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421.11 - Committee on Branch Group & Chain
Banking
Pocket

Branch, Chain, and Group Banking

HEARINGS
BEFORE THE

COMMITTEE ON BANKING AND CURRENCY
HOUSE OF REPRESENTATIVES
SEVENTY-FIRST CONGRESS

I

SECOND SESSION
UNDER

H. Res. 141
AUTHORIZING THE BANKING AND CURRENCY COMMITTEE
TO STUDY AND INVESTIGATE GROUP, CHAIN
AND BRANCH BANKING

FEBRUARY 25, 26, AND 27, 1930

VOLUME 1
Part 1

UNITED STATES
GOVERNMENT I'RINTING OFFICE
WASHINGTON: 1930

i
-

COMMMITTEE ON BANKING AND CURRENCY
LOUIS T. McFADDEN,Pennsylvania, Chairman
OTIS WINGO, Arkansas.
HENRY B. STEAGALL, Alabama.
CHARLES II. BRAND,Georgia.
W. F. STEVENSON, South Carolina.
T. ALAN GOLDSBOROUGH, Maryland
ANNING S. PRALL, New York.
JEFF BUSBY, Mississippi.

JAMES G. STRONG, Kansas.
ROBERT LUCE, Massachusetts.
E. HART FENN, Connecticut.
GUY E. CAMPBELL, Pennsylvania.
CARROLL L. REEDY, Maine.
JOSEPH L. HOOPER, Michigan.
GODFREY G. GOODWIN, Minnesota.
F. DICKINSON LETTS, Iowa.
FRANKLIN W. FORT, New Jersey.
BENJAMIN M. COLDER, Pennsylvania.
FRANCIS pEIBERLING, Ohio.
MRS. RUfli PRATT, New'York.
JAMES4V. DUNBAR, Indiana.
PHILIP

G. TtiosirsoN, Clerk

CONTENTS
Page

Pole, Hon. John W., Comptroller of the Currency, statement by and
questioning of
In

3

./1V""

BRANCH, CHAIN, AND GROUP BANKING
HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,
Tuesday, February 25, 1930.
The committee met in the committee room, Capitol Building, at
10.30 o'clock a. m., Hon. Louis T. McFadden (chairman) presiding.
The CHAIRMAN. The committee will COMO to order.
This is the beginning of the hearings on the subjects of branch,
group, and chain banking, authorized under House Resolution 141,
reported by the Committee on Rules February 3, 1930, and passed
by the House on February 10, 1930. So that the record may be
clear, the clerk will insert this particular resolution in the minutes at
this point unless there is objection.
(The resolution referred to is here printed in full, as follows:)
Resolved, That for the purpose of obtaining information necessary as a basis
for legislation the Committee on Banking and Currency, as a whole or by subcommittee, is authorized to make a study and investigate group, chain, and
branch banking during the present session of Congress. The committee shall
report to the House the results of its investigation, including such recommendations for legislation as it deems advisable.
For such purposes the committee, or any subcommittee thereof, is authorized
to sit and act at such times and places in the District of Columbia, whether or
not the House is in session, to hold such hearings, to employ such experts and
such clerical, stenographic, and other assistants, to require the attendance of
such witnesses and the production of such books, papers, and documents, to
take such testimony, to have such printing and binding done, and to make
such expenditures as it deems necessary.

The CHAIRMAN. I would like to say at the outset that this is an
important study, and a valuable amount of material will be accumulated during the course of these hearings, and the chairman would
like, so far as possible, to keep out.extraneous matter and to keep
the course of the hearings along the lines of the subjects immediately
before the committee.
Of course, as the hearings go along they can not be indexed, but
when completed I hope to have a proper mdex made as to both
subjects and persons so that any one who reads or wants to study
these hearings may do so with very little trouble as to reference.
I would like to say also at the outset of these hearings that I am
going to invoke the rules of the House in the conduct of these hearings and, so far as possible, as the various witnesses appear, I am
going to suggest that they be permitted .to make an uninterrupted
statement of their position, and then, with the cooperation of the
committee, I am going to try to work out a plan of questioning by
the members in regular order. In that connection, after each member has had an opportunity to interrogate the witness,. I am going
to suggest that we have more of an open forum if additional questions
are necessary. I hope that when the members of the committee
1

2

BRANCH, CHAIN, AND GROUP BANKING

want to interrupt a witness they will first address the chairman of
the committee and secure such permission. I think that program
will tend to smoothen procedure m the committee and make clearer
what is taking place, and, so far as possible, I wish the members of
the committee would make notes as the witnesses bring questions
to their minds, and then propound those questions when they have
the opportunity.
I wish it were possible for us to have agenda prepared in advance,
of the subjects to be covered, but this matter is pretty well defined
and under the rule we are kept strictly to the subject, so that the
probabilities are we will be able to get along nicely without that.
Now, if any members of the committee have any suggestions that
will tend to make these hearings run along smoothly, I would be very
glad to have them at the outset.
Mr. LUCE. In support of the program that the chairman suggested,
I want to ask the permission of the committee to read two or three
sentences from a letter that I received from ex-Governor Benjamin
Strong, of the New York Federal Reserve Bank.
Governor Strong not only had a most beautiful character, but he
was one of the most efficient men that ever came before this committee, and I think we all came to trust and admire his judgment.
In one of his periods of convalescence, he wrote me a letter regarding his own experiences before this. committee,. in which he made
certain suggestions, and one of the things he said is this:
It has seemed to me in all cases where I have appeared before a committee of
Congress that much time was wasted and the opportunity to obtain much valuable material was missed by the failure to have agenda in the hands of both
members of the committee and those appearing before the committee, so that
the witnesses' statements would be consecutive and comprehensive on the one
hand, and so that'questions by the members of the committee would be directed
at the particular part of the subject beinf discussed. Repeatedly at these hearings questions have been asked me relating to subjects other than those which
were in my mind to discuss but for which I had already made preparation, thus
interrupting the narrative, so that once or twice it has only been resumed at a
later hearing, sometimes a day or two deferred.

Governor Strong then went on to contrast that with the method
used in an intricate and important healing in London, where he
appeared before nine members of a commission, the chairman being a
member of the House of Commons. In the course of this, he said:
As there were three of us appearing at.the same time, we specified just when
questions would be asked, in order that consecutive statements might not be
interrupted, and when the question period arrived, the chairman first completed
all the questions which he desired to ask and for which he had made notes, and
then in turn called on each member of the commission to ask his questions for
which he had made notes. At the conclusion of these nine series of questions
a somewhat more informal discussion took place when questions were asked
promiscuously, all however directed to the particular subject we had just discussed, and under the control of the chairman there was no interruption until the
particular line of questioning then under way had been concluded.

Then he says that—
This particular hearing involved a subject of great complexity; in fact, some
very obscure monetary questions indeed, and yet our appearance, which involved
hearing three people, was certainly concluded in less than half the time required
for my own statement alone at the hearing in Washington, and I confidently
believe that the results in the more compact form in which they were so produced
were of greater value than when interlarded with a vast amount of immaterial
and irrelevant discussion.

