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https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 421.11b torresponaence & interviews hiddle J h Committee on Branch Group & Chain Banking TRANSFER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Deoonber 6, 1933 A. J. H. Biddle Bankers Trust Company 16 Wall Street New York City Dear Jacks Mrs. Sissman has looked into the data which woro used to build up the suspension rate, and it appears that there were only two failures of banks having loans and investments of over t60,000,000 betwvAi 1921 and 1931. These were the Bank of the United itates with loans and investments of $213,403,000, failing in 1930, and the Bank of Pittsburgh, N. A. with loans and investments of :56,426,000, failing in 1931. In 193, no banks with loans and investments in excess of 150,000,000 failed, but there were plenty in 1933. There were CZ State and 37 national banks active in 1920 size group, but the compilations in our files do not this in identify these 72 banks or further olassify them by size. The grouping of thotive banks by size of loans and investments, as you will reeall, vas made oy the various Federal reserve banks in the case of :tate banks and by the Comptroller of the Currency in the case of national banks. The appendix to the volume an bank changes gives the distribution of the large banks by States, and you no doubt oould have SOMB one by referenee to Rand McNally Bankers Directory identify the 72 banks in question. Then, they could easily be reolassified in any way one night choose. Your pamphlet has not reached MO as yet. Sincerely yours, •• ?jtW YORK BANKERS TRUST COMPANY itS WALL STREET FIFTH AVENUE AT 424 .°STREET MADISON AVENUE AT 575STREET CA•LE ADDRESS-- NEW VORN PARIS 5 PLACE VENOOM E LONDON 26 OLD GROAD STREET. E C 2 PAR16-•411HTRUST C•OLL •DORESS- LONDON'•ANT.USCOM 16 WALL STREET NEw Yon"( November 290 1933 Mr. George Blattner Division of Analysis and Research Federal Reserve Board 4ashington, D. C. Dear George: I am sorry I seemed negligent in sending you Bulletin No. 3. I took pains to put both you and Goldenweiser on the mailing list, but the list was so large I understand they were very slow in getting them all out, especially since we had them mailed from Chicago. I presume you have gotten yours by this time. You will recall that in our suspension study we gave the rate of suspensions for banks of $50,000,000 and over. I have been asked several times if I could split that up and show the rate for banks from 50,000,000 to $100,0000000 and $100,000,000 and over. I am not sure whether our material is in such shape that that figure could be readily ascertained. Perhaps Ars. Sissman would be good enough to take a look at it and see. At any rate the number of big banks failing has been so small that one might make a list of them showing the size in each case and then a rough figure of the rate could be worked out easily. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely yours, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis november 27. 1936 la*. J. L. iiiddle Bankers Trust Company 16 Veil Areet NeetTork City Dear Jack: I mu glad to enoless a oopy of pace 2 of the "f7unz:1;:ry of tb4; Leports" to repiaoe V:13 one damseed in your copy. am aorr:v that you forgot to resember ue in oonaiction ;titr your latest blast. 70 have had to depend or the Pius JL-ional Bank tor cur supply. Yoe, the battle lines are forma jag an gold, eurreney, and other yeah occult thince. / am nat 81 ,110 woun beli.ve. thaL the ,Tcsia at Is ac ntive It may be that there are subtleties in his maneuvering that are not transparent. I hope your organization will really cone through on the commitment in its recent bulletin to define a constructive proiyam in banking reform. If it does. it will be 2 pre:..edent shattering thing. something heretofore never seen on land or )C., R constructive program with respeot to banl,:iLs 1.form coming from a banking organization itself. Sincerely yours, NEW YORK BANKERS TRUST COMPANY 16 WALL STREET FIFTH AVENUE AT 425...STREET MADISON AVENUE AT 57`5STREET PARIS 5 PLACE VENDOME LONDON 26.OLD BROAD STREET. E C CAE., ADDRESS - NEW YORK S PARIS-•ANKTRUST C••1.E. •DDRESS -LONDON- •ANTRUSCOM 16 WALL STREET NEw A'OttI riK November 25, 1933 ir. George Blattner Division of Analysis and Research Federal Reserve Board Washington, D. C. Dear George: I accidentally tore off a part of page 2 of my copy of the "Sumaary of the Reports" and the torn part has been lost. If Hammill has any odd copies of this page, I should greatly appreciate it if you would send me one. I still have a nightmare occasionally over all that material collected in the Wickens study which has never been organized or put in usable form. We spent an awful lot of money on that study and I am sure there is auch worthwhile aaterial there. It is a good example, however, of where a man got so completely buried in statistics that he was never able to extricate himself. I am sure something worthwhile could be worked out of that aaterial if the right man had hold of it. I know you also have this aaterial in mind and some day you may see an opportunity to get it organized. I certainly was glad to see Al Saith come out with his blast. As usual, he hit hard. It will probably take much aore of this kind of fighting, however, to protect the country from the economic quacks. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely yours, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 26, 1933 Mr. J. H. Riddle 0/0 Mr. Guy Emerson 16 Wall Street New York City Dear Jack: I find that at the tie the information was procured with respect to the °oat'? of Recent Eaonomio Changes and Social Trends no figure was obtained with respect to that part, if any, which represented the cost of publication. I find also on inquiry that this information is not easily obtainable in Washington, but for the first study the National Bureau of Eoonomio Research and for the second study the Social Science Researoh Council, both in New York, are the proper soureas to which to direct inquiries. It seems to me that in view of the fact that you are in New York, you may wish to communicate lath these sources yourself. It may well be in both of these oases that some publisher underwrote the publication cost, at least in part, as I understand volumes of both studies were sold at a price. Moreover, I an wondering why, in view of your present interest, you do not get some private estimates of cost in New York. Because of red tape and the general situation here, it is less easy to prooe(ld than it would be in Wm York. I have been so tied up since Monday that I have not had a chance to study further your manuscript on insurance, but I shall do so and oomulunioate with you presently. Mk. Goldenweiser said that he read your manuscript rapidly on Saturday and felt that you had put something together that would appeal to your friend. He said that he had no suggestions to make. Sincerely yours, Anril 13, 1931. Mr. J. H. Biddle Hotel Lennox bt. Louis, lassouri Dear Oaek: I Your letter from Xansas City and the memoranda you sent with it came in this morning. I was sorry to bother you about that Dallas ineuire, but it touched on matters that I couldn't be sure about and so I thought / had better ask you. 3efore I recei/ed your answer another letter tame froei Dallas saying that they had no examiners' reports for the rear 1920 for any of the banks. It bad already seemed to me extremely undesireble to try to dorrow the reports from the Comptroller, largely because we couldn't count feene on his getting them for us praeptly, and -lien was without the 1920 records for any of tile banks, I sent word for them to omit the year 1920. I thought if you reouired it, ee might better get the information out ourselves. I also had aarlock select seven other banks hat failed later in the °prim se that the chance -eould be th2., would be eccessible in Dallas for a number of years erecedine failure. Things seem to be running along pretty smoothly. Ackens has two assistants eho began aork last ?ridgy. 2110 ?ecterhl reserve banks have net been sending in enough material on any of the studies to overcrowd us. Philadelphia called up the other day to exelain agL.In tile difficulty they were herng getting information promptly from the Pennsylvania 3anking Department. The reason fez* it, as you know, is that there is n entirely new personnel in the office. It seems °lain from the .aemorande you are sending in and from the extension of your trip that you are finding it extremely interesting. I am very glad. It alll be good to have you back here though. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Yours most sincerely, "11E0 OELEGRAM • FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) 208gb RECEIVED AT WASHINGTON, --4gnsascity Apl 10 248p C B Hemmond, Board WashingL. Suggest you let Dallas select seven substitute banks for the study referred to unless you have already made some other provision Riddle 4p S.• 001,10.••=11.141,11.10 121•1011: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -11901 • t Form 1414 TELEGRAM FEDERAL RESERVE BOARD LEASED WIRE SERVICE WASH INGTON 2 -0454 Aril 9, 1971 J. H. Riddle, c/o A. - .cAdams, Kansas City tAi Test seeing 'Thornton Cooke of Colambia National, prominent A. B. A. Advocnted branch b• akin thirty years ago, nartorly Journal rconomics, Noiember 1902. M 4/TI liPMOND Official business Chari7e FeUeral '.eserve Board loverulent rate https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • CABLE ADDRESS .MUEHLEBACH. SAMUEL J. WH ITMORE PRESIDENT 6 GERI- MANAGER V6itmoreg1ote1 eo. Lessee 17/ BALTIMORE AVENUE AND TWELFTH STREET kapsas e ,A s • S ,I / • \-. (S) - , 7 ,/ a OELEGRAM FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) RECEIVED AT WASHINGTON. D. C. 77gb Kansascity Apl 8 1017am Hammond Washn We are holding your wire to riddle who has not yet arrived Can you advise when he expects to be here. Mcadams 1126am https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis P. D. 0.2vis•Vm190.1 isorm• 1011•116: Ono 6-110IN V• t Form 14S TELEGRAM FEDERAL RESERVE BOARD LEASED WIRE SERVICE WASHINGTON 2 p454 April 6, 1931 LicAdsms, Kansas City Please hold aiddle wire. .impeet him there in a day or so. 11-1-40*v.LOfficial business Federal Reserve Board Government rate https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Form 148 a TELEGRAM • FEDERAL RESERVE BOARD LEASED WIRE SERVICE WASHINGTON 2—g454 aro April 7, 1931 c/o LIcOlure, Kansns City 'le study of twenty failed trinks Dallas has no r cords for yenrs ilneteen eIhteen, ninet'en, and tienty of seven of the tNenty you selected. Shall they select SelErl re/uired records frca Comptroller. Official business Char T .edern1 heLerve Board Government rate https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis substitutes or snail ln borrow .pril 6, 1931. Mr. J. H. Riddle c/o Mr. M. L. McClure Federal Reserve Agent Federal Reserve Bank Kansas City, Missouri. Dear Jack: We just realized today that you do not intend to get back for some time. For a)me reason I had the impression your trip was not going to be quite so long, and largel7 on that account had made no effort to write you. Nothing unexpected has ha,pened since you left. Things have not been going very rapidly, particularly due to the feat that suspension schedules and other material has not come in from the banks in any quantity and particularly becnuse there has been some illness. Garlock's brother wns extremely ill 1 st week and had to have two opecations, with the consequence that Garlock's own time was pretty badly shot. nckens reported the first of April and is now at work, although he is not feeling entirely himself yet. He - nd I have gone over the studies he tg going to begin on an cal help that he will want. at the present time he is looking up the cleri• Upham has also been under the weather, and besides that was out of town for part of list week. The Comptroller his sent over some of the examiners' reports on susry-nded banks that we wanted, but those that we wanted most they are having the most difficulty in nrocuring. This caused us n slight inconvenience last week, and I spoke to Smead two or three times about getting the stuff. It did come, however, and by now additional suspension schedules hnve come in so that the work in that division is Pa)ing right ahead. I am /orking on my chapter and Miss Hamill has °Inished typing considerable part of what I have done. I got Mr. Goldenweiser in a propitious mood and got his 0. K. to go ahead with the study of affiliations. He felt reluctant to ask the banks to do it. On the whole this satisfies me very well for I think, aL I have https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • Mr. J. P. Riddle, f2 April 6, 1931. insisted to 3mead all along, the job is not so big a one as it appears to be at first sight, and that moreover the work of determining the definitions and classifications, which after all is the hardest part of it, can only be done after we have gone into the subject in a p-eliminary way. As it is, I think the work is starting very nicely. i1liam Blattner is colipiling the %aterial from the reference books we h.ve here and we have a good start already made, althou,h later on we shall undoubtedly want to km, * same help with it. I an quite sure that there is nothing of such mhgnitude and complexity as to raise any difficulties. The memoranda of your conversations with people in Chicago were extremely interesting. I was glad to see that you got up to 7,Aukesha. You apparently were unable to see Andrew J. Frame who is the Koses of the unit bankers. I talked -tith Mrs. Riddle the other day and ?uppet was down to see her. With best wishes for the rest of your trip, I am https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Yours most sincerely, • • •• FEDERAL RESERVE BANK OF MINNEAPOLIA, rk'‘elts. NINTH DISTRICT 4P/i, 4:/kt•• • .