in financing
Government deficits and in fact would
not facilitate financing.
I'VE have always sold our bonds to
those who wanted them" he said.
Interest rates are falling lower and
lower and maturities are getting
longer. The Treasury does not need
the bill, although supports its gen.
eral purposes. To my mind the
money available at banks is of an
enormous amount. either for business
or for the Treasury"
Mr.. Coolidge asserted the main
purpose was to set up control over the
rate of money and the money markets
which does not now exist. He denied
the bill gave the Government any
greater control over the banking sys-
tenn than it now has.
The Undersecretary stated that open
market operations can exert only a
slow influence over wholesale prices
and that the rate for money is only
one of the many factors in deter
mining prices.
Growing U. S. Control Seen.
The Bankers Magazine devotes a
good deal of attention to the banking
bill, in the current issue. In con-
clusion. the magazine says:
Should the proposed banking law
be enacted, it will mark a consid-
cradle step in the absorption of bank
ing by the Government. Paradoxical
as it may seem, while the banks own
the Federal Reserve, the Government,
under this bill, will greatly enlarge
its control over the system, and thus
indirectly over all member banks.
That. from its enactment, the Fed
eral Reserve act made possible too
much political interference with
banking, with unhappy results, is
something clearly revealed by care
full study of the original act and OF
what has happened in our recent
banking history. That this interfer-
ence may be extended, is matter
of deep public concern"
The magazine quotes from a New
York daily, which said that "inroads
already made by the Government
into the field of private banking are
too fresh in the minds OF most per-
sons to require recapitulatlon. so
far as the commercial banks are con-
cerned, the Government has become
a competitor to the extent that its
agencies have upward of S7,000,000,-
900 in loans outstanding, while 1t has
obtained a substantial voting interest
in about half the banks. "A big
stride has been made in this direc-
ton says a recent study of the
Brookings Institution, as part of a
broad movement toward public own
ership and control being extended
on many fronts
Additional to this governmental
competition with the banks Of the
country, there are a number of in
stitutions now doing large volume
of business heretofore done by the
banks. 1t must not be hastily con-
cluded, however. that this loss OF
business is lacking in compensation
In some cases it represents class of
transactions which the banks were
not properly equipped to handle, and
of which they are glad to be freed.
But, on the other hand both the Gov
ernment and some of the institutions
mentioned are encroaching on de-
sirable banking business, the bank
ing publication asserts.
Money Velocity Held Vital.
The Federal Reserve System as it
stands is adequate to control Federal
monetary policy and nothing would
be gained by requiring the $4,000
odd banks of the country to main
tain full reserves, Robert B. Warren
of Case, Pomeroy Co. declares.
In the current issue Of the Ameri-
can Scholar, Mr.. Warren claims that
bankers far from exercising control
are hardly more than intermediates
between Federal policy on the one
hand and the limitations of our econ
omy on the other"
The function of the commercial
bank, Mr.. Warren holds, is not to de-
termine the amount of money" in the
country, but to give it velocity of
turnover and this they can do if the
general economy is in smooth work.
ing order, but here the control Is
limited, for while the Reserve Board
can make credit available it cannot
compel the community to use credit
in excess of the demands of its econ
omy; nor can 1t compel the posses
sors of money, whether that money
Is currency or bank deposit, to spend
money except as their collective judg-
ment, good or bad, may dictate"
The State of Maryland will receive
bids on April IL on the $5,500,000
3 per cent emergency bonds to be
dated April IS, 1885, and due serially
from 1888 to 1850, the State controller
announces. The financing represents
the first installment of an $8,500, 900
loan authorized by the Legislature.
The second installment will be foated
next october, while the final INSTALL
ment will come out in october, 1886,
according to present plans.
The proceeds of the present issue
will be used as follows: $2,300,000
for meeting the anticipated deficit for