The McDowell times. [volume] (Keystone, W. Va.) 1904-1941, 1936-02-14
WOULD PROTECT :. H.
BANKING FIELD
IN RURAL AREAS
sAmer;can Bankers Association
Announces Purpose to Com.
bat Return of Excessive
Number of Banks
CITES LAX CHARTER
POLICIES IN THErPAST
Finds q Chief Cause of Bank Failur..
Was Too Many Banks-Existins
Sound Banks Serving
Communities Well


NEW YORK. Existing sound
banks, especially the small banks I'm
the rural districts which are serving
their communities well. should be pro.
tc"tcd IRON any return OF the over.
banked local conditions caused Inv
f"rmcr Lax charterlng policies. which
We're mainly To blame fol the unfayor-
able failure record OF the past, saws the
Economic Policy Commission of the
American Bankers Association. This 10
brought out in report covering an I'm.
vestigation by the commission of bank
failures and public policies In charter.
ing banks.
The Commissions study given an
impressive revelation OF how yreat n
part mistaken public policies in the
chartering OF banks played in creating
the unsound banking structure which
finally collapsed with the.Sank Holiday
in March 1885," Robert V. Fleming
president OF the association. saws in a
foreword.
"Over-production OF banks, literally
by thousands. over many years in the
face OF insistent warnings not only
from bankers and others who recog-
nized the danger. but even more so from
the mounting records OF bank failures
themselves, is clearly shown to have
constituted as whole one OF the great
est single economic errors in the history
Of the Nation"
A Recurrence Feared
He refers to fears Of a recurrence OF
over-banking recently expressed by
Federal banking authorities, to the
powers given the Federal Deposit In
surance Corporation by the provision OF
the Banking Act of 1885 over the admis-
sion OF banks to membership il. the In.
surance fund, to strengthened state
laws and 10 the policies now being fol.
lowed by both national and state super
viAory authorities aimed to safeguard
the nation against Cver-bankirg.
But sound laws and conscientious
officials are not OF themselves always
sufficient safeguard in any field of our
complex national life unless they havet
the active support OF public opinion
he adds. 1T Is the purpose Of the Ameri.
can Bankers Association to aid in mar.
shalinG Eu3lic opinion in support of
both national and state supervisory AL.
thnrities in their efforts to strengthen
ami protect the banking structure"
The l. 'onomic Policy Commission
summarize; !ti i.GGiagi in Fart as FOL.
lows:
THE f.ct5 3h0w . distinct c.usai re-
lat.onship between tie Gvcr-c.larta.ine
OF banks and the abnormal bank fail
ure CONDITIONS that prevailed from 1920
to the bGHii holiday in 1888. 1t Is desir
able tliat studies be made on the basis
of experience to develop standards gov
ernins The number II Dlnks or the vol
uTn" OF ~ capital wi'ich can be sue
cesslully operated.
Such study would embrace the
gu 5tion neither banking laciltie. can
best he supplied 10 the 'uval districts by
sm"ll G0.t banks or by Erarchc; from
banks "a substantial capital in large
cenicts. Existing sound banks, which
are serving their communities We
SHOULD b. protected from any return CT
the over @3nkCd loca! condition.; ca"se'
~ '''c ia u ny ldN CHdi ,'TII!S nCs.'.CS.
Ranking OfFclls Oacr:.d
AN inquiry among sta,c banl. com
missioneEs shows PFC IaAderant opin
ion against increasing materially I'll
number Of banks, coupled with the fac
that present laws give them eafTicien
discretion to prevent Il repetition Of tt
grave errors Of the past
"tnGcr prcvail;~; abno:nal conii
h"n;. with tie F1dc2.l Gog,rnment c\
te" iv2ly cX crcising /. Eirg pp.,~5 i.
competition with the bpu,., and wi
industry itself so LARGELY supplied wit
f3nd3 as to render u t. ID ,,r, II DOR,
Independent os nprr,sl bgli borrowing
the banking structure r,rn w.'h II
present reduced G&mLafs. GHl. {, GiT
cut 10 support its existing rWd,,l il
vcStment and operating personnel
These are new factors. intcngifyir
the need for highly r.adcu- and rc
strictive charterius poliri,s We urr
the retirement Of the Federal Govern
mcnt from the baL,.Hg business
rapidly az tho return Of normal bus
upyg cOutifiCuc vnr-arf