•• • OFFICE OF THE CHAIRMAN AND FEDERAL RESERVE AGENT /9, ° 4b$/0 414P.Op JOHN R. MITCHELL CHAIRMAN AND FEDERAL RESERVE AGENT CURTIS L. MOSHER 9e,;g10,9 ASSISTANT FEDERAL RESERVE AGENT April 4, 1931 F. M. BAILEY ASSISTANT FEDERAL RESERVE AGENT https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Dr. E. A. Goldenweiser, Chairman, Committee on Branch, Group and Chain Banking, Federal Reserve Board, Washington, D.C. Dear Dr. Goldenweiser: Thus far, I have had a number of visits in Chicago, Des Moines, and several smaller places in Iowa and am, of course, getting a much clearer picture of the situation out here than I could have gotten in any other way. I am jotting down the high lights on each interview and sending them in to Miss Hamill to be typed. I hnve also asked her to give you copies of these interviews. I have just arrived in Minneapolis and am convinced that I should see something of conditions in this district as well as Kansas City and St.Louis before returning. That will mean perhaps ten days more. I have not heard from the office, but presume there are no urgent matters which dema-d my return immediately. At the present time, I expect to arrive in Kansas City during the latter part of next week, and in St.Louis around the middle of the following week. Presumably, any communications addressed to me in care of the agents in those cities will reach me. Sincerely yours, aii-t/A7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis April 4, 1931 Mr. Eugene M. Stevens. Federal Reserve !gent, Federal Reserve Bank, Chicago, Illinois. Dear Mr. Stevens: I am enclosing herewith a copy of a letter which I have just written to Mr. Bruce Townsend, \idrector of Reoeiverships, Des Moines, Iowa, asking for certain information. The letter is self-explanatory and merely note thnt I have asked him to send the information requested to you to be forwarded to me at Washington. Very truly yours. J. H. Riddle, Secretary, Committee on Branch, Group and Chain Banking. JHR/AE Enclosure • Apr'l 4, 1931 Mr. Bruce Townsend, Director of Receiverships. Gtate Canitol Building. Des Moines, Iowa. Dear Mr. Townsend: In acoordanee with our conversation of lost Tuesday, I have had mimeographed the form for oollecting information from reoeivers of failed banks, nnd am sending you herewith R suoply. / would greatly eppreoiate it if you con have this filled out for some ten or twelve typical bonks in the etate of Iowa. /t in hoped that they oAn be as noarly representative of the average of failed honks. as poRsible. I take it, for axe:sole. that a bank .which psye out 80 or 90 per cent on dopesits is dust as ununual as n bank vihich pays only 10 or 16 per oent. I got a fairly good idea of the situation in the northern pert of tho state. Ground Spencer and neighboring towns, Rnd I An Pnxious thnt sore of the banks4eleoted should be from the South nnd other sections of the state whichl did not see. I tried out the form on a number of reoe!vers, both of etste and national bnnks as I wont thru the atato, and found that they oould eueply the information very readily with vory little labor. *:e shall oolleot this same information from receivers in a number of the other states, and when a memory of the dsta IR prepared, 1 shell be glad to let you have a oopy of the roe:lite. Since we collect nll of our informtion thru the Federal reserve bank of the district in which a state in located, T suggest that you send these sohedulos, when oompleted, to lie Federal Reserve AgerA of the Federal Reserve Bank of Chieago to be forwarded to me At 'eshington. I 4hall write to Mr. Stevone explaining to hi. what I I ave done. Thonking you for your neeistanoe ahile in Dos noinos, I n.m Very truly yours J. H. Riddle, Seoretary, Comitteo on Branoh, Group and Chnin Banking. JuRAr, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis April 4, 1931 Honorable L. A. Andrew, Superintendent of Banking, Des Moines, Iowa. Dear Mr. Andrew: I was very sorry, indeed, not to get to see you again before leaving Des Moines, but when / got thru in that section, I found that I was compelled to leave rather early in the morning or lose a day. Aiter visiting a few towns around Des Moines, I ORMO north thru Fort Dodge and up to Spencer where I visited some of the surrounding towns. The story I got everywhere was practically the save as your oan version of the situation, with practically no now angles. Everywhere it is a story of too liberal loans on inflated values, numerous loans for buying land, and other capital purposes. In nearly every instance, much was due to a question of management, although there is very much feeling that during tho oritioal years of the inflation and immediately following bank supervision was rather lax. I found in the smaller places very few definite suggestions as to renedial measures. In many oases, however, / found a sympathetic attitude towards Iowalq new law permitting the opening of offices in snail towns where no bank exists. I have just arrived in Minneapolis and expect to go into 90M0 of the eommunities in this aistriot, as well as one or two other districts. After I have had an opportunity to see some of the other states, I shall write to you on returning to Washington, and give you my impresions gained elsewhere. The day I visited you your secretary took down the high points of your statenont regarding conditions in Iowa, and I presume you intended to give me a copy of the statement after it was typed. I shall appreointe it if you will send it to me at Washington in care of the Federal Reserve Bard. Thanking you for your cooperation and assistance while Moines, I am Des in Very truly yours, •THR/AE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis J. H. Riddle, Seoretary, Committee on Branch Group and Chain Banking. -1 • April 4, Mr. David L. Vackens, Bureau of Agricultural Economics, United States Department of Agriculture, Washington. D.C. • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Dear rr. 17ickens: I have been trying out on the reoeivers of failed banks in Town the schedule that you prepared for collecting information as to the type of loans found in failed banks, and the losses on these loans. / have nada oertain modifications in the form on the basis of experience with these receivers, and em having some 'copies mimeographed here in Minneapolis. I find that tho receivers oan supply the dollar figures as eas5ly as the percentages, and the Banking Department at Dos roines has promiRed to have ten or twelve of these forms filled out for typical failed institutions in that state. I shall also try it out in the other states which I visit, and feel opstic) that we may get the cooperation of a number of State Banking Departments. A copy of the revised form in enclosed for your information. I sinoerely hope that you have fully reoovered your health, and ..re feeling normal again. It will perhaps be ten days Or two weeks before I return. 7hen you have nn opportunity. be aura to talk to Dr. Goldenweiser and Mr.Smeed about the inquiry Which you propose to sene to active banks. I gavo each of them a copy of your original tentative draft . . With kind regards, I an Sincerely yours, JHR/AE t• April 4, 1931 Mr. Guy Greer. c/e Federal Reserve Bank, New York City, New York. Dear Guy: I https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis shall not be ,back in I find that Washington before perhaps ten days or one weekrfrom today. Presumably, you will want to start on your trip to Canada before that time. and I see no reason why you should not go ahead. I should like to ha-re had a talk with you before your going. but I had nothing definite in mind and probably have nothing to suggest that would be of any partioular assistance to you. If there is anything special you want a docision on, you oan of course, talk to Mr. Rounds or Dr. Goldenweiser. I dish you sucoesa on the trip and shall look forward to seeing you when you return. Sincerely yours, JHR/AP, z....... _ NEW - FIREP,OOF 125 ROOMS o1 50 WITH BATH LLI)(,1 • E.G. TAN GN EY, PRES. E.J .TA NGNEY,MGR itn ; --1 -/ St „ • — • • (Adz- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ,e- • • (,' Lej GOLF PRIVILEGES MAY BE SECURED FROM CLERK TO GUESTS OF THIS HOTEL THE STEV6IS l' II' 115 1 III Chicago, I /-.-eZZ-- ir-193! Ii. TheW6rld's Createsillotel Michigan Boulevard -PI,Street to 8 III Street TELEPHONE WABASH 4400 ,‘ -//°1/49 4:40. LAy'Lr, 24'Z'P—"4 / a` ; L` -A-t_e«e zt &A-4 1 z:z>o https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r(_,t g, ‘ Larch 25, 1931. Mr. J. H. Riddle Federal leserve Bank Ohicago, Illinois Dear Mr. I learned from :,1r. Hammond today that you were planning to talk with someone in International Harvester. It occurs to me that their diatribution program has been adjusted pretty closely to the changes that have been going on in agricultural communities. . trading area are deisloping, and outlying small towns are- lost,* business to larger ard more centralized tons, the International harvester list of agents and agenies should show the direction and the degree of the change in the various states. I am not certain whether it is their policy to make such information public, but I think it will be useful to Ub if se can get it along sith whatever opinions they may have about the position of the small agricultural town. It would also be interesting to know in what ways their distribution policy in the southeast varies from that in the Aliddlewest. I hope trip has coAmenced well and that you will hnve an opportunity to talk with an officer of International Harvester on this subject. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1ery trulylyours, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Otrytemtbryf 1:07 .1, II, Riddle, Mew York, Polerftl. '08197"-71,/ , •Irt , Trv 021 ' 1 1 Trn-7 Y ‘ea.A. _diet Tinelosed is the ansser I sa78est to the lettor ryncllesecl., "If ylva fPel thnt It !rim: :r,szatias lr ro-nytm "Tor, 71-0n eo”1,-4 moo. ,rte ayircleri, 111-7,1t ti "7-1-r. Fey? "Tr.•,',.k4 0 f.lierart se t*).1 let t Pr a8 711 !7er.tt, t;r11: 7r,rtt-St https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Soptanbei' Ir. J. R. Riddle, Pedersl Reserve Rank o' raw York, Now York, New York. Isar Riddle: Rnolosed is a wry of the letter am th. has gone ont tor to all Agents ma to the which Schedule will observe thPt it is very close to 7onr Yon amiptroller. the only ohange.I node was to add a think draft: in font I clause in the first numbered paragraph. When your draft ex,rived, I wog orolwed in nlittir together w originAl 311. and your oriinal one, endI iftP =Oh surprised to see now nearly identical our 0/Torts tioro. troller'a office I took your draft over to the fl about disanlointaent it ovor it with Ur. Pouts. Mr only and wanted i the interview las that he avrewei it se swewoinsay. to see what Drain and some of thb other people vfno a.se -Forking en the dotal.; mould say, tut it,. Posts did. not 'sort to brihr! Una into it aryirently and I wad net insist. A totter oar to you this morning fray Mr. 'Nernett, s asking a study of bransh banking in the Ilarvord Man 11110 OalifOrniao I teak the liberty of opening it because it was obviously Oemnittee business. Me Only says thAt he expects to be here in Washington next Maisdey, the 1504 =twill mil. So I will tell him nothing* but find out everything and seed him on to you for the rest. //erg truly yours, ano. S FEDERAL RESERVE BANK OF NEWYORK September 11, 1930. Dear Hammond: I received your letter of yesterday with the enclosed copy of a proposed letter to be sent to the Federal reserve agentk I sent you a proposed draft of a similar letter yesterday and„Wpresume m you have received it this morning. IL many respects I think your letter is better than mine. There- fore I have drawn up a new draft using both your letter as well as my original draft. Please do any editing that you think necessary before sending It out. The only material incorporated in this draft which was not in your letter are found in numbered paragraphs two and three. I think clearly thfiL2 should mo in, but I wish you would examine number three very carefully to see if it needs any editing. I hope you can met these letters out tomorrow. Very truly yours, B. Mr. C. Hammond, Committee on Branch, Group, and Chain Banking, Federal Reserve Board, -1ash1ngton, L. C. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • Dear Mr. Curtiss: Now that actual work on the Suspensions Schedules, submitted to you with our letter of July 25th, is under way, questions are arising in certain states which reflect the different methods of keeping records and the difficulties in reporting exactly what is asked for. It is manifestly impossible to expect that any one schedule could be found equally well adatpted to all states and to the Comptroller's office,- and it is, therefore, unavoidable that in some states it will be much more difficult to fill out the Schedules than it is in others. To insure as much uniformity as possible, however, and to insure accuracy in interpreting the reports, it seems desirable to emphasize the following points: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1. Sections 9 and 10 of the schedule, as well as sections 7 and 8, call for data on claims by depositors only, but where the records are such that depositors' claims cannot be segregated from other claims, that is, bills payable and notes evidencing borrowed money, then total claims should be reported and a notation made to that effect. 2. Secured claims should include only those claims secured by collateral'a-notclaims secured by surety bonds w4 The latter should be listed among general claims. 3. It is apparently the practise in some states not to list as claims those deposits which are secured by collateralbecause they are assumed to be self-liquidating. For purposes of this schedule, however, all such deposits should oe listed as secured claims allowed and the amounts realized by the depositors on tne collateral should be shown as payments on these claims. The amounts realized on the collateral should also oe shown under collections. 4. In many cases it is difficult to show a figure for Secured Claims that does not include items which in part are present also as General Claims. The reason for this is that Secured Claims are assumed to be selfliquidating and, therefore, are not part of the receiver's direct responsibility, which covers only claims allowed for dividend purposes. Any portion of a Secured Claim not liquidated by the collateral segregated to it may, however, be allowed as a General Claim and, therefore, increase the claims allowed for dividend purposes. 'hen this happens and a corresponding change is not made in what was originally reported as secured claims, it results in duplication. Where it is possible within a reasonable time to get accurate figures of Secured Claims that are net and do not include amounts also included as General Claims, it is desired that they be so reported. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 If this is not possible, however, and the only available figures of Secured Claims include amounts also present in general Claims, it should be clearly indicated on the schedule that this is the case. 5. Under section 10 the amounts shown as "offsets to claims" should not be included either under collections or under claims allowed. 6. If records are in such shape that the figures cannot be supplied in exactly the form called for in the above sections or any other sections of the schedule, then the best figures available should be given and a notation made as to exactly what they represent. This is essential as a guide in tabulating this material in order that we may not compare wholly unlike figures from different states. Very truly yours, 5ept(ober 10, 1930. Mr. J. K. Piddle, 1Pederal Reserve Bank of New York, New York, New York. Dear 11Adle: Encloc,e,;. Is tio dr^,ft of s letter in line with aur betephons convereatior of :reste7-71-. I have glum it to both Blattner and 3mead, Blattner raisei the question if we mere net perhaps embarrassing ourselves by sending the litter to Other agents than those from shun um have inquiries, but he eeeeed inclined not to 2ress this ':nestion Olen I empLiasized the fact that tlic C7Ttroller's offir.e, .1.s.e7te f., Amably the meet conscientious -tork or them sus-207,:;17-s tsbeqies will be dove, muld naturally mr),:e more c:'7 the ,lif71.cultirs than Commissioners here an(). there iii the oorntily who !meld decide wan their or amount to substitute figures and Pryor stares wherever they bad ary Or the other hand,:-1(.4 Dread, withr.ut imestior, approves sardine the letter rylt. His only suggestion war: ' , ,raph three ebni, that the first sel,tenco of =bored rars! be maAe more clear. wlth res2sot to er,.I also intend the last three y4raF:r1nhr jut, 712-A moti)ns of the it refers'to. I mleo enclose a bill for the 1-e: to to Mr. Rounds and a bill frol the printer for the aa. 1at of bank suspensions schedules. As I remember it, the Is correct. but Miss Nammill =A I are unable to find the in. AuShse you left: Therefore, though mtr recollection is rather distinct that this is the T.13unt, / preferred to send it to you rather than directly to Lir, Round* for payment. Very truly yours, itno. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis E-ertenber 10, 1930, Mr. Frederic Rs Curtiss, Federal Reserve kment, Federal Reserve Banl-r. of Boston, Bostor„ 1.Ilseachusetts, My dear Mr, Curtiss: NOw that actual work on the Suspensions Schedules, sdbmitted to you with our /Otter of July ZEth, is mnder way, Taesti ons are aria. ing in oertain states whist reflect the different method s of records and diffieulties in reporting exactly what is anted for. -/t Is manifestly imposSibls to expect that siv on schedule could be found eo.ually woll adopted to all states and to the Comptr oller's °Moe, and it is, therefore, unavoidable that in some statos it will be Anoh ,nore diffieult to fill out the Schedules than it is in others, To "nears as mash uniformity as possible, however, sna to insare a3csdrac7 in interpretinr --,.,1rte, it seems desirable to em-hasize the following poirts; ------1-end-some-epeo4f6or https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1, .orever it is neceasagy to remit* figures other than as - ,i. for, it is ImperatiVe It the Cesaittee be informed exactly *hat the figeree do represent. / efI , , N 47 2, With respect to Alamo by depositors as distinw .4 neighed from claims on eocourt of bills pepable or notes evidencing borrowed money, the Schedule *ells for claims bv deoositors only. If the reeoree have been so kept that other claims, thot is, hills payle rind notes, ch;,7-ot be eliminated, the total should be reported and notntior made that it covers each claims as well as depositors cltms. 3. In marr, epees it is difficult to show a firdre for ecured Claims that does not include items Which in part are present also as General Claims. The reason for this is that ',Alcured Claims are assumed to be self-liquidating and, therefore, 9re not part of the receiver's direct responsibility, which covers only claim allowed for dividend purposes. Am portion of a Secured Claim not liquidated by the collateral segregated to It may, however, be allowed as a General Claim and, therefore, more se the claims allowed fr- 1.ividend purposes; hat https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Frederic P., Curtiss 12 September 10, 197- when this happens, it does not follow that a oorresponding allaca will 10 made in what was originally reported as fteered nabs*. Where it is possible within a reasonable ttee to get aeourate figures of Secured Claim, that are net Gadd° mot include amounts also inoluded as General Claims, It IS dmeired that they be so rrported. If this is not peesine and the 07117 svn1.1.011e ri.7:1rE of fAaartld OtAma inMonate also present in General Clatne, it should be •l ateerty indloated that this is the oasis, 4. The amount* reported as total oolleotions should be mmt, after deducting offset* allTTed, The latter should he ameemstel for under the heaaing, "Offts to olahas (loans paid, etojw Vary truly youl's, C 3. lialLaoud • •••••• FEDERAL RESERVE BANK OF NEWYORK September 10, 1930. Mr. C. B. Hammond, Committee on Branch, Group and Chain Banking, Federal Reserve Board, Washington, D. C. Dear Mr. Hammond: I am sending you herewith a draft of the proposed letter to be sent to the various Federal Reserve Banks covering the questions which have been raised regarding the suspension schedule. the suggestions in your letter_ _ of _September _ most of the points raised. I have followed very closely ‘0, and believe I have covered This draft is merely a suggestion, however, and I hope you and the other boys who have given some thought to this schedule will go over it mo4critical1y before sending it out. ?or example, I am not entirely clear in my own mind just how deposits secured by collateral are handled in the case of a suspended bank, and if you have any doubts as to whether I have covered it accurately and clearly, you had better discuss the matter with the Comptroller's office again. I have no desire to ask the Comptroller or any of the State Banking Departments to do an unreasonable amount of work merely to classify the figures just as we have asked for them on the schedule. Therefore, if it entails much less work to show total claims rather than deposit claims, I think we might take the figures in that form. You are correct, however, in saying that they should stipulate in every case just what the figures represent. Likewise it may be very difficult in some cases to get accurate figures of secured claims. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I understand from your letter of September 2 that FEDERAL RESERVE BANK OF NEW YORK C. B. Hammond 410 :41r. Drain thinks this is true of National Bank suspensions. 9/10/30. If this is true we will of course have to be satisfied with the general claims. After all it is the general depositor or general claimant in wham we are most interested. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Very truly yours, J. H. Riddle, Sec'y, Committee on Branch, Group and Claim Banking. kt• Lear Inquiries have COMB in from some of the state banking departments regarding certain sections of the schedule on bank suspensions which indicate a need for instructions in order to insure as much uniformity as possible in the data supplied. Many of these questions arise from differences in methods of keeping records which makeOf it difficult in some cases to supply the information in the precise form called for on the schedule. This is especially true with reference to sections 9 and 10 of the schedule. Thcce 4ections as well as sections 7 and 8 call for data on claims A by depositors only, but where the records are such that depositors' claims 1 cannot be segregated from other claims, that is, bills payable and notes evidencing borrowed money, then total claims should be reported and a notation made to that effect. It is apparently the practise in some states not to list as claims those deposits which are secured by collateraljbut for purposes of this schedule all such deposits should be listed as secured claims allowed and the amounts realized by the depositors on the collateral should be shown as payments on these claims. The amounts realized on the collateral should also be shown under collections. Secured claims should include only those claims secured by collateral and not claims secured by surety bonds. among general claims. The latter should be listed If feasible the figures for secured claims should be net, that is, if the collateral is not sufficient to cover the entire claim and the remainder becomes a general claim, then the amount reported under secured claims should equal only the amount actually covered by the collateral. This will prevent duplication of amounts under secured claims and general claims and make the sum of the three items—secured claims, preferred claims, and general https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • • - 2- If this is not possible, however, without claimsr equal total claims. .st too much laborandlthe only figures available for secured claims include amounts which are also present in general claims, this fact should be clearly indicated. Under section 10 the amount shown as "offsets to claims" should not be included either under collections or under claims allowed. If records are in such shape that the figures cannot be supplied' in exactly the form called for in the above sections or any other sections of the schedule, then the best figures available should be given and a notation made as to exactly what they represent. This is essential as a guide in tabulating this material in order that we may not compare wholly unlike figures from different states. Very truly yours, 1- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -ei--I 40-- •• FEDERAL RESERVE BANK OF NEWYORK September 10, 1930. Ir. D. W. Blattner, Division of Analysis and Research, Federal Reserve Board, Washington, D. C. Lear Blattner: The New York Bank has prepared their own work sheets in the study on earnings which seeing to be very good. I am sending you several copies which may be useful in case you are asked for suggestions along this line by any of the other banks. New York is making rapid headway on the study, and I think it is now about one-third completed. They have raised a number of questions in regard to certain exceptional cases which may require some kind of a ruling in order to insure uniform practice in all the districts. be drawn up These cases will a memorandum -C.4~# next week and forwarded to you. I don't know what problems other banks may have raised. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Very truly yours, R. J. Riddle, Secretary, Committee on Branch, Group and Chain Banking. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis September 10, 1930 Dear Mr. Riddle: I have your note and I en glad to be in contact with you once more. I suppose I shall seep you here at the end of the hay fever season, but I may have occasion to be in New York before then. Sincerely yours, I. A. Oeldeeweiser Director of Research and Statistics Mr. J. N. Riddle c/o Federal Reserve Bank New York City •• •• 15") n FEDERAL RESERVE BANK 0 .4S 44/( 4,V10 *414'0 OF NEW YO R K 4". September 9, 1930. Goldenweiser, Chairman, Committee on Branch, Group and Chain Banking, Federal Reserve Board, Washington, Dear Dr. Goldenweiser: I have returned from my vacation and, beginning today, am devoting my time aglAn to the work of the committee. The Federal Reserve Bank of New York has been good enou* to give me an office and I shall be here for about two weeks, at the end of which time I think I can return to Washington INithout taking too much risk of hay fever. meantithe I shall keep in close touch with Hammond and In the Blattner and the work of the committee. I hope you had a pleasant trip during your vacation and that you returned from your travels with your health fully restored. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Very truly yours, J. H. Riddle, Secretery, Comnittee on Branch, Group and Chain Banking. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. J. H. Riddle, 45 Fifth Avenue, Xew York City. Dear Your lettcr of the 4th postmarked fast les rark just this rdnute arrived. Apparently yea ASA mot i. *sive mall that I sent you in New Hwepeilmo earlier in the 'seek. It included principally ifuet Altoother correepaomence or the esereneleme ollbodelo, The letters will doubtless WI forwarded to you 'by moil. I enclose copies that we hopper to hove of the two most important oemaanioations. Miss amain finds the ussorandea you asked for celled "Swgested nest ions to be Subtaltted to suobessfal eankors," and It is also onol000d. Goldenseiser will be here Monday, I think.) Tery tray yours, • 11. RIDDLE 43 FIFTH AVENUE NEW YORK CITY • .11.-1 Vile - 3..).1)..11.-L,.-„ed also sand https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis , • ty,)ed for .3ucce:;.;f1J :f a CO); H.-..-.)7.1nd 3:1.0 -tile number of bank failures in the country durir„; 5.10 C• a f ) Mr. J. H. Riddle, The llowst PlOOMMMto Bretton Wooas, White no-ants:ins, W. He Dear Riddle: Adelosed are copies of the letters or. the saspensions schedule fruCleveland and from Atlanta, whioh I :captioned in my last letter. I did net get through with the oonterenoe at the Comptroller's offtoe in time yeeterdey to send thee* on to you as I expeoted, I 7antmd to find out from thee how their problem lined up lith that presented in the letter emeloeed, eo that the answer that we send out 1111 insure uniformity. now I take with Yr. Drain :tein and also with Mr. Sanford, whom you 6,o far ca the national beaks are ooneerned, they are bow enough , will not re. looldicittp other inflimeetien, emd, as I indicated before of week, yet. couple a Ocire sa answer on sect..--s I) and 10 for probably ulty in rediffic Jr. Biafora ounfteedL, . Jraints diserlption of the said that and S, -orting aeoured Otetme Mid general Claims as net figare the in. rwoort it ?wild take a year or were ter their present force to s would formation that wir ani svmm so be &hi not believe that the figure be accurate, fertile reason that there was nothAng to check against and only people faailbirwith the records would be able to fiat the right foam figures together. Perthemmere beiere the year 1927 a different istion iisfall the h furnis not ly nrolaib of reperttng-wes used loam mad desirei at all. real (u, The letter from Attested*** net eeem to me to raise any t claims deposi te separa to unable floulty, exeept that epperentty they are 1:10 is to seems it end Oleeet fro* free other types of oleims. The letter m, proble own his ed analys ghly thorou written by someone who has not very net do his of letter ports emt for at learnt as Inaba it out, the differ hang together. They axe apparently bothered by two oirounstamee: the diffiailfy of remitter ',eared Claim, which is the same problem that the CoaptrOther bee; and eeeond, the difileaty of eliminating claims on amount of bills reeelvehle and money borrowed fraa alai:as to deposi' whiehL, however, as stated by the Cleveland letter, does not appear t. inenperable. It **ems to as that our greatest danger lies in the probability that in a great many of the states the schedule will be filled out awarding https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. J. R. Riddle f2 SeptaMber 4, 1930. to their own neoessities and not amording to the schedule, .11L1 that we will not be I:BA:timed of what has happened. We cannot require fisurea ihiCh it is impossible to farnitik, bet es sea at sey rate nsk that Of, fires that are furnished he deaoribed in endk Oleg that we oan determine to What extent they may be combined or oespoved with Corresponding figarea of other states. I soggiest, therefore, that we send to the Wore' lieeewe Agents letter substantially BA falOWBS le Say in the first plea*, as the work on the seepenston schedules progresses it bosoms arparent that the different methods of keeping the records in the different states raises questions of uniform interpretation of the schedule; ani that wherever it is neoessary to furnish figares other than as sated for it is txperative that the Committee be I:refereed exactly what the figures do represent. 2. Say farther in partioularthet with weepeet to elates by depositors as distingaithed from claims on amount of bills payable or notes evidenoIng borrowed money, the eahednie calls for claims by depositors only; nrd thrt if the reeerkle are in such a state that vether claims, that Is, bills peyehle and nehes 3 mannot be eltmineted, the total should be reported and notation nada that/such other olatms are inpluded in it *IOW with dow! rositors claims. r 3. ANy in the third plane, that if it is possible within a vreasonnble time to get secure% figures of Secured. Claim* that are net and do not inelvie amounts also included as Gee. eral Claims, it is desired that they he so reported.' If this is not possible and the only svaliabie flow** of 300ered Claims include amounts also present in deneralt.Olatme, It shortU be nearly indioated that is is the ease. I hilts to bother you with this metier *die you are on leave, but I hed so little to do with the *moonstone sehednle that I do not feel jestifled ir answering the Taestions that have been raised 117 MY61411 . ?hi famptrollor is taken oars of all right for the time betng. In the elle Of the other plaess, however, I think something as indicated above in the nmeherei pezegrephe needs to be sort to Atlanta nnd Cleveland 17 war of smear to their letters and ale, to the othPr A.striots as a matter of preestatton. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Very tray yours, September 2, 1930, . J. P. iddle, The 4,,.JInt leasant, Bretton Woods, White Utuntains, R, Dear itleidles earleek arrived thisisorming and is alre ady at ivory r' the atetistiee of breath benklai fran 1900 to the present nee . They are workbag just now an what we oall sources net is, .ae Peherel Reserve Agents' renorts on branch banking in the year 1025. MO Is starting off niaely, and I feel that we *art /The btu lolly mach. ooerespondenoe Which you desired, I think sierithing of Importance is included, We did not male Any attempt, however, to get together all of the letters meriny aokasitedging the reoeipt of stuff that has been pent in. A few mem reports an grouw_end chain systems has been reoeived, but nothing eamelete from &WI district, ,The mest important nestles that we have up jou will find dimmed in the attached correspondence. It is the ,-:uestIon of the scepausiese sehedulee Toe will see frau the correspondenoe that the gumption of bow the exposes is t. be absorbed has-been raised are*/ bet we have avoided giving nnr final answer. The more lapertset question has to do with the interprets. tion of the temps of the schedule, partionl arly respecting mee. , tions 9 and 10, Mr, Drain, who is handling thelsortover at the Oolsptrolleres *Moe, was over here last week antes bed a oonp. femme,both Blattner and Mcrbett join t as. This earning .tinee. time on the Buse point came in gran Olovelar d and'Atlautas. The letters are too lomg rarities to get oopiod this after6' no, but I will send copies of them to you tomo ro,/. Mr. Drain did not notice until se called his attentio n to it that undrschedule 10 at the bottom of the page the amounts to be eatare *perments to depositersen BB felt that it would be praott. oally il=possible to report the flare exactly reason thnt the sonroes of his information; aa pecht for the namely, the :41sceiver:. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. J. H. RiAdle #2 September 2, 1930, reports do not distinguish between the claims of depositors ere the claims of other ereditors. Is also motes the point that borrowed money alter a bank gets into diffloulties very !Weft quently Is evidemeed by a certificate of deposit rrther then by a note, and that sedh deposits hem been classified 137 court decision as amtmelly tills piyabia. The letter from Olevelemd also questions the preeticebilit7 end the pr:yprlety of omitting liabilities represented by moray borrowed or tills peyable or re.1,1soounts. The seise point is also raised in the letter tram Atlanta. Another difficulty has to de with the elassification of claims as secured and gemerel. Ordimerily the reports of the evolver, ehlah, or cour.i-e„ are the source of at of the temptreller4s information do not tell arrthirgrabont 'immured cleime; eemeequently, it is impossible to report them as 'ma, end it is also ippessible to tell what pert oft)* general stains represent what were originally esenrai elatms for *hi& the eollateral was inadequate. Mr.'Mall ergs that if it is neeessery to furnish net figures for seenred elates and general olalne, as called for an the ethe&Ile under sections 9 and 10, It will tate about twice as lamg to do the work an suspended national boats as it w-uld If seoured clams were Ignored. 1e svs farther net it would be tnpossible to Awe any nrumrseoe of acaursoy in 1- ,!= flares, for the reasor thnt there is notaing to ohook them again It would be neoessar7 ta go throe. eerrespamdenoe and other sepplow nentary souraes outside the nesolwere imports and assemble all the referenomo to meourea olias thet Dodd be bond. This is a prowess that would, of *ours., leave a largo morgin of The gee of the diffloultzr appears to be thin When a receiver totes ahems of a beak he bases his liquidation wen allowed obit which prabany do mot *Teal the liabilities in tote that have to bc 11-11d-"4. Creditors whose claims are satisfied with collaterrl old end can realise on, of course5 do not ANJOU Olt, Of him at all. 0 , 16h ease appear ant: Then that: collateral is InadeTuate. Dhder such circumstenoes it OONalo alwlr that secured slates, preferred alatms, and general claims, as set dovn on the schedule, would Almost never give a met in representing total (slab's, far If secured claims are known at all, it still remains true that they do not enter into the reeeiveres balance IMO and are represented in part, but to an admen part, in the figure of general elates. You will in that from the oorresponimome that the question reload by the oanoismiomer in Oklahoma has been anomorod. Mr. Drain is arimmarg to go ahead with other items of information on the sobs& ule„ het Winn leave the sections in question open pending farther insielletiena. NO MR do this without delmriag the wort. The few https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Gb urs4 I. Riddle #3 September 2, 1930. sohodules that him been retuned from the Philadelphia district arc incomplete and unsatisfactory I Shoal& war from a cursory inspeoti I am going to study the Atlanta and the alewelani %otters ant gill write you ageLn tomorrow at the same time I e1e10:a them. Pos. siblyly thst thee / oan get the problem bettor organised. As it is, I do not know uhother yea tore a class idea o-r it or not. I bows beau oonsuatieg with Blatt and Horbett oatI5 point, es.1, have already II/ALUMNA, but thO7 Mee no reedy solution to offer. Mrs Ooldesweleer Is not expeOtei back for ei week, but Mrs asset returned tOday, so the* / shall new be able to oonenit with bios I deliberately delayed writing until tow, hoping thee I wag hear whether you are niarring to be in Were* fres mg* ea errors staying in the Mite yountaines A low latter as benkearidsge some in fry* don Prencisoo this uorning sesilwaa teasel over to Blattner. It mig be &matter of same oesitort to yes to know that it la hotter here than It is polite form to ser in from* of xis. Mesaill. and that Blattner is miserable with the hery fever. ar earryingoa epethosery Meo:) in his pocket he tries to dreg himself into an op. pearence of health, but he says tint the appearing.* Is decent*. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis With best wishes 7017 tray yam* ; https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE MOUNT PLEASANT BRETTON WOODS WHITE MOUNTAINS. N. H. 7 v(3 Z(,e_je,7 z ,9 • August 23, 1930, Ur. J. de Riddle, Bretton 7oods, :21;tc -,,t11ns, V. N. Dear Riddle: 1Ai5 .'.1•.s been a mnoh quiter week than last week was. I was gitd to get your letter because there was a doubt ir my mind as to what yoi thou )!t of doing with respect to the r,tber a71pliaants beside gar1ock4 I hare kept their aoplicstio told tho. wnuld let the.. :mow if things developed in may that therr :IRE reod. for addltional help. Both Ass ';.eston and Lasc Young impressed we vsry.favorably, They have had rs7-. experience to mr7rie nem ralnable, I 'oad a letter fro4 Garlock :octerday mvinr" he mould be here imaediately after Labor AT. The 1)ab7 has clmo and overithing seems to be all right. VA, are still 'Ini.7ging mmkr at the branch banking record. I enclose a memorandumHvbich I made to record reconcilements in the statistics of national hank branches, I haven't been .,ble to figure out yet vhy that table was ever published in the bullotin in the first place, and Why on to)of that it use taken over In the Willis study with even greater Letaile As it stands the figure& are absolute/7 meaningless, I certainly don't vent anyone to *owe along a few years after we have finished our job and wonder what on earth we were trying to do. It puzzles me the more because the A7sents, reports for 1924 are nnasaally full of infOnation. Mr. Hrath of Chicago either misunderstood entirely how the reports were to be made up or oloe he failed to give the banks any instructions at all, for the reports, I find, are all wranc for that state, mhey give resources and loans aad investments for branches instead of the whole organisation, and in the case of merged banks they report in composite fashion the branches and size of the oom. ponent parts of the present Sonsolidated institution, as if the con- • .olidation had been 'fretted for all the years covered by the inquiry. I didn't vent to send them all baok to be done over, immure it is unnome*ery as we can get the correct Information frnim r^oords here. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 El., J. A, Biddle #2 August 23, 1930. I also enclose a memerenden on the olassificat ion of elaims and suspensions. It was smatter I had to discuss with Blattner and go over to the Comptroller's office about, in order to answer questions raised by the comnissioner in Oklahoma. Mb are Information has acme In or an of the in:niries he other day I wrote to the three districts who we bow' nelds4 on brunch lianktug from 1900 to 1915 and alba reported be net pet expect their figures. aight then bre soon we It is cool as October down here which would :lake one )1 7:4; chilly in the White ;Lountains. Best twine th t It MOwaill joins, if she doesn't she wishes. iu fmr lem-7e this -.t"r. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Te17 truly yours, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE MOUNT PLEASANT BRETTON WOODS WHITE MOUNTAINS, N. H. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE MOUNT PLEASANT BRETTON WOODS WHITE MOUNTAINS. N. H. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE MOUNT PLEASANT BRETTON WOODS WHITE MOUNTAINS. N. H. 7167 • /vtA''/T-ct https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • CLARK, DODGE & 6 I WALL STREET Co. NEW YORK •!r. J. —. flid'lle 13 Fifth _ore: Tew 7ork, jear f. Riddle: Reply to your recent letter rec-arding the work in Washington has been delayed by the turn Li's. Garlock presented of circumstances at home. me with a fine baby girl early Eonday morning. Both of them are doing so nicely that I feel reasonably certain of being able to take up my duties with the Federal Reserve Board the first of September. I am very happy to accept the position subject to the conditions stated in your letter with the understanding that I will be allowed sufficient time the latter part of September to move my family to Tashington. Respectfully yours, RHG:t Mr. J. Biddlo, 43 iifth 31ronne, New lark City. Dear Riddle: After receiving your letter of the thirteenth, I --' "117t have had no ropI:7 fral hi Mr. Garlock ar yOu It is alao of aeme Interest th:lt no r1A4 has ben received from the letter I sant to W. Lengstreet of Lola:Nino, 7latucky• Kiss foams. Ike use reesimaded in the letter Xiss Yneeland sent you, called the Met of the rat end left her application. I told her that we meld let her know later. I should say that hor ekeparlance qualtriss her for the yea we have to de. This morning another friend of yaws, whew, ma I did not gee, ailed we free the Treasury and suggested alias 7estan, wIlo has Just oomkleted her doctoral work at Stanford and is temporarily emnloyed by the Comoros Dowrtialat. I made an appointment to see Use ..oston =wily evening, with the understand as in the ease of Miss Youngs that we could not make a decision at the -nresont time. Things are getting along vory nicely. Miss Hamill is busy (the looks at me as if I were not getting it emphatisally enough) wit:1 the oorresnondonce and typing for both Blattmer and:myself. Mime MUhn is busy on the figures of early breach banking. The latter is rather a tedious jag partioularly beams Whe Is naturally net familiar with brinking ter, and particularly became there are a may little t_irkJs that have to be dhodkod. For Instanos, there was no imdiaation on moot of the reports as to ehether the beaks were private erantail., ..nd in many eases it am mamma to look them ip in old reeerds, ulnae the bnka themalree are as Unger in adistamoi. The reports Muslim Jenollr had to be Musa for "000011iation, but are no bask in asir hands again. The merle from Delaware were obvionsly aromas sad bad also to be arrested by retorting to old records that we bad hams anst at preload I am trying teenage discrepancies between the number of bremehes Operated by malonal bf https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. J. H. Riddle #2 August 16, 1050. C.s reported in the 'Allis study and as reportld by the C3mrtre117,r. The trenble Is that there allows have been a consider:110 nomil bimnabes Wish the Comptroller has offieialIy ignored. Those WO *Om of the MIPS birort-lat we have had to IL._ with. The ambess laselsosd are not largo, but errors In she! .fteald be v ry ecospiesseS. Amos cdce knows swilling ubout the history C• teench banking in this esontry mead detect instantly an error of two lethal* breathes in some of the old states, sue would eirnIthiwer become mandates* of or tables as a whole. We get en adding machine, vp Marne= etulru and hay.; Zlot dies. meowed that it is net wortimg dependmbly. So I have h -it the 5urrolghs smetwer and they are grave to take the mmehiae out and 7ive na ea activate wan the eost of -vatting it in °Antis& to be used. I have not done anything about mowing sot, IVIVe bees 'busy mother things amd there seemed to be plent: o2 timo. rrive yea spy strong reason tor preferring that Gnrleht mod I movo In th3 rein lies ma bee It seems to me that It Is as lapport-nt for one Wise to be 01000 to yeses as smother, and rithey telephone brew& now 3stab1iebe4 sate/self settled, I feel reluctant. I confess, to mown unllse it is fir greater consmaismee. go additions' emeponlasne boa bawo coma in and rests for non soples We bees seeplIsd with. aeon lir, Snead loft, I had•*two to talk with hbs farther sheet the redmottyn it the amber of belts mod beidt edriliations. He seems sea smah interested in the 'otter, mod sammOted thftt we mete •them" investigation of *bat we bed as beat SIM would an ble us to get the Intennation desired, without min to no bseillmg commissioners. Ue,I looked lobo sons of the commissioners, reports simined• smslyese seek as vs vent for the eV ton of Wei Illehigni4 Delmer* mod Mode Island. Tie only point at Ida the intodestion 33031118 VOUtthe is in respect to suspensions. Iowa, Mt limetemee, in the ton years roorts only 315 sumpensises, whereas the Beard rororts :28. That moans, of course, that th3 commissioner has classified a great many suspensi)ns as ooneolidations. is asslilbs straightemed out sheave realism the schedules an suseemstems from the various states. As it is, the fig. urea or to sham 1546 banns is 1921 fed 1027 at present, ft net reduction of 319. This roduetian is the met rosalt of 139 decreases 1. consolidation, 2 by conversion, 319 by Oespensien and 42 by 78ationT and of 52 increases by reopenimg sad 121 by primary organi https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mrs J. H. HMIs #81 Lugust 16, IMO. PiasaDU I bare burdened you with nem datiins of what is gates ,Ltd. to Uwe Oa then pat ear. about. Oa the other hand, you may be E, &Try without t difficulty. that things are gettiag elm slow] https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis T1r7 tray Imurs, O. 3. Hanterage Per the OenMoe en Breash, Grew sad Chain liaskiag. • I. 11. RIDDLE 43 VIM AVENUE NEW YORE (sr( • e) ; . • ' •• !1riock wanted to report for -, nveniont affairs *ht lake it somewhat inco , rt, however, to report on I urL;ed him to ,--Lake every effo I ; note a you drop him ,,romised to do so. I sujjest that hope the nt and express I hLeve advised you of his a.)pointme the first of September. by ,ton hin,: 'ill be able to CD710 to ';:as .30 ,3 definite) distributio:: .:robabl;i time; to :hii will be necessary to move :ass of the space for our staff. It difficulty of iavin to another room because of the is in operation. I sul:est you conferences while the typewriter Yr. :Lhodee to :Alt in a buzzer from :ove her -!hile I am away and as: would be better for you and desk to her room. 2erhaps it 2ut :ass occupied by —iss 1:u"An 7r.1 then :arlock to take the room now will then We . occi which you now Kuhn and :iss Z.snill in the room f in staf the for ry machines necesT3a reep all typewriters or other that one l be in the Ulite —ountains, I don't know just where I shal Fifth Ave., e7,ed to an sdtress, but • letter clIr ,j on't j.vo you York, will always reach le. . :.ew https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis August 11, 1930. Mr. J. E. Riddle, 43 Fifth Avenue, Few York City. Dear Riddle: I have just talked with amead about Garlock and he is favorably disposed. He will call up Mr. Rounds tomorrow morning and say that if it is agreeable with the two of you up there it is agreeable to him also. He does not object to the figure named. Very truly yours, CBH:CH https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis March 25. 