Evening star., 1941-05-16
Existing Bank Laws
Declared Adequate
In A. B. A. Report
Reply TO Wagner Urges
Better Management
And Supervision

Better banking is to be expected
more from improved bank manage
ment and improved bank super
vision than through changes in the
organization of the banking system,
1t was stated by the American
Bankers Association in its reply to
the Wagner study QUESTIONABLE filed
with the chairman of the Senate
Banking and Currency Committee
here today.
The A. B. A. reply suggested that
concentration on present national
objectives is now more important
than details of the banking system.
1t recommended consideration of
action dealing with the problems of
bank credit expansion and activity,
fiscal policies as related to taxes
and borrowing. and prices and wages
that will prevent initiation develop
ing out of the national defense
program.
1t also recommended, among other
things, the continuation of the dual
system of national banks and State
chartered banks and the preserva-
ton of the present dual system of
bank supervision by State and Fed
eral supervisory agencies as the best
means of serving the diverse re-
quirements of American economic
life and preventing too great a con-
centration of power.
Present System Favored.
1t recommended the continuation
of unit banking and that the regu-
lation of branch banking be left
within the control of the States.
The reply suggested that the rela-
tions between the Federal Reserve
Board and the Reserve banks might
be made more effective by greater
concentration of the powers of the
Reserve System in the Federal Open
Market Committee.
1t stressed the Importance of
maintaining the present ownership
of stock of the Federal Reserve
banks as conforming to the prin-
ciple described by Woodrow Wilson
as democracy of credit"
1t stated that the Reserve System
las originally set up derived its in
from a midway position
between Government and CONNER
cial banking. President Wilson
called it a democracy of credit
Membership banks own the stock
but stock ownership does not con-
Stitute control. The only voting
power it carries is for the election
of two-thirds of the directors, but
half of this two-thirds must be
businessmen.
These men do not regard them
selves as responsible to the member
banks but to the public generally.
The Government appoints one-third
of the directors through a govern
mental body, the Board of Gov
ernors of the Federal Reserve Sys-
tenn, whose approval is required in
the appointment of the two chief
executives of each Reserve bank"
Emergency Needs Cited.
Emphasizing the Importance of
considering the banking problems
arising out of the war emergency,
the A. B. A. reply says: There is
in the foregoing requiring
legislation at the present time, when
mems minds should be engaged in
dealing with great national objec-
tlVes rather than with details of the
banking system. 1t is not a time
when peoples energies and atten-
tion should be taken away from the
major task by non-essential read
justments in the banking ma
chinery.
In World War l, and in other
great wars, this and other countries
experienced severe imitation. In the
absence of appropriate preventive
policies the forces now at work will
lead to like result.
Preventive action is necessary in
three areas: (a) Bank credit ex-
pansion and activity, (b) fiscal pol
icies as to taxes and borrowing and
(c) prices and wages.
The Congress, the banks, and
others, should therefore give timely
consideration to the proposals for
dealing with these problems, made
jointly by the several bodies of the
Federal Reserve System.
This report is in agreement with
the Federal Reserve System In the
following general proposals: (a)