116-_

BRANCH, CHAIN, AND GROUP BANKING

3

I present this consideration, sir, from a man of wide experience in
these matters, from the point of view of the witness; and the value of
such procedure to the committee and to others is apparent.
So I express my own gratification that your program is to be as
announced.
The CHAIRMAN. Are there any other comments by the members
of the committee?
Mr. BEEDY. As long as we have witnesses before the committee, I
shall not make any further suggestions, but I had mapped out a plan
of segregating and grouping our witnesses which I should like to
submit to the committee; but perhaps we can do that later in executive
session.
The CHAIRMAN. We now have before the committee Hon. J. W.
Pole, the Comptroller of the Currency, as the first witness. In
accordance with my previous statement, I understand that the comptroller has prepared himself to make an uninterrupted statement,
after which he will submit to questioning.
• Now, Mr. Comptroller, make yourself comfortable and entirely
informal, and be not afraid.
STATEMENT OF HON. JOHN W. POLE, COMPTROLLER OF THE
CURRENCY
Mr. POLE. Thank you. I appreciate the action of the committee
in permitting me to make this statement uninterruptedly, and, in
view of its length,I will beg the committee's indulgence, but by reason
of the great importance of the subject I feel that I could not say less.
The CHAIRMAN. Before you proceed with your statement, may I
ask if you will embody in your statement a repetition of your recommendations contained in your last report to Congress?
Mr. POLE. There will be a reference to them, but not a repetition.
The CHAIRMAN. I am going.to suggest, because of the importance
of that recommendation, that it be placed in the record at this point.
Mr. POLE. That is my first suggestion, Mr. Chairman.
The CHAIRMAN. All right, sir.
(The recommendation referred to is here printed in full, as follows:)
LEGISLATION RECOMMENDED
The experience of the postwar period has been of sufficient duration to permit
a comprehensive appraisal of the effect of the new economic and social conditions
Upon our system of banking. Briefly stated, it,may be said that banking in following in the wake of the trend of business in general toward larger operating
units with stronger capital funds and more experienced and highly trained management. The natural result has been that the larger cities are being favored
With banking organizations of great financial stability with the capacity to render
a better and more diversified type of service.
In the principal cities, therefore, in various parts of the country, there have
grown up through mergers and through increases in the variety and volume of
business banking institutions which for strength of oapital and management
technique were unknown in the pre-war period. There have been no failures of
any of these types of metropolitan banks. They are giving the general public a
safer and higher type of banking service than has hitherto been known. Their
'stability rests upon the great diversity of banking business to which they have
access and to the further fact that they are able to secure the most highly trained
and experienced talent. These banks comprise both unit and branch banking
institutions.

4

BRANCH, CHAIN, AND GROUP BANKING

The aggregate of all the banking resources in the United States is about
$72,000,000,000, held by a little more than 25,000 banks (as of June 29, 1929),
but 250 banks hold resources to the aggregate amount of approximately
$33,400,000,000.
While the largest and strongest banks with the bulk of the banking resources
are in the large cities, about three-fourths of all the banks in number are in the
smaller towns and cities and may be classed as country banks. It is these banks
which serve directly the agricultural communities. They operate with small
capital funds and are very much limited in their ability to employ a trained
management. The economic developments of the postwar period have had the
effect of decreasing the opportunities of these banks to operate with profit and it
is this situation to which I should like to direct your most serious consideration.
We are faced with the fact that during the 9-year period from July 1, 1920, to
June 30, 1929, inclusive, about 5,000 banks, nearly all in the agricultural communities, closed their doors and tied up deposits of approximately $1,500,000,000.1
These failures have not been limited to any one section of the country, although
they have been most prevalent in the agricultutal districts. Up to November 1,
521 banks with deposits of about $200,000,000 had suspended during the year
1929. The number of failures by States during the fiscal years ending June 30,
1921 to 1929, inclusive, is as follows:
State
and
private
3
1
1
15
1
2

Maine
New Hampshire
Vermont
Massachusetts
Rhode Island
Connecticut
Total New
States

1
1
1

Indiana
Illinois
Michigan
Wisconsin
Minnesota
Iowa
Missouri

National

78
68
63
57
320
356
241

13
13
2
8
58
81
5

1,241

188

385
264
279
182
136
52
60
40
174

59
51
28
12
55
11
18
20
53

1,572

305

41
36
13
48
13
2
27

8
7
16
25
4

180

83

England

New York
New Jersey
Pennsylvania
Delaware
Maryland
District of Columbia
Total Eastern States__
Virginia
West Virginia
North Carolina
South Carolina
Deorgia
Florida
Alabama
Mississippi
Louisiana
Texas
Arkansas
Kentucky
Tennt‘r
Total Southern States__
Dhio

State
and
private

National

23

3

10

2

26
5

11
1
1
1

41

16

29
21
98
170
293
110
22
40
33
178
80
40
56

2
4
12
21
12
13
4
3
1
39
8

1, 170

122

28

8

3

Total Middle Western
States
North Dakota
South Dakota
Nebraska
Kansas
Montana
Wyoming
Colorado
New Mexico
Oklahoma
Total Western States___
Washington
Oregon
California
Idaho
Utah
Nevada
Arizona
Total Pacific States
The Territory of Hawaii
Total United States.-._

3

1
4,228

697

As will be observed from the foregoing table, the failures of State chartered
banks greatly outnumber those of the national banks, but small national banks
have not been immune to the conditions which are causing the failures of small
country banks generally. As an illustration of the wide scope of this economic
condition, it may be said that in seven States over 40 per cent of all the banks in
existence in 1920 have failed and in six States between 25 and 40 per cent. In
26 States, or more than one-half the total, over 10 petr cent of the banks that
were in operation in 1920 have since failed. When it is considered that no
I These figures embrace only those banks which actually went into the hands of receivers. They do not
Include about 500 banks which suspended business but were later reopened after reorganization, often
resulting in depositors and shareholders voluntarily suffering some loss.