150 Mr. J. H. Alddlo 43 Fifth Avenue Now 'fork City lir deer Diddle: I am wondering whether you couldn't come down here to arrive es Ihiroday eerning. to be in conferenos reasay, eel today and I had tenor- raw I have to go to the Vbew, Coomitteewith the Ooveraor. / wape*. I shall have to go again on Friday. but I think I could spend a good part of Theredey in going over the plans for the Committeo's weak with you. Sincerely yours, 2. A. Goldesweiser Director of loseareh aed Statistics gr. LicitaY (Deputy Governor at Chieago) Inflation is bask of most bank trouble feud it cannot all A) laid to management. Many banks had operated emesessfUly for 26 years befbre this trouble ems. Too liberal loans on land valuen, et*. Brew* banking is probably solution to difficulties. B. 3. net limited to limb, limes but allowed in larger areas (did not define his areas,. )A. *an emotainly aford better management in thearection of the banks general policy. If large city banks had had branches in the rural sections a nore eautious policy would have been observed and any losses occurring mould have been Absorbed without loss to depositors. The Cook County bankers association is now in favor of branch lanking. This association is dominated by the outlying banks around Chicago and they new being in difficulties because of real estr:te loans would now like to ewe wider the wing of the ..etropolitan 'Ianks. Until the recent oollapse the savings deposits in these banks inerensd rapidly and theytarested large proportions of their funds in r.4k1 estate. Then this growth stopped and now the public has lost same of its oonfidenee and their deposits are declining. In any eases these savings deposits are being shifted to the larger banks in the city. Does net favor group banking. Thinks organisation toe cumberand uneconomical. Thinks bank situation most important problem busing country today. Fbrty per cent of the menbers of the Chicago Federal eserve Bank 7Inuld not be admitted today if they wen) out and applied anea, gush of the difficulties et scourge go back to the days of too ohartors. Thinks if Committee Men emy "gmte" it will empress its visas elusions. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Youn& (Assistant Agent at Chieago) Difficult situation of banks not yet cleared up. lieny books now suffering froa urban reel estate loans and bonds. In Miehigan law required three-fifths of time deposits to be Invested in speeified types of seeurities, largely real estate mortgages and bonds and munieipals. In co;ecquense many banks hold heavily of reel estate *Impurities, new of :hieh are in default. In Iowa previous superintendent of banks disemeregscall fereigsbonds an un. desirable (foreign being anything °ingot& the state). As quelloe Iowa banks. bee OODOOP loaded up with local stuff amd had little diversification. In looking for causes of failure one almost ale*. semes back to nanagememt. In leaking over eondition of banks now in bad shape their paper is almost emOirislyledsl stuff. Investments are small and mostly of peer grade. Loans to offieers end directors a fro- "gently heavy mod each of the best paper has been hypotheeated. They have arrived in this wrdition ever a period if years and there is little the Fedoral Reserve oan do. 400 hanks in the Chicago district are in the se-called third and fourth elass_s. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis atevsns (Ai:Ant at Chicago) Thinks failure problem a serious ems end preventive measures should be considered along lines of pronoting bettor nanagenent and better super.. vision. Task is entirely too biz for examining staff many of :!hich are young and inexperienoed. National supw-vision mmoh better than state. ICuld attach to examiners staff a Group of export emperienied nen 'hose business would be to doctor up '7,Lnks headed In wrong dimities., This Is :ob the chief examiner is trying to do but he is swopped by' the smokers of suc. leuld not give one men or group of men power to remove annoys of banks - too autocratio. Nore ought to done to encourage directors to re- move offieors, however. ?rastige of F. R. System has suffared by failures of meabere cause 2ublic has empeeted mecherthip to moan conetlIng in the way of semi ourity. Little that Federal Rese7ve can dep.bowevors without encroaching on sphere of supervisors. Sentiment has bell veering towards branch banking herescrawahat• Difficulties of chioago - outlying banks could have boon avoided if thar had been bre:whose of large nedrepolitan banks, or if they could have been taken over. Lamas Ma preinbrd county vide branch banking in towns where there are no banks. Teen permits epeming Wiese od"deposit in towns where there lege hanks *hills have filled thereby leaving the towns bank:lees. He personally fevers restrietime breeehes to eeenty lines. This could to. prove management greatly but admits it wouldn't promote much diversifisation. Thinks Comaittoe Should exxesa its views and eonslusions ::.ttor anzlztng the facts. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Governor McDougal Supervising authorities should tabs gesator eare to see thut bank staterlents published mere nearly show the wawa woadition of the !monk: that lessee are properly written off. Cagy statements are new grossly misleading and supervision ham been too lam. Prior to last decade rigidly insisted on the writing off of"bed, paper but with the diffieult$Iss of deflation they adopted the polies,of namirr ng thou aloft. -;xitoloors should aloe be able to size up the momagwoomt of shoot mad dam the in. stitution is headed in the wrong direetion tehe mere positive steps to bring it to the attention of the directors. His omportowoo has been that Arnammer a situation is broucht to at-,ention of diresters there vill always be owe we more of them who will oeeperate in an attempt to sorrow* SW plan to goad note to sash (limiter advising hit that sass ILA boon made wad a opmrsaatio tho prooldost or managing effieer for the use of the direetoors. Dees not tome shrift embody but direetors the power of removal 01/11.-ers. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Nugent (Vice-i'resident, First katismal Hooke Chicago) Banking difficulties os000d ley too liberal loose On real estate. Country banks have boon working moo thaw that their *sty was to the community. They mos, good follows belsogingtothe Notary Club and wore ithwat with idea of developing scosonity. So it was hard to say no to a request for credit and the propositivo borreweVe ability to repay was not given sufficient sossideratien. The banks frequently forgot that thoir first duty vas to themselves and to depositors. To little oonsider mos given to safety of depositors funds. It's impossible to est used management for these small banks at the prior they ean afford to pay. Many towns really don't need banks and establish them merely as a matter of basal pride. Perhaps branah bing is the solution. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis kr. al.rry ,heeler (First National Bank of Chicago) Failure due to too many banks being chartered in communities which mould net support a bank or communities in which banking realities Imre already ample. Too ampy banks, infllAion, poor ;:lanagenent, etc., all foe. tore. Dees net believe all banks should be under one system or one super. vlsory system. Thi - ks membership in ;Wesel Deserve System must be made to mean so mash that all wed banks will be forsed in by public opinion4 rhints brunch banking is solution and met ultimately come—very slowly, however. The unit beakers are still mina eppmeed to it and even nog the public will not support it without first a sell divested plan of eduortion. This should be undertaken, perhaps by the U. S. Ohmeher of Commeroe and in cooperation with manufseturers association. Some such organisation at least.. The national organization itself would not, should not make direst contest with the people but should present the proposition to state chambcrs or other local bodies for investigation and expression of opinion. If these local bodies inveitigmho and find in favor of the desired change they mill get behind any reform movement. The findings will, of course, not be uniform in the various states but if in this Ivey a sufficient nunber of Oates line up the others will gradually some around. In the beginnings branch banking must be in a small limy and be gradually tested out and extended to larger areas. The Indiana and Sews lane are entering midges and indieste Irene dhow et opinion. Doubts that even today the Conk Ownftylwmbswe would veto a majority for branch banking. Many would because they would like to be taken over but ihey are in such shape that nobody wants them. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis A• A. Lather' Preeidemt *anheika Natiemal 3anks ietukethaik Failures due almost entirely to overestension of erodit on inns. ted value*. Inflation of aeme kind has led to praetieally all bank troubles. Yet the oautioue conservative banker has weathered the storms. -isconaih is dairying state and has had less trouble than many surrounding states, but that doesn't mean they are better ankers; there was lees inflation. Is strong for unit banking; doesn't believe in branch or group banking beeense it leads to ocneentration of control, etc. His county and adjoining county are organising regional elearing house to prJLaote bett,er :nanslemont, are making exhaustive ela:ainations before taking a bank in. There's mush talk in other sections of state and surrounding states reorgaTising regional elearing houses. Thinks supervision has been lax and that mere attention should be given to banks when they begin to show temdemier in wrong direction. Losses should be written off immediately and when paper is bad or tendency wrong the matter should be milled terse:tally to attehtion of directors. Thinks ocaptroller made unwise remark then he said his business was to keep bombs open instead of closing them. Should have std his business was to Mop than clean. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r.Sehaller (President the Missies Mei National, storm Lake, Iowa) ir.3lair (Deputy Coveraor, Chicago) Llmost all the difSioulties of barks date back to the inflation, when loans were tee liberal as inflated values. The remedy is a long slow process of working out. It will some When a market develops far farm land and the real estate on which loons are new tied up begins to move.(Blair) Uanagement is the biggest hater but supervision has beJn lax and there Should be a better system of fallowing up banks headed in wrong direction. W. Mailer says that in 1918 during the period that Charters war.; being granted excessively he Ins a moshor of omaaittes of (state and national) whish waited on the legislature to explain the dangers and persuade thee to restrict the =Ober of charters. rhe legislature laughed at then and said, the more eompetition the better, and went on granting Charters. In his oounty in 1920 there wore 21 banks for a population of 17,000. 41th the coming of pod reads every bran in witUn 40 minu:os of the county seat and as A he *aunty eensequenee =eh bastions including banking has gravitated the county seat (atoms Lake with popular.. tion of 4200). The outlying banks have lost deposits and have had dif i• cult times. Some bad situations in this as well as ether eountios hue • been take7: cars of by mergers. Thinks there will be more mergers. Hartley, Iowa with a population of 1,i00 had four banks in 1921 with a oombined capital of f205,000,surplus 466,000 and deposits #2,4714000. In 1930 there there was one bank with capital 4b0,000, surplus 48,000 and deposits 086,000. (Cheek) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ur. Jay A. Bays (Prssident S..0 Bank& Trust GmapallY) Failures around Chia's° caused by greed whioh led to purehase of high yield paper, Banks baccsa loaded up with real estaLs paper or real ce-:?te. beinds-..either local stuff or from seas other section of the city which some slit* salesmen induced theLI to buy. 4ith the slump in r.Jal estate c.nd the decline in deposits such banks were unable to liquidate and azA had to close* others merged* etc. It is a case of the survival Of the fittest as in any other besines. Those banks in trouble had very little open. :larkat paper or limbed oommrities. The 4el1 managed bank has survived and will continue to survive. The I-C is a small bank with 41,S49,000 of deposits and an equal amount of loans and investments. It could liquidate within 24 hours and pay every coat of deposits. Sall loans and oom,arcial paper•1431,000, listed bonds, 074000, sash and duo from banks* 4297,000* oollatoral commt7.:r loans secured*. 'isted stook.J wid bonds, ,249,00., and real estate nortgages, #105,001Q. .trongly op4osed to grov and data basking, but feels 0 is not so strong against branch banking. Semsthisig of a sontim‘ up that bransh banking is inevitable sod is ssly a setter of time. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis jr. Kelleri International harvester Company Mr. Kinney) Country was and is overbanked. Many ba"ks got involved in the real estate business and were Operating on a false basis of values. Cold roads and chain stores hare arrested the small esmommities 80 that thair business has been drying up to sons extent. lie:rester has reduced V;s dealers perhaps 15 or 20 per oent sines 1920. There are ether factors entering into this *hangs however such as increasing need for Berries son farm equipments etc. People who formerly did their business in the less] small to n can now get to the esunty sent or a larger to in a few minutes. they 0 there be:Gauze there is a movie there and ›atter stor..1s, etc. liaturally their nking has followed. Thiaphowever, is not the principal cause of bank failures because the .lost of the trouble is with the banks in these somewhat larger towns. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Powell (Statistician Federlil °servo ,.iank of "inneapolis) Canadian law provides that all criticised paper should .)es out in non-currant account. If directors take paper out of this account or refuse to so classify paper which has bell criticised they are held liable for it. (viii write me). iisconsin publishes list of homori.roll banks. This in a mall r is a rating of banks. one state (0 oontemplat e proviAng for banks to deposit each year out of errings a small sum with the equals the Jank's capi,al. nking dopartlient an amount until iL This is a reserve for the Aookholders double liability and would help to pr:-mide fbr tho oollection of 100 as.essment. (will write me particulars.) Number of :ember ba:.ks in district which light bo considerou tc) 77coessive illiquid paper is about 60 per oent of total. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Govornor Geery) :r. Litchell ) Federal aeserve Bank of Unneapolis Ak. Z.osher Give the same story of too lib:ral loans on inflated values. -sgain say the largest fault lie' in manacement although conditions have tested good banks severely. Litohell thinks county wide branch banking would be beneficial. Minks branch bankin6, if it comes, should start on small scale and develop slowly. titchell thinks all bunka should be under Federal Reserve suivision, better examinations provided, etc. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2kr. Peyton (.Aiporintendont of 3anking in 'Ariii.esota) Bank failuros aro due 4,.;&, IlanageneAt. Znows plenty of tons .;hero 'lank survived in olean condition whilo ethrs failed. Loane on raal .id tho damago. Doesn't think group banking will provide any better :aanagan nt than unit banks can. Is a unit banker. If branch banks had existed in 1013-20 perhaps just as large a proportion of than would have failed. 1..ttorly IOLA difficulties have been oaused by bond buildings desroci_ting. Ils has ad ed to his of-ice a bond specialist who will analyze the holdings of banks and advise them. bank This is an attempt to do for all stute .rhat the grou.;:s do for their banks in the investment field. Ile also expoots to have a grou of coon whoso ')usiness it is to follow up and advise with banks which are headed in the -;:rong direction. Be .low calls in directors aud offices of banks and tolls thw; what the trouble is and frequently tells then they muet got rid of thoir cashier or operating officer. Ilopse in tiae to have non who can be callod on I,: the bunks to direct their affairs in such cases until they can find capable men. Is not an advocate of branch banking but thinks it may come faster thaL uo anticipate. Doos not favor publishing rcLtings of banks because it would mean loeinc r,any more )anks. ill.nks it not practicable to list poor 'paper in separate item eallod ''non-current" bowmen examin::,s are not able to correctly classify paper. itnks examiners should have :lore' tine to examine btink, got '..)ettor . akarieso etc. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4inms (Fergus Falls, T'inn.) Gave me little information not included in his tostitaony before Anate ComAtts, the ,Icv Classes himself among the independent bankers, but at preeent he isn't very violeht in his opposition to groups. Says group banking is more humane ,han branch banking beoause of the local autonomy in management. iLr. Adams and family osh two others. Also other interests. He has formed a holding ooApany to held those various interests which :asks and he no one bank and a substantial interest in his situation similar to the group bankers can't oppose their set-up too 'strongly. He has ae.n accused of forming the holding company to avoid the double liability. Mr. Aim Ws that good managment oould and did bring banks through the difficulties of the past decade. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - nn. Prosident AnApsota Independent i- ankers are Harry Leep(Long Prairie, A Association) Strongly opposed to grou2a a712arently because of size. Is opposed to big business of all kinds. Says cre h:ve too much power and Loan discriminate against independent norohants, eto. Says the two groros are operating branches in innespolis illegally. Hints vaguely that oertain failures were due to pressure fro gro- ns, etc. Lee and his family operate a chain of 6 banks around Long Prairie. A third party said _A.. ,4e's banks had tried to 7,;41-t into the group and were denied. At any rate he seers to have a vialett grudge! against then and is apparently willing to go to any lengths to fight them.'Jils says they drain the comunity of funds for inveatment elsewhere. I leaked at a statement of his banks and pointed out that in the case of one bank, over half of its assets were in bonds and other investments not local securities. His anewe' was that that was an exceptionally thtifty oommunity of cautious bayrowers and the bank couldn't lend all its funds locally. says no banker has oone through past decade Athout heavy losses and the banker who didn't have to close was lucky. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ur. Thompson (inneger, MOrthmeet leneorporstion) Emphasises policy of local autonomy fOr manarmmt of member banks. Allows mere freedom than First Lanoorporation. kember banks don't even re)ort loans to head office, except Aonthly report. Thinks desirable to foatar local gooF!-and encroachment on looal manai:lment must come slowly and cautiously. Failures oaused by looms which never should have be.em made. They mare in nature of permanent or oapital loans. aanks paid toO little atfelltier to borrower% ability to pay a loan. They looked at his financial statement and loaned on his uorth or equity rather than on his operating statement, or his ability to pay. -a a result who.. farmers got into difficulties these permanent linos of credit proved losses to the Janks. Then they tried to navy the situation by making :lore loans tnated of taking losses. Also says solution for '::;anking in smaller omamnities is brtelch banbing on limited seals. Mt. T. gave mo little information not included in the testimony of the cre.J s before the House and ,Amle Cota.Attees. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr, Lie :MOM (nAnag:r First 3ancorporation) on Gave usual story of excessive loans/Inflated values as cuuse of failures. Again a question of managoment. Loans took on a p:rn.anent nature with no pratonse of collecting. .eney becaue in fact capital loans. banks still in difficult position. lerequent applications to his corporation to be taken in. Citse numerous oases Where banks in difficult position have been taken over, somet .es only after directors and stockholders have put suwtantial amount of cash to take care of bad paper. 0r3.ps have stabilized banking conditions in Northwest so -..ewhat and restored confidence. In sox e oommunities depositors are shifting from independent banks to members of grous. Aolding company buys all investments for group and also exercises closer supervision over loans and loan policies of members than the liorthest eancorporation. Group is already offectinL; ecoJamics in management, illuminating useless personnel, ate. The prinoi al .sefIness of grouis, however, islin promoting better banking. They hay.) learned lesson from oommercial credit companies and provide for installment payment of loans so that they can't beooplo permanent loans. If chattel loan on dairy oattle is made 'r;hen it is providoki that a payment be made to the bank on the loan at every dairy check dato. Solution to problem of small agricultural communities is to establish branches. is desir_ble. United branch banking similar to Iowa law, or i.iontana law ndlits brLnches can be operated more eoonomisally than group members. Not disposed to deny that group banking is a transition ate:. from indeperdont banks to branch Jenks. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Also had two talks with Mr. Wakefield but the ground eovered was about same as his testimony before House and benate Commitees. He especially emphasised the lengths to w.flich local boards of directors have gone to save their Jal-las. One man with only shares of stook put in 4127,000. Another with only 10 shares of stoo4 put in 427,000. He says we hardly realize the desperate plight of the smell tonne when their banks fail. His bank AWCOS it a point to lend to -,,he banks in difficulties as long as they have any paper on which there is a r.asonable possibility of collecting. of paper fro In this way they huvo accumulated large maounts these failed institutions and haw established au insolvent bank division for collecting. This costs eensidersble time and meow but he is anxious that no bank can say If the First National had only leaned us #75,000 sore we eould have pulled through. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Horning (Notional Bank ;;xlimlner in South Dakota) YeUt. Ur. Vail (National Sank 4zsminer in North Dakota) ager,(Deputy Governor, Federal iteserve Sank of :Anneapolis) Nr. Mr. Yeager was a national balk examiner in .lohtt:.na fro:1 1910-1914. During that period he handled 4,5 applictions for new bank charters, and reported favorably on 6, which m3re granted am. unfavorably on 40. In the Spring .of 1914 john Skelton Allians, Comptroller of the Currency, announced that wherever 5 or more responsible persons a:)pli:3d he would grunt a Charter. The yeA• following, A-. Yeager's successor reoma.oandee 30 charters and they dors granted in the State of tans. the race was on betweAl the Colaptroller and the State banking department in the granting of chartors. The opening up of adAtional public lands in 191._,-1916 for homesteaders caused a rush of people to the state and the establishment of many to,rns and many banks. SometilTes a bank was establishea befere there ift. half...dozen houses erected. Itilonc the Great Northern railway in l'iorthwestern Aontana for a distance of nearly 100 miles, for emaaple, between Fresno and Shelby therD LItl a town about every 6 minutes. Those todns ranged from 250 to 600 people (perhaps one town of 1000). "ith ono siception every town had tdo or nore banks, many of them thre,i. AU classes 1fl!) people had hoLleatoaded but there .i.ere few farmers .mong them. ihe people had gon wild in specu- . than the eirst mortlation but even then the farms were zorth little .hor.) gages had bowl plaeed on theLl. rho mon running these banks knew vary lit%le abui. or practicozof banks. he principles John Smith, a farmer, soling an • sier way to make money and the prestige attached thereto, sold his farm a%d ert.blished a bank, getting a ,mookkeeper from a neighboring town to run it. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2- :ontana, North Dakota, and parts of 1outh Dakota didn't have .,he . extrale rise in land prices as °tier states. The grentest inflation of land values oecur-ed in Iowa, Souther! .'innesota, cistern Illinois, hebraskn, 4ansas and Northern L.i souri. The increasinc nuMber of banks compet&. strongly for business, both for deposits and for loans. Aistakse made in loans Jere usually rectified by continued rise in land values Increasing equity of farmers. This had always been the previous experience of banks. .ihen :)Anks mere caught with farm mortgges in 1893-1896, for exaLples the prioes came busk and the bnnks liuidted -ithin 2 or 3 yetirs. ,hen war came the b rks were urged to bid freely for pur- pose of buying liberty bonds, and for the purpose of eneouraging the A-oduetion of foodstuffs or other essential materials. both Fedefal and stte ager.cies inoludin had nove This urge came from banking departmont3. Jenks who borrowed before and who considered bervowing an unsound practise were encouraged to rediscount and taught hoa to do so. They cot into the habit of borrowing for lending. It was only one more step for the banker to begin to encourage his patrons to eorrow or various purposes, it might be for bet,;er stocking the farm, for .iuying more modern farm implements or equipment or for buying land. :nder such oonditions it became far too easy for the public to borrow. They were encouragod to borrow, frequently the banker took the ini- tiative and suggested to his patrons how they could expand or throve on borrowed :money. Men „to under -.oraal conditions never would have been con- sidered good credit risks wer.J able to get eredit with little difficulty. Speculation was in the air an tLe coatinued rise of land values intoxicated whole omaJunities and whole states https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis the possibilities of quick lee1th. -6- The bankers themselves got into the real estate game. They handled transactions and got oo Aissions. rhey frequently bought and sold land theuselves and frequently loaned the money neeessary to consummate such deals. In other wor4 some banks beow:1) in effect real estate offices. Ian, who was chairman of the Anate banking con ittee in 1Warth Dakota in 1915. tried to gat the iesate to put a cheek on the organizauion of ne-, banks by raising the uinimum capital from J.0.000 to ,0',.0.000. The farme s In the Senate wouldn't consider such a move. The; thought the '.ankers wore trying to monopoli4e the .•anking business and prevent others ooming in. They wanted to have it possible for anyone to enter the banking business. r. Horning says the Governor of South Dakota. at *bout the same times who was an honest and sincere mane believed that every town. no matte how grail should have a 131.nk in order to insure the public competitive banking facilities. Pollock. South Dakota. 'Axan of 500 people. had one state bank and Alen the Comptroller of the Currency (wIlliams) against advise T— it national charter. aesult is tm) cripAed banks. Tower City with populatim of 600 people 111,c1 thre banks. ,,11 failed. Sargent County. N. D. had 16 banks and naw has 3. Population about 10.000. Scotland. S. D. a town of 1.200 people had 3 banks, One benk Ins run very conservatively by a r. Staller (German). Hs ranged to maks Improvident loans. The people painted his bank yellov4 and then went to his home with a rope. He sold the bank. story by https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis larning) A11 three banks later failed. (This -4- South ..Jakota had a law limiting the amount by .hich a ban, could rediscount to 50 por cent of its ccpital. Legislature remoNed this rietriation in 1913. 2he bank f7.41ure epidemic startA in ...ontana after tho Jevere winter of 19190.20. Heavy snow stood on the ground all winter, Nee,rn 411-.ort and whole herds of cattle and sheep died. Cattle men were unable to pay off loans at bank but went in debt deeper. '211a:r borrowed more the next spring to restock. ,:lut with declining priees L. the fellowinc years thuy gradially opt deeper and deeper LI debt. Ihe bnks took seco_d zages on t'A, land but with the centinua,d decline ih land v.lues these seem; Aortgages grew lees an lees valuablc and the 1:L.nkert were in so deep they eou/dn't got out. If the deprassion in acrieultural pries. and lands had lasted two or three years only many fanleve Gould have paid out, but for ten years it vas almost impossible. Sven the best banker:' had to take heavy losses and were lucky if they have :.lanaged to stay open. Mr. Vail resorts that in th) banks under his reoeivership the bulk of loans at closing wamchattel loans and unsecured leans. n unsecured loans the loss is about 50 per eent and on chatels about 25. These loans bear 37, and on an average have be •n running for perhaps 10 years. Ls. Horning reports that in a bank with ,,iio00,000 assets the holdtugs will be about as follows at date )1* closing: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Chattel loans Unsecured loans ..iecond farm :lortgages Second cortgages on °it- propert: Other real estate Bank building All other asets 4200,000 75,000 75,000 50,000 40,000 201,000 46,0J3 The rate of interest runs 4-10 per cent and the average age years. :any b -fes have been keHt open for years by new funds put in by director .nd stockholders. Frequently the institution is saved and frequently it fails after the amount of the eapital has bell put in 3 or 4 times. Ninety r-r sent of the direetors of failed banks are in- solvent when the banks feil. They usually make every sacrifice in a community to save the bee-k. Sentiment as a rule is still opposed to branch and group banking, especially among bankers. Opposition perhaps not so stronr as some yele.rs ago. /n some seetions something of the sentiment prevails that perhans sone such banking structure must ultinately eome. Perhaps business men net so strong as among bankers but the unit eankere ,,av( gradually edecated their people to op osition. Bark statements are misleading in some respee (1) 3. Bonds are sLoen as assets but the amount pledged to secur deposit is not sheen. (2) In the ease of bil)s -Avable the extra collateral pledged to secure those borrowings is not sheen. (3) Other real estate is frequently put in a holding corporation organized for the purpose and a note p/aeed in the bank's assets in its a place. This ote is carried as/loan When in fact it is still nothing but ether real estate. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r...itter (Farmers savings and ,4-ust Oompany, Spencer, Iowa) This is only bank in Spenoer which did uot close although it suffered heavy losses and was reorganized. A bank can keep liquid if it knows the values of personal property and watches its collateral. Good management can keep a bank liquid even under trying times such as Iowa has had. Banks made too many loans on land, and after farmers got into difficulty tried to save their farms for than instead of taking losses. It was too easy to borrow money. The banks actually ehoouraged it. ions too many banks all trying to nake loans. 'his bank has practically no unsecured loans and makes loans --mostly on chattel mortgages. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis _thiays requires property statement. Ar. George 4". Perkins (Lstherville, Iowa, State bank receiver) Story is practically identical with that of other receivers, both as to assets of failed banks and causes of failure. 1-4therville had 4 banks and every one failed. One reopened and a new one was organised. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r. John Spalla (Spencer, ba, receiver for slArte banks) .4sets at date of closing of a bank would be about as follows: Unslcured loans Loans on second mortgages (farms) Lorais on first mortgages (city property) Loans on chattel mortgages Loans on other collateral Other real estate owned Jan Building Cash Total assets . . • tf465,000 20o,000 40,000 30,000 60,000 1001000 30,000 20,000 $ 1,000000 Perhaps SIC per eent of these loans were to fNrmers. 1,-uch of paper has run fer years - back to inflation days. Losses average about 50 per cent on the unsecured loaAs, 75 per cent on the seoend glortgages, 50 per oent on the first mortage city pro:7erty loans, 40 per Gent on the chattel mortgage loans, 50 per cent on ot'ler collateral, per cent on other real estate and U per cent on bunk Not many of his banks have had excessive ex,denditures for bank buildings. ilearly all failures, .th whieh he is aequaanted, prior to 2 or .j years ago were uone-man" banks. idany leans were made for the purpose of buying land. the first payment was made out of money borrowed lima the bank. Frequently The :Janke actually enecuraged borrowing to buy laid. In oth,ar aords, the: fostered the speou ation. L owned 400 acres of land worth at the high prises $200 or more per sere. It was unencumbered. lie mortgaged it and bought 670 acres mere making part payment. liegraduslly borrowed #30,000 to carry charges as well as to me k certain personal expenditures. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis As the land declined he had 2 lir. John Spalla to gradually sell off his land at sacrifice priee to me4t interest *largos, etc. t - oday he has only 180 acres with a first Aortgage on that of *100 per acre. In adiAtion he has a debt of 413,000. 4penosr is a town of 4,000 and had 4 banks. Thre failed the fourth reorganized but kept going. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mason City had 4 banks and failed. atherville, a tam of 4,00,, had 4 banks and all failed. Algona, with a population of 4600, had 4 banks and 3 failed. C. J. Obrochtj.(Bpirit Lake, Iowa, Resolver for national banks) Pr a failed bank of 4900,000 total assets, which may be taken as typica1,4* the holdings; were roughly as fellows: Unsecured loans (largely to firms) Loans on seoond mortgagsa on farms Loans on chattel mortgages Loans on other collateral Otherroal estate owned Bank building Cash Other assets 4400,000 200,000 100,000 60,000 WOO 80,000 30,000 iotal _PAW momomkspowsor $900,000 Losses upon settdoment; wount to about 50 per sent on unsecured loans and 75 per sent on :, ;he .scond mortgages. Yield was 8 per sent on A.s.cA.cally all loans. the age of these loans at date of suspension probably averagod 7 or 8 years. Some had run for 12 or 15 years. Nearly all banks for urAch he has beon resolver were "masomen" banks. Largo amoumt of loons were for purpose of buyinG land or other capital purposes. Banks encourAged such loans. In his seal to take care of borrowers and develop the oommunity the banker forgot his duty to depositors. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Trouble undoubtedly lay in management. 0 mt. L. W. Irwin (iMinetsburg, Iowa, Roceiver far national banks) Eighty per cent of the loons node by the banks was farmers' *me, mostly unsecured of loans on Iiii1411,ai le. although there nor° substanttal amounts seond mortgages on fart property and on chattel nortgagos. There was practically no oommuroial paper aeoeptances, or bonds. One bank which may be taken as typioal had holdings at failure about as follows: Unsecured loans (819 to faraers) &mond mortgages on farm property. on crops and, livestock Chattel ' Bank building Other real estate Cash total assets (roughly) i750,000 100,000 40,000 40,000 60,000 .4,000 41,000,000 Losses in the unsoourad loans were about 40 per sent, and in the loans an seoond mortgages about -i0i. or more, bank building and other real estate 60%. Practically all loans in this section bear 8 per cent. A large proportion of these loans, perhaps 40;., Gould be alas :d as capital loans used for buyinc; ranas and other capital purposes. Thinks loans in failed banks have been runaingson an average, five years - maw at than 10 pears or more. goat of ths loans eausini; the difficult/as were takes is during the inflation period. Mesa lines of *credit mere mow Ohaumai up over a long period of years. Perhaps two-thirds of the failed banks wars "one-man* banks. as a rule the °Moore arid directors arid their interests were heavy borrowers. ..winy banks became in fact rual estate offises. They enoouragJd real estate loans and astually fostered the land speculation and therefore the inflation of land values. They got a long way from commercial banAng and forgot the interosts of the depositor. Inexperienced and inoom etent https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2 • Irwin agers siwply lozt their halanoe in the inflation. Lands doubled and trebled in value and those who didn't 1-eve land bought at high prices. Ihose who did have fame, eortgagod what they had and bought more. Lands which rose to ;;200 and 4100 per acre or more are now back around #100. The banks were lending to most of these people and with the gradual decline in prices and land values they got in deeper and deeper. The mortgage oompanies, insuranoe oompanies„ etc. had the first mortgagee but the oanks usually wound up with 2nd, or 6rd nortgages or no security at all. :.laaminers and supervising authorities were very remiss in correcting wrong teadetoies. They criticised a let but did not act. Until re- centl. ./ examiners have not taken full advantage of their privileges of call .r bad situations or tendencies -o attention of directors. AT. Irwin has been in th the banking business in this state for many years and during period of inflation and expansion he does not remember a single nots of waraing fro any examiner or from the Comptroller's office or the state banking department as to what the banks were headed for. Thinks average examiner in this section is supposed to examine around 100 banks in 6 months. It is humanly imposeqble to do that well. An examiner spends 1 to ii days examining deposits. a c...nk of $500,000 or -j,000,000. There may ea five hundred or more pieces of paper in the port- fclio. le may oe entirely unfamiliar with the coamunity or the names on the paper. Yet in li days he is suvosed to decide what is good and that is bad in that paper and face tae direotors oh anything he thinks is not good. The f:.-xt is that it is almost imposeible to do anything but a perfunctory Job. He knew* vary little about the paper after such an https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -3- r. N. W. Irwin examinution and the bankers kno,; it. Ile rusher to the next bank and doesn't have 'Wit, to follow up or give this bank a thought for anotln:r six ilonths until 7.1, returns, if he does. The examiner draws a salary of 43,000 or 43,500 ad as soon as one shows a little ability some hank picks him up, and the examinations must be carried on by new men or the mediocre. At some time the *hole banking business in shot through with policieal influence or pressure of sone kind. '4equentl5i politicians are interested in a bank and use influence when examiner tries to close it up. Other bankers can bring outside pressure throng: politicians. For example, if examiner beers down enough to have chief examiner meet board of direeters he is faced witb politicians or other personuges who went to minimise and glees over diflioulties. If case goes to 4ashington then likely a congress. man or senator will sit on it. Eamedies:(1) Make stooklu4ders, especially directors, deposit with banking department security sufficient to oover the 100 per cent assessment, if it should prove neeessary. (2) Define more definitely direeters' liability and put some tlostb in the law. It is almost impossible today to go into court and make a ease against directors. His liability seems to be too vague and the sympathy of oourts soem to be with him. (3) Provide better examiners and pay Setter salaries. Give the examiners MOre time to exa ins a bank and provide better system of fellow up. Be sure to put on screws when wrong tendency first develops. (4) Give supervisingsuthorities power to remove loses. potent officers. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 4u. Mr. N. 4,r, Irwin (5) Require certain qualifiaations for of_icers and directors. (6) ;i;odified fern of bran& ).anking is probable nosessary to give small oommuaities safe banking facilities. Probably not sible to provide oonpetent management for small unit banks. .:.4 ...arttsburg in a town of 4,000 and had four batiks. failed.. One reorganised and a now on. opened. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rAmory ono ix. F. ". Yeadon (receiver fbr several state banks with headquarters at Fort Dodge, Iowa GiV3S distribution of assets of failed banks about Barn. „0 1.1r. Townsend. Heavy unsecured loans, other real estate and sec. gazes on farm property. hothing in Jay of open-market securitios. tines a few bad inveetmants, unlisted stuff. Some About two-thirds oonsistn7 of po sonal notes, chattel aortgagos and 2nd aortgages, all local paper. Confirms Townsend's opinions .on other points also. standing. 1.905. Poor loans are of long The origin of sozie of the banks' difficulties go back as far as Management principally at fault but supervision has been lax. Lo , has seemed sufficiently interested in protecting the depositor. Thinks ratings on banks should be published the same as industrial concerns so that :labile can be on guard. nany banks are still in diffioult position and the publican of ratings at thim stage of some, of course, might do mush damage. Nhen omanoditios and lands wer J- rising a f,.?4 years ago, Air. A after staying out of the land game a long tiae couldn't resist longer. So he bought a farm for n40,000, paying down all his savings, ,7,000 - the seller taking a lit mortgage for Q23,000. Me then needs live.. stock, of course, to run the farm and borrows from his bank *1,500 for that purpose. Next, certain equipment, improvomonts, ec., Atka another t1,500 nhich the sankar lets him have without security as ia the first case. The first ye-r's crop finds prises not so good and the interest of the mortgage is heavy. At the same time he needs to buy same hogs, etc. This time the banker insists on some security and lends him another 42,00, but takes a bhattel mortgage on the livestock. and Mr. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis A The second year prises are off again doesn't net enough to meet his interest and other obligations. Mr. F. • Yeadon Ho mns,; - borrow again and the banker takes a 2nd mortgage oh his farm. The next year when he still oan't meet his payments, the banker refuses to lend more, but Flr. A says, ,hen I must sell my hogu. *ought and begins to release his lien on chattels. So thu banker is Ultimately he is left with only the 2nd mortgage which is no good because land alues have declined. Thf- banks have allowed themselves to get into tile position of holding the tail end of those deals. The insuranse eompanies, mortgage companies, ete. piok up the first mortgages and the banks get the juniors. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r. Porter (Receiver for small banks located at Nev,da, Iowa) Saae story of local loans on inflated values, poor managemmto to. Hee dame no construe Lye thinking on remedies but thinks the re- sent Iowa law peraiting offlomin to,ns ,here no bank exists wil solve problem of mealier comeutitics. hel Several small communities within range of a Morals@ et Nevada are now without banking facilities and frequently people have lost confidenee in banks so much that they refuse to sponsor aLoth-3r one. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Vice-President and Cashier of lort Dodge Netionc/ Town of over 20,000 people. ftnIk Did have 8 bunks. Failures and .,,rers have reduced this to two. Total &posits in town are now about two-thirds of what they wer3 five years ago. Yuch individual investing iu stocks and bonds. Don't wonder that public has lost oonfidence and hesitates to keep money in banks. USUAi story of loans on inflated values, capital loans, etc. Zimphasised fact that many of the loans wore for purposes of purchasing land or making improvements. Clearly capital loans, aeeently banks have suffered losses on bond depreciation. Chiefly a question of managooent but best hankers got *aught for heavy looses. It was imnossible to foresee all the difficulties Ibieh have befallen. Had little to offer in way of remedial measures. Thinks situation will clear up when agricultural prices rise again. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r. Bruce Townsend (Direetor of Receiverships, Des -01nes) Cause of faileres - too liberal loans on inflated values. As rule, paper now causing trouble has been in banks several years. ?motto cally all loans of failed banks were local. Very few No diversification. investments, aside from "other.real estate", purchased until recently many banks have suffered losses from poor bonds purchased. Liquidations. to date sitar, few investments and eractically no commercial paper, etc. ExcesAve expenditl,res for bank buildths. have been factor in nearly 50 per cent of failures. Initial loans of these bwks were as a rule unsecured. As dif- ficei'Aes developed the banks took any collateral possible, usually second mortgages. At date of closing about 40;; of assets were unsecured lo,ns, 20% loans on farm eortgages (mostly second), 6% city real estte loans (mostly first mortgage), 20 per cent collateral loans, mostly on crops and liveatosk, other real estate 10 per cent, and practically nothing is invest. mente, oommercial paper, etc. Lofeses average about 40",. on this paper. Lessee on other reel estate abut 95; , on second far;, iJortgages 810 8, first firm sefteges 40A4 , first mortgages on city property 40, collateral loana 24% or 6101, and unsecured loans 0» https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis dank of $1,000,000 as3etc i600,000 5 _9-01 ( .! Colleetiers eTerevl Assessments (i) Total Borrowed money and other preferred claims 100,000 550,000 35,000 Remainder 15,000 Payments on general slams about 55 or 6..) per cent. About 50% of assessments are oolleiveel as a rule. ir X. (Gas tar of flUxley Savings 4a,-.k _ caww. Huxley is a town of 400or500 population in a rIch fmin. 00.411111- nity about 20 miles from Dee ..loines. Deposits of bank wore just under 200,000 at peak around and gradually ilindied away to 96,00. at date of olosin..;. ?Goole of oommunity did wooh of their shopping in larger neighboring towns out cashier :Knows of but one case where a client shited his bankinc: connection to anothpr town. Town was rot drying up - if anything, the population increased smewhat, kvortant cause of decline in deposits was loss of confidence of people as r,isult of other 'oank failures in the state and the generous publicity given to thom b an the neraspapers. hae, subdrantial amount of fro:tea loans which dated back beyond the time ir. X became cashier, 1926. teacher before he became crIttier. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ms the village school r. Clyde Brenton, a. Horton, and other officers of Iowa Des Zoines Sational Bank (4ifiliate of Lorthweat anoorporation) Failures due to managaamt in practically every case. nf :ond Plenty asmza novn 'vntinued to operate prnfitably In worst of oammuni mono ;.n towns of on77 400 or 500 population. Dallas Co. Iravirgs capital of 915,000 (Surplus, etc. $64,000) has continued to operate in a Amburn, Iowa, of 400 people, and last year mede $11,000 net. art' practically all local loans but holds cash and bona' x 4174,000. Loans 24110 depovits • 017,006. Besides 1-0.s interest in tho above bank, :Ir. 3rentot owns and oper*ter a chain of nine smell banks in small communities, 2 national, 2 state and 5 private. The combined capital of those nine banks is $315,000, surplus $140,000, trtsl deposits 45,114,000. About 601 of assets are 10. cal loans and soother 10-, in 1st farm .Aortgages, om.leroial paper and marketable bonds 12%, and cash and duo from banks lA Solution for bank failures is beter management. This can be secured in a measure by better supervision but chiefly by branch and group banking. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis L. A.. Andrew (Superintendent of l'anks in Iowa) Usual lino about inflation, deflation and drying up of the local communities. these. aood eanageaeet, however, should and did survive all The big out:Itanding cause of failures has been poor aaeaFeaet, improeident loans etc. dank's have held no great amount of investments. Recent law permitting establishing offices is solution in part. Weak tanks can now be taken over and operated as otitis**. Zetimates the coat of operating the smallest banks in state ranges from $4,000 to $7,000 per year, wtile these ofAces can be operated at cost of $1200 per years Davos not favor group banking or more extended form of branch banking. Stock arguments. Directors and stockholders have taken 436,000,000 of bad paper crli: of ths lenks of Iowa in last six years. He now forces banks to hold directors meetings monthly and report leee to him. Permerly many banks held directors meetinge only once a year. Nhen he finds bknk headed in wrong direction he brings officers and directors into Des Uoines and goes over situation with them. 'enly 107, of the banks in stute are now giving him trouble . States that as a rule his failed benks pay out &Deft% of doposits. The recant law permits estblishment of offices for reeeiving deposits and paying dmiks in same county or oontiguous counties but only in townie where no bank exists. If a bank is later establishei in a town where an offieilexiste the latter must close. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis While this is defi[itely a https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . C. Berkeley (Vloe-?resident The Fidelity Savings Bank, Marshalltown, Iowa. 2x-receiver of state banks) Usual line of loans on inflat great weakness as noapital loans" est,te offioes. values, to. He expresses the Many banks beoame, in effect, ra;.l Frequently the molter' got commissions on deals and naturally this tended to bias their judgments as to values. 3ankors also sometimes aseepted sommissions on loans made by thair bwilLa (unlawful). 3anks were long way from strict commercial banking. Problem is one 0: management but supervision has not been what it might have been. definite on question of remedies. Lot very sympathetic with branch bank- ing but only reasons are um:aline of https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis hot very pride of community. eto. r.Cantlev, :Juperin neat of Bkeks, A.ssouri nkilur s due to deflat1on or prices, orop failures, too nary bankr and pool. inanagmtent. ::.300 to NfIC pyr acre which Is MAC would probably brinc not more tha:. LissourilLnA4 rose ko high as worth leas they_ 400 and at auctin toms of 30C and 00 people hid 2 banks. Thinks more banks till fail but situation in Ussouri is getting to b fairly well slammed up and the number in difficult sit=tion is net so great. Thinks solution is larger and better banks. Oonsolidtions are being effected wherever possible and this together with failures will gradually olek.n up the poorer bks. Thinks the small rusel cozmunities don't need hanks. They oar go to the larger towns. Moat sountios could get ilong with one bank or perhaps two. Is strongly opposed to branc7: banking because it .souldn't de.olop the loc.1 eomnunities as rapidl unit banking. This country would have been much slower in c2:2veloping under branch banks. Also fears too large organizations which Aght coniight (:)t be opposed to Iowa plan of local trol credit of country. offices in cone or oontiguous counties after thinking it over. trouble 13 1—.1 of power by supervisors. Thinks one it difficult to get fro state dosed% even the utate legislature the propor authority. is double liability. Present law provides zinisati,, tel of $15,000 but a number of banks are oporating with capital of 30,000 organized under old law. Sane changes and udcatIonal powers uhleh he would like to have are as f011eum: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 Animum °spited of #25.000 amble liability (Present law is a cohstitutional provision) Power to reooAs incompetent uffioors and directors Providing for moru defiAte responsibility of directors and penalties at,uched 4:tive ..uperintundent of Beni* poer to pass oh qualifications of F.irectors and require ati;eLdanoe at directors' meetings. Provide for audit of each )ank 0=0 WL14- in adtiition to examins• tions. Limit deposit of public filn in a balk to 107. or perhaps 6;» of bar.kis capital aud surplus. Citud one ease /here 40:, of baAkis deposits were public funds and all its liquid securities mere pledod to secure these deposits (a) Aould require regional or county clearing house asfiociations. WOuld be *splashy valuable in exehange of credit inforlation and Oheeking duplicate borrowing (9) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Requir) directors to have a sUbstantima interest in the bank. Aood, ..gent at St. Louis — "ood was an examiner and chief exaainor up till about 18 nonths ago. In 1919 :any BB examiner he %tamed banks to get in liquid position. nks anticipating the crash did this of their oun accord and some of thom as a result of his advise. .any of eourse got caught. He concludes it is a questi n of managoamt und doubts hethor high grade management can be fur 'shee., in the numerous small banks. Ile also dou)ts whether we can ever develop under the unit banking systm the tradition in banking whidh keeps it sound as in Angland. Ad not exproas himself positively for or against branch banking but apparently feels that it is coming in 30.:10 :10difiOd form. Doesn't believe that politioLl influence imerferee very mueh with the duties of national bank examiners. :;tate bank examinations are not so good as national bank esalinations. Doesn't think eckyervisory functions should be imposJd on Federal Ueservo balks because they are preferred creditors and it would lead to complications, charges, etc., if they had to represent the depositor at the same time. Thinks regional or °aunty clearing houses would improve bunking management. danks will often resist oritioisms of legal supervisor ut will be very careful to avoid criticism of competitors and to keep in good oondition. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Governor :s.,rtin, Federal Reserve Bank of et. Louis Is very positive that the great defect in our banking system is management. Says that the form of banking strioture vzhio. prgzootes tho be!3t t:.pre of management is the one that -;43 must and will adopt. Gave several expeples of uttitr stupidity in managemant, one case 'where lack of judgment ehem another bank closed would have 4recked his bank but for the extreme efforts of the kederal Reserve Bank. The unit banking system has sorved a treat purpose in developing the oountry. .,hen esonomic life of community '.,:pas simple the unit banker could grasp the situation and knew his credits, etc. With the growing _complexity of economic life, however, he loses his grapp somewhat and doesn't understand the factors involved or the forces at cork. Is it not possible that he must give away to a form of banking bettor suited to the complex business world. Also thinks supervision has temporized entirely too much with banks trying to kelt thea open to make a reoord. Thinks rigid stund in writing off 1os5es Should be taken. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ht. Smith, Proeidont, Boatman's National 3ftr± t. Louis ilhole problem is one or Laanagoment and doesn't think good manageIaont can be Bemired for the great number of small banks. Many bankers got into trouble by making improvident loans, capital loans and also loans on crops which Should have ..;(3en _ado by intersediato credit banks. loan Crop not a suitable loan for oororoial banks. Not a spoola: rAdvoeate or branch banking 'mit thinks its coming io inevitable. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ::re Nicholson, Illinois 3anking Department Thinks it almost 1Lopolass to got good Asnagement in the numerous 13,1als. They aren't trtiinetl In banking prineiplas. Im ossible to got reports of condition properly filled out after years of effort. Any banker who can't or lloa't fill out oorreetly reports going out of his office hasn't the right qualifioatione. &c bno -..v-111,1116 is till.) solution, county or conticuous onunties. Thinks- public isn't ovosed to Omni& banking; on y bunkors. rho argument of preservin ti— unit banks bemuse of local pride and that they gill better serve local interests is all houey. PUblio could easily be mobilited behind a branch bank movement. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Doesn't like chain and group banking. Federe.1 iioserve 3a:_k of Kansas City,- various officers The usual story of changs In prices 1.:..nd -ea',uen, loans on ins flated velus, etc. able to survive Oenerally agree that the (. 111 managed bank has been spite of difficulties, but not, a course, without losses. Few auggeetions as to remedial measures. Covernor Bailey is op?oscn:1 to branch banking in any form. Is sure the situation eill adjust itne/f in time. There were far too any banks and they must be reduced through failures and coneolidations. Is opposed to branch banking on monopolistic grounds. Is en individualist and believes in local initiative. Thinks it would be a sad day when a few people from New York can control the destinies of the country through banking oontrol. This is what has happened in Canada and the slew development of that country as compared the United States is due to that fact. Thinks Canada would havo developed much faster under unit kcClure, agent, is also opposed to branch banking and group banking as a rule but perhaps not so vigorously as the Governor. Feels that supervision has been walk emi meds improvement could be effected in this direction. Does not believe homovers that supervisory functions should be placed in hs,nde Federal Reserve banke because it might interfere with the cordial !illations existing between the Federal ?ammo banks and their meMber banks. Some of the younger MAan didn't seem to be so much (wooed to eultiple banking. _ ..;elams seemed to feel that the epideeic of bank failures is a serious problem which should receive attention. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis .as a rule land values in this district were not inflated to -.2 Feder41 Loser,* Bank of Anus City ':,he suss sxkont as IL Iowa or natio other statos. laze° way. Several mon know of oai as 3 or port.: times tract https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 11114 it did exist in a bora fhrns exohangod hands as man' ono day, oftch time at a higher price. ._.:voh con- 13orely rocordod on the back of tho old dead. Ono examples---Davies County, Aissouri had 21 banks and 19 failed. 1.tr. James 1. Kemper, President and r. illiams, Vise-President, Commerce Truat Sompany ?rob/= of seal/ bank is largely one o: management and does think it possible to sewers good manageavent for the thousands of snail institutions. Ftuftmental defoct la banking structure. Believes in multiple banking. HAS a group of five or six outlying banks in ..,ansas City owned by a holding company, the st.00k of ehich is trusteed for benefit of stockholders of 2.mmserce Trust. The latter is not a malber of the Urow.aold probably comort these banks into branches if it -aero permissible. (lie did not say this directly, however). Sentiment in this region was growing in favor of multiple bank. biz until the Bank of Kentucky and the Bank of the U. S. failed. This checkod thc growth of soatilent in favor of group and branch banking. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . 2z . 14. 4)ornatt Presidnt, Fir3t !;.Aional 3ank of Karnali City Is generally opposod to branch and group banking. banking wo..ld be of 117.A - lo valao unlos it coverc;,1 hinks branch aufficiontly broad terAtory to socuro a wide divorcificalon of risks. Ze might not opposo oountr- wide branch banking, however, to take care of tho small rural comuAtios. Lt the sumo timo branch or group banking. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis doesn't want to c::gigo in either
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