View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

June 2 , 1938

Honorable Leo T. Crowley
Chairman of the Board
Federal Deposit Insurance Corporation
Washington, D. C.
Dear Mr. Crowleyi
• complete copy of the speech you had prepared for delivery at
Del Monte on M y 26 has just c m to my attention. I a informed that
o e
during actual delivexy of the address you deleted a portion critical of
branch banking. However, the f a l l text appears to have been distributed
in advance to press services and newspaper* in a l l parts of the country.
In the case of the Associated Press in San Francisco i t arrived after
the speech had been delivered, without the deletion.
To press representatives at Del Monte your attack on branch
banking was so sensational that soms of the newspapers were ready to
give i t a big play. Fortunately your deletion forestalled this. The
fact that you were to m k the speech in California was interpreted as
indicating that your attack w s directed at large branch banking instia
tutions in this state. While w are confident in the strength of Bank
of America, and feel secure in the public confidence that brings two
million depositors to our banking offices, publication of your attack
might easily have caused thousands of those depositors to become fearful
over the safety of their funds* Xou know the contagion of such fears,
and the final effect might have been dire at this time, when the banks
are the one bulwark of confidence in an economically depressed nation.
One of the statements you were prepared to make, and circulated
widely in the advance copies of your talk, went like thisi

•As insurer of the safety of deposits, the Corporation
believes that s m limits must be placed upon the number of
o e
offices and upon the extent of control over banking resources
in.a given area that are permitted to any corporate entity, be
i t branch bank or holding company. •

Honorable Leo T.Crowl«y
June 2, 1938


Such a statement m d by anyone elee night not have serious
effects, but coming from you and directed at m m e banks of your o n
e br
organisation, the ground is laid for a dangerous inference that depositors1 funds in a branch banking institution are not safe* Surely you
would not want to do that just to carry on a campaign for unit banking?
N w let us look at the next statements
"Diversification of risk is essential to the success of
any insurance plan. Too great a concentration of an area's
resources in any branch or group violates this basis principle.®
This strikes m as a strange contradiction. The same prine
ciple of diversification applies to banking as well as to insurance.
Diversification of risk is branch banking's greatest factor of safety.
Here in California our loans are as diversified as the whole range of
aetivity throughout the entire state. Simultaneously, that same diversity is the depositor's best assurance of safety for his funds. Each
branch has the strength of all*
Further, h w can the number of banking offices influence the
"concentration of an area's resources in any branch or group" any more
than the number of tellers' windows in a unit bank? A branch of a bank
serves the convenience of customers by expanding the number of available
windows and relieves the congestion at metropolitan headquarters. Would
you limit the number of these windows and s t i l l permit a unit bank unlimited expansion under one roof?
o Depositors are not under compulsion, and i f enough of them take
their funds to a given banking office you will have concentration of resources, regardless of whether i t is a unit or a branch bank* H w would
you control the right of a depositor to take his funds where his confidence directs? Would the F.D.I*C. issue periodical bulletins notifying
the public that such and such a bank has a sufficient concentration of resources, and that business should be diverted to a l i s t of less thriving
institutions? The number of benking offices or tellers' windows operated
by s bank doss not necessarily govern the total volume of businsss.
Let m again resdnd you of what 1 said to you at Mr. Twohy's
housei I t has long been the Administration's desire to decentralise the
Wall Street concentration of the nation's financial resources. An institution like Bank of America Is an ideal vehicle for such decentralisation
because of its ability to handle transactions of a slss beyond the capacity of a small bank* The development of at least one major banking institution should be encouraged in each Federal Reserve District, otherwise
large seale business end smaller banks themselves will be compelled to continue to turn to Wall Street.

Honorable Leo T. Crowley
June 2 , 1938
Page 3
Near the end of your deleted passage you were to sayt "Adequate
examination and supervision of large branch banks within a state is d i f f i cult. 0
This statement amased me, directly opposed as i t is to the statements of other Government officials, as well as to actual experience. Coming from you i t might be interpreted as an inference that this and the
other large branch banking institutions in California are not completely
examined. Such reflections are damaging, and needless since they are based
on fallacy. So far as I know, no supervising official has ever complained
of difficulty in examining and supervising the activities of this bank. I f
you have any such complaint to m k I think you might present i t to us beae
fore preparing to circulate such charged throughout the country.
Any statement tending to discourage the people needlessly is the
wrong sort of thing to c m from a chief Government official. I recognise
o e
that i f you honestly believe in unit banking as against branch banking,
that is your personal privilege. I believe also that on your part you
recognise that the American philosophy of government is that the f i r s t
duty of a public officer is to discharge his public responsibility, which
in your case is to safeguard the soundness of the banking structure as a
whole rather than any section of i t , and in this you will find Bank of
America ready to cooperate to the limit. But in the event that you do feel
that you must carry the torch of the unit banker m earnest hope is that you
will base your arguments on proved facts. In any debate to establish the
truth, this institution will proudly submit Its record of service and soundness.
I a disappointed that sny reservations you held in mind were not
discussed with m or m associates when you were in ny office recently. A
frank exchange of ideas on these matters would have been to our mutual advantage, I a sure.

Sincerely yours,