BRANCH, CHAIN, AND GROUP BANKING

5

important failures have occurred among banks in the larger cities, the ratio of
failures in the country districts is even higher.
We have, therefore, a strong contrast between city and country bank operations. Whereas the depositor in a large city bank, whether a wage earner or a
business man, has had full protection, the depositor in the small country bank
has suffered severely from the inability of so many of these banks to meet their
deposit liabilities. The farming communities have not been afforded the protection for their savings which has been available to depositors in the large cities.
It is cause for immediate concern that the operating conditions faced by the
country banks show no prospect of improvement under the present system.
There are many country banks now operated at a loss and many others operating
Upon earnings insufficient to justify their capital investment. There is not available to me the earning statements of State banks, but taking the national banks
as an illustration and the year 1927 as a typical year (later earning figures not
being compiled) 966 national banks operated at a loss and an additional 2,000
earned less than 5 per cent. These constituted about 38 per cent of all national
banks in the United States.
Comprehensive study of the banking situation for the past nine years clearly
Indicates that the system of banking in the rural communities has broken down
through causes beyond the control of the individual banker or the local community. These causes are of a basic nature and have many ramifications throughout the great economic and social changes which have occurred in the United
States since 1914. I shall not attempt in this report a detailed analysis of this
situation except to say that the economic movement away from a large number
of independent local utility and industrial operating units toward a stronger and
more centralized form of operation in the large cities has curtailed the opportunities of the country bank for diversity and extension of business while broadening those opportunities for the large city bank.
Any attempt to maintain the present country bank system by force of legislation in the nature of guaranty of deposits or the like, would be economically
unsound and would not accomplish the purpose intended. If in the free course
of business the country bank can not successfully operate as an independent
banking corporation, affording ample protection to its depositors and its stockholders, the obligation and responsibility is upon the Government of the United
States, at least so far as the national banks are concerned, to set up a system of
national banking which will insure the rural communities against the continuing
disastrous effects of local bank failures.
There have been no general financial panics in this country since the war—
thanks to the Federal reserve system. Any bank can have access, directly or
indirectly, to the benefits of the Federal reserve system to the extent of its sound
commercial and business loans and the decline of the country banks has taken
place notwithstanding the valuable assistance rendered by the Federal reserve
system. A Federal reserve bank is not charged with the responsibility of preventing bank failures. It is beyond the power of the Federal reserve system, as
it is beyond the power of any governmental agency, to stand between these
banks and insolvency.
In the absence of legislation to remedy the conditions above described, private
enterprise has within recent months undertaken to meet the economic situation
presented by the growing isolation of the country banks. Local holding companies have been formed in many sections of the country for the purpose of
bringing together a number of banks into a single operating group. The usual
procedure is for the holding company, a State corporation, to purchase a majority
of the stock of several banks, one of which would be a large city bank which in
effect becomes the parent bank of the group. The management personnel of the
central bank becomes in practice the responsible management for the entire
group. Through such a group system it appears to be possible to make a close
approach to a form of branch banking whereby each operating unit leans for
support upon the central bank, or upon the holding company, and receives the
benefits of its moral and financial support; its prestige and good will; its extension of the wider type of banking service; and the benefits of its highly trained
management.
This holding-company movement is of such recent development that complete statistics are not yet available as to the number of companies in operation
or the number of banks taken over. It appears that in many cases some of the
most responsible bankers and business men of the community have been instrumental in the organization of these holding companies and this it would seem is
a sufficient indication of the seriousness of the purpose behind the movement.
However, these holding companies are attempting to do under the sanction of

6

BRANCH, CHAIN, AND GROCP BANKING

existing laws, which are crudely adapted to the purpose, what should be made
possible in a simpler manner by new legislation. If branch banking were permitted to be extended from the adequately capitalized large city banks to the
outlying communities within the economic zone of operations of such banks,
there would be no logical reason for the existence of the local holding company
and it would give way to a system of branches operated directly by the central
bank of the group.
These conditions would seem to warrant a further amendment of section 5155 of
the Revised Statutes of the United States as amended by the act of February 25,
1927 (U. S. Code, title 12, sec. 36), known as the McFadden Act, to permit
national banks, with the approval of the Comptroller of the Currency, to establish
branches within the trade areas of the cities in which such banks may be situated.
These trade areas may in some cases be coextensive with Federal reserve district
lines; in other cases they may be of a more limited extent, but in my judgment
they should not extend beyond Federal reserve district boundaries, except to
take care of a few exceptional cases where a trade area may extend from one
Federal reserve district into another, nor should a bank be permitted to establish
a branch in another city in which there is a Federal reserve bank or a branch
thereof.
Under such a system of branches there would gradually be extended to the
agricultural communities from the large city banks a safe and sound system of
banking which would render remote the possibility of bank failures. There
would, however, be no compulsion upon unit banks to enter a branch organization. The two systems of banking-unit banking and branch banking-would
no doubt operate side by side for an indefinite length of time; that is to say,
there would be in every rural section some unit banks well organized, competently managed, and held in high esteem by the community which would continue to operate advantageously.
These suggestions for branch banking are made not with the intention primarily to deal with the question of the decline in the number of national banks
through defection from the national to the State systems, but rather as a remedy
for what appears to be a serious and fundamental weakness in our systems of
banking both national and State. Such a grant of power to the national banks
would, however, give them such an outstanding operating advantage that it
would seem reasonable to expect that the exodus of banks from the national
system would practically cease and that many now under State supervision would
return to the national charter which they have forsaken..
Any such legislation, based not upon the theory of equalizing the national with
the State bank charter powers but giving a real advantage to the national charter,
would be fully justified under existing conditions which seriously jeopardize the
maintenance of the national banking system. The State legislatures have for
years given to the State banks operating advantages which.the national banks
did not possess and it is in this situation that we find the motive for the abandonment of national charters. There is appended hereto a list of 127 large national
banks which have within the past 10 years given up their national charters for the
purpose of operating under State charters.
Name and location of bank

State

Capital

Resources

Georgia
New York
California
do
do

$1,000,000
3,000,000
600,000
300,000
2, 000,000

$27,053,000
49,942,000
8,358,000
6,985,000
20, 224,000

Missouri
do
New York
Ohio
New Jersey
Ohio
Louisiana
Ohio
Missouri
Ohio
New York
Missouri
California
New York
California

1,000,000
1,000,000
1,000,000
2, 500,000
1, 500,000
4,000,000
500,000
1,000,000
1, 000,000
1, 500,000
5, 000,000
4,000.000
375,000
300,000
300,000

11,534,000
12,542,000
22,272,000
101,524,000
31,372,000
78,323,000
11,863,000
is,781,000
27,629,000
14,765,000
121,642,000
68,613,000
5,404,000
9,224,000
5,490.000

Year ended Oct. 31, IRO
Third National Bank of Atlanta
Merchants National Bank of the City of New York
Security National Bank of Los Angeles
Farmers National Bank of Fresno
Mercantile National Bank of San Francisco
Year ended Oct. 31, 195'!
National Reserve Bank of Kansas City
Midwest National Bank de Trust Co. of Kansas City
Lincoln National Bank of Rochester
First National Bank of Cleveland
Union National Bank of Newark
Union Commerce National Bank of Cleveland
Canal-Commercial National Bank of New Orleans
National Bank of Commerce of Toledo
Central National Bank of St. Louis
National Commercial Bank of Cleveland
Liberty National Bank of New York
National Bank of Commerce of Kansas City
Union National Bank of Pasadena
Ridgewood National Bank, Ridgewood
National Bank & Trust Co. of Pasadena

BRANCH, CHAIN, AND GROUP BANKING

Name and location of bank

State

Capital

Resources

$500,000
300,000
400,000
1,000,000
2,000,000
1,000,000

$9, 771,000
6, 717,000
7, 127,000
21,776,000
76, 135,000
15, 854,000

California
250,000
Georgia
1,000,000
New York
12, 500,000
Pennsylvania
2,000,000
California
1, 500,000
Ohio
1,500,000
New York
1, 5oo,000
North Carolina.. _
300,000
Pennsylvania
400,000
New York
1, 500,000
California
2,000,000
Pennsylvania
500,000

5, 108,000
21, 350,000
297, 935,000
31, 490,000
15,052,000
22,003,000
43,550,000
5, 576,000
5,018,000
12, 952,000
25,623,000
14, 527,000

Ohio
California
Maryland
New York
Missouri
Ohio
California
Ohio
Illinobi

500,000
6,000,000
1, 500,000
1,000,000
500,000
1,000,000
200,000
I,000,000
5,000,000

12,418,000
93,806,000
17, 532,000
9, 128,000
8, 499,000
15,692,000
7,112,000
16,477,000
132,302,000

California
New York
do
Massachusetts.._

I,000,000
1,200,000
1,500,000
1,000,000

11,953,000
25, 302,000
19, 371,900
17, 129,000

Manufacturers & Traders National Bank of Buffalo
Coal & Iron National Bank of the City of New York
First National Bank of Hammond
Planters National Bank of Richmond
Norwood National think of Greenville
National Exchange Bank of Providence
First National Bank of Jamaica
City National Bank of Plainfield
State National Bank of North Tonawanda
Fheonix National Bank of Hartford
National Exchange Bank of Lockport
Second National Bank of Hoboken
First National Bank & Trust Co. of Utica
National American Bank of New York
National Butchers & Drovers Bank of the City of New
York.
Year ended Oct, 31, 1927

New York
do
Indiana
Virginia
South Carolina__
Rhode Island
New York
New Jersey
New York
Connecticut
New York
New Jersey
New York
do
do

2,000,000
1, 500,000
250,000
1,000,000
250,000
1, 250,000
200,000
150,000
600,000
1,000,000
300,000
700,000
1, 250,000
1,000,000
2,000,000

61,935,000
25, 778,000
5, 433,000
17, 547,000
7,085,00,0
N),871,000
9,862,000
7, 198,000
8,007,000
17, 714,000
6,655,000
6,653,000
19,821,000
12, 576,000
14,447,000

American Exchange-Pacific National Bank of New York...
First National Bank of Albany
West Branch National Bank of Williamsport
Citizens National Bank & Trust Co. of Cincinnati
Fifth-third National Bank of Cincinnati
Merchants di Manufacturers National Bank of Newark_ _ _
Commercial National Trust & Savings Bank of Los Angeles.
Griswold National Bank of Detroit
American National Dank of Newark
Franklin National Bank in New York

New York
do
Pennsylvania
Ohio
do
New Jersey
California
Michigan
New Jersey
New York

7, 500,000
600,000
600,000
2,000,000
3,000.000
1, 350,000
2,000,000
2,000,000
500,000
800,000

264, 212,000
15, 154,000
9,657,000
20, 330,000
53,527,000
20, 458,000
25, 116,000
22,733,000
17,662,000
7, 263,000

Pennsylvania
Massachusetts._ __
Illinois
Pennsylvania
New York
do
Maine
Kentucky

1, 000,000
900,000
800,000
500,000
1, 500,000
300,000
400,000
350,000

23,044,000
5,893,000
7, 717,000
10, 732,000
19, 216,000
9,986,000
8,308,000
5,676,000

Year ended Oct. 31, 1922
First National Bank of Fresno
First National Bank of Berkeley
First National Bank of Bakersfield
Atlantic National Bank of the City of New York
Bank of New York National Banking Association
National State & City Bank of Richmond

California
do
do
New York
do
Virginia

Year ended Oct. SI, 1923
Merchants National Bank of San Diego
Lowry National Bank of Atlanta
Irving National Bank, New York
Hank of North America, Philadelphia
Merchants National Bank of San Francisco
First -Second National Bank of Akron
Importers and Traders National Bank of New York
Merchants National Bank of Raleigh
Lucerne County National Bank of Wilkes-Barre
Battery Park National Bank of New York
American National Bank of San Francisco
Ninth National Bank of Philadelphia
Year ended Oct. 31, 1924
Fourth National Bank of Cincinnati
Wells Fargo National Bank of San Francisco
National Exchange Bank of Baltimore
Lafayette National Bank of Buffalo
Continental National Bank dz Trust Co. of Kansas City-Northern National Bank of Toledo
Lang Beach National Bank, Long Beach
Second National Bank of Toledo
Corn Exchange National Bank of Chicago
Year ended Oct. 31, 1925
First National Bank of Oakland
Fifth National Bank of the City of New York
Gotham National Bank of New York
National Union Bank of Boston
Year ended Oct. 31, 1926

Year ended October 31, 1928
Union National Bank of Philadelphia_
City National Bank of Holyoke
National Bank of Commerce in Chicago
National Bank of Commerce in Philadelphia
_Hamilton National Bank of New York
Bronx National Bank of the City of New York
First National Bank of Bangor
Liberty National Bank of Covington

8

BRANCH, CHAIN, AND GROUP BANKING

Name and location of bank

State

Capital

Resources

Year ended October 31, 1928-Continued
First National Bank in Columbus
Massasoit-Pocasset National Bank of Fall River
United Capitol National Bank & Trust Co. of New York_ _
Flushing National Bank, Flushing
National Bank of Rochester
Broad Street National Bank of Philadelphia
National Bank of North Philadelphia
National City Bank of Los Angeles

Ohio
Massachusetts__ _ _
New York
do
do
Pennsylvania
do
California

$503,000 $14,071,000
650,000
8,752,000
5, 000,000
03, 144,000
000,050
5,070,000
1, 200,000
22,558,000
503,000
12, 293,000
700,000
6,872.000
1,000,000
10,898,000

New York
do
Virginia
California
Pennsylvania
Maryland
Texas
California
New York
California
New Jersey
Michigan
New York
do
do
do
Maine
Kentucky
Michigan
New York
do
Missouri
do
Pennsylvania
New York
do
Connecticut
Ohio
Texas
Ohio
New York
North Carolina_
do
do
Connecticut

1,000,000
1, 500,000
2,000,000
4,000,000
400,000

Year ended Oct. 31, 1929
First National Bank of Brooklyn
Seventh National Bank of New York
American National Bank of Richmond
Merchants National Trust & Savings Bank of Los Angeles_
I
Northern National Bank of Philadelphia
National Union Bank of Maryland at Baltimore
Mercantile National Bank in Dallas
First National Bank of Long Beach
National Bank of Commerce in New York
First National Trust & Savings Bank of Whittier
Bloomfield National Bank, Bloomfield
Old National Bank of Grand Rapids
Nanover National Bank of the City of New York
Third National Bank of Syracuse
Liberty National Bank & Trust Co. of Syracuse
Chemical National Bank of New York
Chapman National Bank of Portland
Louisville National Bank & Trust Co., Louisville
Merchants National Bank of Detroit
Arcadia National Bank & Trust Co. of Newark
Seaboard National Bank of the City of New York
Merchants-Laclede National Bank of St. Louis
State National Bank of St. Louis
Tenth National Bank of Philadelphia
Community National Bank of Buffalo
Fordham National Bank in New York
Thamet National Bank, Norwich
Norwood National Bank
City National Bank of San Antonio
National City Bank of Akron
National Bank of Niagara & Trust Co., Niagara Falls
Citizens National Bank of Raleigh
Murchison National Bank of Wilmington
American National Bank & Trust Co. of Greensboro
City National Bank Si Trust Co. of Bridgeport

23,025,000
14,524,000
21, 774,000
184,645,000
10,256,000
11,052,000
1,'200
i010
"
:1,000 13,950,000
6,916,000
25,000,000 884,456,000
250,000
5,639,000
300,000
7,457,000
800,000
16,866,000
10,000,000 209,026,000
300,000
5, 508,000
400,000
5,002,000
233,708,000
0
,"
000
9,750,000
750,000
14,679,000
2,099,000
26,780,000
5,666,000
11, 'l02°13
00,000
°°0 286;954,000
1, 700,000
23, 751,000
2,009,00o
21,687,000
1,000,000
10,746,000
1,090,000
23, 596,000
0,616,000
107"
000
5,218,000
5, 157,000
1,000,000
14,040,000
15, 461,000
11,1201,001
13,492,000
750,000
8,679,000
1: ,0
i1)00
00:000
12,285,000
11,297,000
1,000.000
18,351,000

6'147

1,12%

Recapitulation by years
Number
1920
1921
1922
1923
1924
1925

5
15
6
12
9
4

Capital

Resources

$6,000,000
24,075,000
5, 200,000
24,950,000
16, 700,000
4,700,000

$112,562,000
538,978,000
137,380,000
500,794,000
310,956,000
73.755,000

Number
1926
1927
1928
1929
Total._

Capital

Resources

15
10
16
35

$13,450,000
20, 200,000
15, 100,000
82,850,000

$241,582,000
456, 112,000
222, 230,000
1,966, 789,000

127

215,075,000

4,561, 148,000

, Many smaller national banks during this period also relinquished their charters
to go into the State system, but the foregoing list includes only banks of the metropolitan class.
Following the approval of the McFadden Act (act of February 25, 1927) several
large State banks were converted into national banks, but this gain has been far
more than offset by the recent great loss of national charters. Boards of directors
of banks and their stockholders, in giving consideration to the question of whether
the corporation should operate under the national or the State charter, are not
moved by questions of sentiment or patriotism. The fact that a national bank
is an instrumentality of the Federal Government designed to fulfill certain public
purposes does not seem to be considered an operating advantage to the bank.
The corporation must in the nature of the case be moved almost solely by consideration of the most profitable use of the capital invested in the enterprise. In
other words, the question of the choice of charter presents to the corporation a

BRANCH, CHAIN, AND GROUP BANKING
9
•
business proposition. In the history of banking in the United States since 1863
banking corporations have switched from State to national and from national to
State charters as the business advantages lay with the one or the other. From
the standpoint, therefore, of the operating banker the grant of the wider branch
banking powers to national banks would be considered by him as an invitation to
enlarge the sphere of his business operations to the greater advantage of his stockholders.
The Government of the United States, as distinguished from the national
banking corporation, would be concerned primarily with the question of strengthening the national banks as Federal instrumentalities and with the establishment
of a sound system of banking throughout the United States. Under the existing
trend with the operating advantage in favor of the State banks the development
is in the direction of 48 separate and distinct systems of commercial banking each
under the supervision, control, and direction of a separate State government with
a corresponding disappearance of the national banks from the field.
It has been said that this situation does not present ally cause for concern for
the reason that,the Federal reserve system which embraces State banks in its
membership has made the national banking system unnecessary. The Federal
reserve act, however, did not set up a system of banks in the United States. It
did set up a system of coordination of bank reserves and a flexible currency,
Which operate advantageously for all banks. The approach to equalization between the State and national banks afforded by the Federal reserve system does
not involve a rearrangement of charter powers but an extension of the privileges
and the benefits of the Federal system to State chartered banks. If therefore, in
addition to these privileges which they derive from the Federal Government, they
Secure from their respective legislatures charter powers giving them certain operating advantages over national banks, the Federal reserve system thus becomes indirectly the means of forcing national banks toltake out State charters.
The announced legislative policy of the so-called McFadden Bank Act of
February 25, 1927, was parity between the national and State systems. The
Purpose of the bill was to make the charter powers of national banks approximately equal in operating advantage to those of the State banks. Nearly three
Years of operation under that act has demonstrated that it has failed of its purpose in this respect.
The theory of parity between the two systems of banks is, in my opinion,
economically unsound. Commerce is interstate and is recognized by the Constitution of the United States as being fundamentally a national question. One
of the primary purposes of the national bank act of 1863 was to establish a
sound and uniform system of commercial banking throughout the country in
order that commercial transactions growing out of the production, the manufacture, and the transportation of goods and commodities from one section of
the country to the other might not be hampered by local banking legislation but
Should have access to a system of banks operating under Federal authority and
pervision under a single set of rules and regulations and statutory enactments
in order that the free flow of commerce should not be embarrassed by a multiplicity of restrictions having their origin in local political conditions.
The proposal for the extension of branch banking which is here made would
have the direct effect of establishing a strong system of banks in the rural districts
and indirectly it would lead to the gradual restoration of the national banks as
the primary system of commercial banking in the country.
While it would seem to be to the interest of the local bank holding companies
to convert their groups of banks into branches after the enactment of legislation
as above outlined, there might possibly still remain in operation some of these
local companies and some of a wider regional operation. In view of the fact
that such companies are outside of all jurisdiction of the Federal Government
and that they would be in a position to dictate the policies and operations of
such national banks as they controlled through stock ownership, I further recommend to the Congress an amendment to the national banking laws which will
bring the operations of such bank holding companies under some degree of
Federal supervision where they own the majority of the stock of more than one
national bank and a further amendment to safeguard the additional shareholders'
liability which each such bank holding company incurs through the ownership
of the shares of national-bank stock.

The CHAIRMAN. I understand that my recent annual report to
Congress will be placed in the record and. I shall attempt to refrain
from repeating the data given therein. In that report attention was

10

BRANCH, CHAIN, AND GROUP BANKING

drawn to a condition in our system of bank organization which appears
to require legislation to protect the interest of the public. It should,
however, be said at the outset that there seems to be no need for
emergency legislation but rather for an attempt to reach a normal and
fundamental solution.
I will submit for the information of the committee copies of three
formal addresses which were made by me last year, namely, the
Demand for Professional Bank Management, delivered before the
Ohio Bankers' Association, Columbus, Ohio, February 12, 1929;
Banking and the New Finance Era, before the Maryland Bankers'
Association, Atlantic City, May 23, 1929; and The Need of a New
Banking Policy, delivered before the convention of the American
Bankers' Association, San Francisco, October 21 1929. These are
marked "Exhibit A," "Exhibit B," and "Exhibit C," respectively.
I shall not attempt to elaborate further the facts which I have given
relative to bank failures except to bring some of the figures down to
date. In several parts of the country more than one-half of all of
the banks in existence in 1920 have closed their doors and many of
those which are left have little likelihood of success under present
conditions. If such a condition of affairs were localized, that is to
say, were confined to one particular section or subject to the conditions
of one particular industry, general conclusions would no doubt be
unjustified, but such is not the case. During the last 10 years and
continuing at the present time bank failures have been a blight in the
Mississippi Valley, the South, the Southwest, and Northwest. There
are agricultural counties in which every bank has failed. In many
cases it has been necessary to assess shareholders in order to keep
banks alive and it has often happened that a failure occurred after
as many as three such assessments had been paid in vain. The
hardship which these failures have imposed upon depositors and upon
those who invest their money in country bank stocks, over such a
wide geographical area, is an indication that there is something
seriously wrong with the system of banking in the rural districts.
Surely a great country like ours should not permit the continuation
of this suffering on the part of that element of the population least
able to bear it if it lies within the power of the National Government
to provide a remedy.
The views which I bring before this committee are not primarily
the result of recent research and the collection of information. I was
myself a country banker. Later, as a national-bank examiner and as
chief national-bank examiner,it became my duty to examine the affairs
of hundreds of country national banks. For more than 20 years I
have been in daily and intimate contact with the operations of our
banking system. No one knows any better than I do that there are
still strong and profitable country banks, and if I had any prejudices
they would naturally be in favor of the system of unit banking to the
sustenance of which I have been devoted for so many years. It is
with great reluctance that I have slowly come to the conclusion that
our small independent unit country banks are no longer fulfilling the
purposes of their creation and that there is need for a better,sounder,
and stronger system.
In order to avoid the impression that I am interested only in the
national banks in this discussion,may I take this occasion to emphasize
the fact that the statements I have made with reference to bank fail-

1

BRANCH, CHAIN, AND GROUP BANKING

11.

ur
.es
. apply with equal if not greater force to State banks? The conditions which rural banking faces in the United States are the same
for both national and State banks, and, as between the two, the
statistics will show that the national banks have shown the stronger
resistance in the ratio of approximately 3 to 1 during the last nine
years. I am confident that your committee will have before it in
the course of these hearings ample information which will lead to
the conclusion that notwithstanding the fact that it is still possible
for many country banks to operate successfully, the system under
which rural banking as a whole is carried on does not provide a
sufficient safeguard either to the depositors or to the shareholders
nor does it offer a type of banking service adequate for modern
conditions.
Many of the strong and well-managed country banks have found
it necessary at times to discontinue making loans and to build up
and carry large cash reserves for long periods of time. Due to the
fear of "lack of confidence" and in their efforts to be prepared to
withstand sudden withdrawals, some of these banks have restricted
their operations to such an extent that they are of little benefit to
the community in which they are located, and in some communities
have practically ceased to function. Such banks are necessarily
experiencing difficulty in earning a sufficient amount to cover
operating expenses.
We are faced with a banking situation which applies almost entirely
to the rural districts, although it should be borne in mind that there
are also a considerable number of small banks in the larger cities,
particularly in the outlying districts. There were on June 30, 1929,
in the United States, 24,912 incorporated banks. Of this number
20,008 were situated in cities of 10,000 population or less. In other
words, more than four-fifths of all the banks in the United States are
situated in small towns. The average capital of these banks is about
$44,000 and their aggregate capital about $881,000,000. They
are all small banks.
I shall submit in this connection, marked "Exhibit D," a statistical
table by States showing the distribution of banks in cities of 10,000
population or less as of June 30, 1929.
It is among these small banks that most of the failures have
occurred. Figures have not been compiled for the entire decade
but for the eight-year period, ending with 1927, 71 per cent of the
banks that failed, national and State, were capitalized below $50,000
each and 88 per cent under $100,000. By far the largest number of
failures occurred among banks having $25,000. capital or less, these
constituting 63 per cent of the failures. The number of failures for
this period was 4,513. These figures are embodied in a chart which
I shall submit, marked "Exhibit E."
As to the places in which these failures occurred, 2,039—that is to
say, a little over 40 per cent—were situated in towns and villages of
population less than 500 persons; an additional 1,006, or 20 per cent,
failed in towns having between 500 and 1,000 population; an additional 964 banks, or about 20 per cent, failed in towns of from 1,000 to
2,500 population; an additional 584 failures occurred in towns from
2,500 to 10,000 population. In other words, about 92 per cent of the
failures were in places having less than 10,000 population. Reference
is again made to the fact that there are also a number of banks of

12

BRANCH, CHAIN, AND GROUP BANKING

small capital in cities above 10,000 population, failures among which
go largely to make up the remaining 8 per cent of the total failures.
I feel quite certain that the figures for 1928 and 1929 will upon
analysis disclose a situation equally as unfavorable as that of the
previous eight years.
I lave a charter, "Exhibit F," showing these figures.
During the last decade there were no failures in that class of banks
known as metropolitan banks having a capital of more than $2,000,000.
There were three failures of State banks and one national bank in
the million-dollar-capital class, namely, the Trement Trust Co., Boston, Mass., capital $1,309,000, deposits $15,472,000, which suspended
in 1921; the Citizens Bank & Trust Co., Tampa, Fla., capital
$1,000,000, deposits $13,737,000, which suspended in 1929; the City
Trust Co., New York, N. Y., capital $1,225,000, deposits $7,482,000,
which suspended in 1929; and the Exchange National Bank, Spokane,
Wash., capital $1,000,000 and deposits $11,717,000, which failed
in 1928.
In this connection I desire to state that I am using the term
"failure" as synonymous with the term "suspension," although these
two terms are not always so used. The statistics of the Federal
Reserve Board for bank failures are based upon suspensions; that is
to say, a bank suspends when it is unable or unwilling longer to keep
open its doors for carrying on the business of banking. It sometimes happens that such a suspension is.followed by a reorganization
of the bank or a. rejuvenation of its capital structure with the result
that the bank is able to resume business. however, in many such
cases both the shareholders and the depositors are.called upon to
make voluntary sacrifices in order to. avoid a receivership with a
resulting burden of loss as great as in some other cases where a
receiver is appointed. On the other hand, the office of the Comptroller of the Currency many years ago adopted the practice of listing
as a failed bank only those for which receivers have been appointed
and leaving out those which have been restored to operations after
suspension.
For the purpose of this discussion the Federal reserve figures present
a more accurate description of the situation.. The two systems of
statistics, however, cause certain variations in figures compiled by
the Federal Reserve Board and by the Comptroller of the Currency,
respectively.
Attention is particularly directed to the circumstances that the
failures of country banks is not embraced in a period of time which
has been closed and upon which we may look only in retrospect. This
error has been made by many writers in making reference to the 5,000
bank failures as though the failures arose out of some past condition,
the chief significance of which is to furnish an argument for or against
a system of banking. . It is true that this period had a somewhat
definite beginning which appears to be coterminus with the war
period and is no doubt related to many of the changes in our social
and economic life caused directly or indirectly by the war. Unfortunately, the period in which these failures have occurred and are
occurring has not been brought to a close. In the year 1929 there
were 640 bank failures in the United States causing the tying up of
about $234,000,000 of deposits, the greatest of any year in the decade
except 1926. During the first seven weeks of 1930, there have been

-.11•101.-

BRANCH, CHAIN, AND GROUP BANKING

13

155 additional failures. In other words more than 10 years after the
War we are still in the midst of a continuation of a condition which is
causing small banks to fail. The 9-year period ending with December 31, 1929, witnessed 5,640 bank failures with aggregate deposits of
$1,721,000,000—scattered very largely throughout those small cities
of less than 10,000 population to which reference has been made.
Of this number 4,877 were State banks and 763 were National banks.
)[ have not the figures for the actual and .final losses to the depositors
in these banks. Many of them are still in process of liquidation.
I shall submit as a part of my statement a table compiled by the
Federal Reserve Board,January 28, 1930, marked "Exhibit G," which
gives the bank suspensions by Federal reserve districts, 1921-1929,
showing the number of banks, by districts, each year and the deposits
of each.
There has been prepared for the use of the committee a chart
showing the operating profit and loss of all national banks in the
United States, by States, for the year 1927, and there are in course
of preparation other charts which will be submitted within a few
days, giving the operating profit and loss of all national banks for
the year 1928. I have made a study of these preliminary figures and
they will undoubetdly emphasize the operating difficulites confronting
the small banks.
, Your committee knows that a supervisory bank official is always
reluctant to close a bank. He would naturally like to see no bank
failures. The Comptroller of the Currency goes to the utmost
lengths within his power and responsibility—having regard first for
the depositors of the bank—to prevent a national bank from failing,
and the State bank supervisors naturally have the same attitude
toward State banks. Were this not the case and did the Comptroller
of the Currency simply as a matter of machine routine permit national
banks in bad condition to drift into insolvency, and did the State
supervisors take the same attitude, there would, or course, be a
great many more failures added to those already recorded than we
have seen.
In considering the great flood of statistical information which
must be studied in order to discover the causes and effects of bank
failures there is the danger of losing sight.of the human and social
aspect of the situation. Every .bank failure presents a distinct
phenomenon to the local community.. It is a local dramatic event.
Whereas the supervising official may m many cases not be surprised
that the bank has failed and the executive officers of the bank and
Perhaps the local board of directors have been struggling for months
or years to keep the bank open, the actual failure comes as a complete surprise and a shock to the depositors and in most cases to
those shareholders who are not officers or directors of the bank.
There is no more distressing sight than a group of citizens, men
and women, clamoring before the closed doors of a bank bewailing
the loss of their savings. These losses fall upon the best and most
substantial citizens in the community and many of them never
recover their previous financial.condition. Multiply this local event
by nearly 6,000 and scatter it throughout the great agricultural
States of the Union and the magnitude of its effect reaches astounding proportions.
100136-30-rr1-2

14

BRANCH, CHAIN, AND GROUP BANKING

It is estimated that 7,264,957 depositors have contributed to the
great total of more than $1,700,000,000 of deposits in failed banks
during the past nine years and that no less than 114,000 shareholders
have suffered losses through these suspensions.
A similar adverse effect is had upon the borrowers of a bank which
fails. When a receiver is appointed his duty is to wind up the
affairs of the bank and to enforce liquidation. Many of the borrowers
may have been doing business with the bank for years and may
have been upon intimate terms with the officers of the bank. This
is especially true of the so-called character loans where the bank
takes an interest in a person who has good character and good
prospects but weak in collateral and who is accommodated each year
or from time to time covering a considerable period. The character
and reputation of such person may be unknown to other banks;
therefore, the credit standing of this class of borrower for the time
being is destroyed. The receiver must demand payment and if
payment is not made he must institute suit and prosecute the case
to judgment in order to gain as much as he can for the depositors.
Notwithstanding every means is employed to soften the blow which
the community has sustained, this enforced liquidation in countrybanks works a bitter hardship upon the borrowers—the very type of
borrowers which it has been claimed the unit system of banking is
particularly designed to protect. Failed banks in the United States
have caused within the last nine years the enforced liquidation of
approximately two billions dollars of loans—chiefly small loans.
Many causes have been assigned for these bank failures; in one
section droughts, in another insect pests, in another failure of the
cattle market, in another a drop in the price of wheat, and so on.
A great many failures have been attributed to mismanagement,
incompetent management, or criminal management; some banks
have been closed on account of single cases of defalcation and
robbery; another cause assigned is that too many rural bank charters
have been granted.
While these various factors may have been the immediate occasion
for the closing of these banks they do not indicate the basic cause.
If one observes the same type of small country bank, situated in
various sections of the country, unable to keep open its doors one
naturally would seek the reason for the general condition. Can not
the basic cause be found in the great economic and social changes
which have come over this country within the past 15 years—the
war period and the postwar period? We have witnessed a revolution
in the method of transportation and communication in the rural districts. Local communities which were at one time economically and
socially independent have been put upon arterial highways which
have drawn them close to the larger cities. It is now impossible for
the country bank to gain that diversification in the banking business
which was possible a few decades ago. The business of the small city
is becoming more and more an adjunct of the business of the larger
commercial centers. Opportunities for independent local financing
are becoming fewer and fewer. The commercial business and the
trust business are going to the large city bank. The country bank is
left largely with real estate and small local loans.
If therefore these fundamental conditions have caused the business
of the small bank to shrink to the point where it becomes unprofitable

_.■

BRANCH, CHAIN, AND GROUP BANKING

15

for the bank to operate we are met with a basic condition which can
not be cuied by palliatives. Several remedies have been proposed
to meet these conditions, the principal of which I shall here discuss.
The remedy most frequently suggested as a protection to the
depositor is some form of guarantee of bank deposits. This guarantee
may take the form of compulsory insurance for the payment of deposits or compulsory contribution on the part of all banks to pay
deposit losses in failed banks or a direct governmental guarantee
under which the taxing power of the State would be used to pay losses
to depositors in failed banks. Several of the States in the Union have
enacted guarantee of deposit laws but in every case the operation of
the law has proven unsuccessful.
A system of banking with a deposit guarantee superimposed upon
the local bank by governmental authority under which some other
instrumentality than the bank itself undertakes to insure the safety
of deposits, will not prevent the local bank from failing if it can not
maintain a successful operation as a business enterprise. If local
economic conditions are unfavorable to such a bank and if the loans
are not properly made or become frozen after they are made with
reasonable care, the bank will have to close its doors. No system of
guarantee of deposits under such conditions will serve to keep the
bank open. In other words, whereas a system of guarantee of bank
deposits might theoretically give the depositor a 100 per cent protection against loss in case of the failure of the bank such a system can not
be said to be a remedy for the failure itself.
In the case where the burden of the system of guarantee of bank
deposits has been carried by the banks themselves, the result has been
that the strong and successfully operated banks have been compelled
to assume liability for deposits in weak and unsuccessfully operated
banks—a responsibility which the stronger banks were compelled to
assume without any power to protect themselves.
It has, I believe, been suggested that the Federal Government, in
so far as national banks are concerned, undertake to set up some
system of deposit guaranty, in order to protect the depositors from
the unsuccessful bank administration, either through a governmental
subsidy or through a guaranty to be met by the Federal reserve banks.
While I have not seen a formulation of such a plan it would appear
that any such guaranty would be subject to similar objections to
those heretofore adopted by the States. Laws involving the guaranty of deposits of State banks have been in operation in Kansas,
Mississippi, Nebraska, North Dakota, Oklahoma, South Dakota,
Texas, and Washington, but, with the exception of Nebraska, I
understand, such laws have been repealed.
A member of this committee has introduced a bill providing for
compulsory insurance for the.shareholders' liability in national banks.
This is a different question from the guaranty of deposits and I
take it that this measure is designed to meet only one particular
weakness in our banking system, namely, the frequent inability of the
shareholder to meet the financial liability to the creditors of the bank
imposed upon him by law to the extent of 100 per cent of the par
value of his stock. I shall not attempt here to enter into a discussion
of this measure but I wish to make some general observations on the
question of shareholders' liability.

16

BRANCH, CHAIN, AND GROUP BANKING

The provisions of the national bank act fixing the individual liability of shareholders were enacted in 1864 as a part of the original
act. It fixed the individual liability in an amount equal to the par
value of the shares held. In other words, the amount of the liability
has no relationship to the question of book value or of market value
of the shares. This individual liability therefore is not equivalent
to the value of the investment of the shareholder in the stock but
simply to the original amount paid in by him.
This additional individual liability was designed as a protection
to the creditors of the bank but not as a full protection. For example,
where the deposit liability of the bank is in proportion to capital of
10 to 1 it will be readily seen that the additional liability was not
designed as a guaranty of the payment of bank deposits. The bank
with $100,000 paid-in capital and $1,000,000 of deposit liabilities
would carry an additional individual liability upon its shareholders
of only $100,000. To take an extreme case, if all of the capital and
all of the deposits were wiped out by losses, the individual liability
if realized in full would net the depositors only 10 cents to the dollar.
It may have been the presumption of the original framers of the
national bank act that all the shareholders of the national banks
would be persons of substance fully competent to discharge this
individual liability. Otherwise it would seem that the act would
have provided some safeguards to preserve and maintain it. Apparently it was not foreseen that the shares of national banks would
find their way into the hands of persons who were financially irresponsible. Neither was it foreseen that bank stocks of the large city
national banks would be actively traded in on the securities markets
by investors who had no personal relationship to the bank and little
or no thought of their individual liability when they purchased the
shares.
As a practical matter the question of enforcement by the Comptroller of the Currency of this individual liability has been confined
during the past 65 years almost entirely against the shareholders in
small country banks. Most of the shareholders resided in the rural
communities and were small business men or farmers. In winding
up the affairs of 815 national banks the records of the comptroller's
office show that an average of 48.29 per cent.has been collected
from shareholders under their individual liability: These figures
do not include numerous cases of assessments against shareholders
to restore the impaired capital of going national banks.
I may take this occasion to say that the enforcement of the individual liability against national bank shareholders is one of the most
disagreeable duties which the Comptroller of the Currency is called
upon to perform. These shareholders invest in local bank stocks
upon the assumption that it will be a profitable enterprise. Some
of them even feel that the Government of the Umted States is responsible for the operations of national banks. Many of them have no
appreciation of the responsiblities which they incur under the individual liability clause. When therefore they have lost their original
investment and they are called upon to pay in an amount equal to
the par value of their stock a great hardship is incurred. In numbers
of cases farms have been sold or mortgaged and whole families driven
into bankruptcy through the enforcement of the individual liability.

BEANCH, CHAIN, AND GBOUP BANKING

17

It would seem therefore that the individual liability of the shareholders of national banks has been an inadequate protection to the
depositors and where enforcement has been attempted, a great
hardship upon the shareholders. Under a system of national banking
created and supervised by the Government of the United States
should not both the shareholder and the depositor enjoy a greater
security?
Several students of the banking situation, recognizing the difficulties under which the small country bank now operates, have
suggested as a remedy for the failure of these banks and the improvement of rural banking conditions a Federal statute requiring a minimum capitalization of $100,000 for national banks and a similar provision by the various States. The theory of this proposal is that
such a provision will automatically decrease the number of country
banks and will compel the formation of stronger banking institutions.
Under this plan if the conventional ratio of 10 to 1 is maintained,
there would be no banks in the United States with deposits of less
than $1,000,000. This proposal is open to several serious objections.
Such a plan to be successful would require complete legislative
cooperation on the part of the State governments as the minimum
capitalization of national banks has always been higher than that
required as a rule by the State laws. The present minimum capitalization of $25,000 for national banks as now required is too high for
State banks in many States. In other words, the present capital
requirements for national banks has not had the effect of causing
State legislatures to require the State banks to adopt a similar
standard. On the contrary, Congress, by the act of March 14, 1900,
reduced the minimum capital for national banks from $50,000 to
$25,000, thus lowering the standard toward that of the,States.
One of the most natural effects of such an increase to a $100,000
minimum for national banks would be to cause hundreds of national
banks to take out State charters and thus remain in operation. The
operating conditions of the banks in the rural districts are the same
for both national and State banks and any comprehensive remedy
looking to an improvement of the rural banking situation must embrace directly or indirectly both State and national banks.
There is another feature of this proposal which must be considered.
A banking institution from the standpoint of the investing shareholder furnishes a vehicle for the employment of capital. Such a
shareholder is not required to make his investment with patriotic
motives or with a desire to confer a benefit upon the community.
His motives are the same as those who employ capital in other business enterprises. In other words, he invests his money in bank stock
with the expectation of a reasonable return in dividends. From the
standpoint of the Government, however, a bank possesses certain
public responsibilities which the Governments, State and national,
have attempted to establish and protect by statutory enactment.
If in pursuance of this aim the Government requires a minimum
capitalization too high for profitable employment in a given local
community no bank would be operative there.
There are thousands of communities in the United States where
banks are now operating which would be deprived of all local banking
services if the minimum capital for country banks were placed at
$100,000. This would mean that these local communities would be

18

BRANCH, CHAIN, AND GROUP BANKING

• put to the inconvenience of going considerable.distances, especially
in the less densely populated agricultural States. Such as situation
would naturally result in hoarding of funds and this would be a backward step in the development of the country. Banking develops
business in a community and every community should have convenient access to banking services. In our desire to create a sound system
of rural banking we must guard against the establishment of safety
at the expense of the convenience of hundreds of thousands of citizens
who ought to have immediate access to banking facilities.
In this connection permit me to survey the distribution of banking
capital in the United States. Taking the figures as of June 30, 1929,
there were in the United States 5,468 incorporated banks with
capital of less than $25,000. There were an additional 5,357 banks
of $25,000 capital; 6,031 banks with capital above $25,000 but not
exceeding $50,000; and 1,073 banks with capital above $50,000 and
up to but not including $100,000. In other words, there were on
June 30, 1929, 17,929 banks in the United States capitalized at less
than $100,000 each. The total number of banks was 24,912, which
leaves only 6,983 banks in the United States having a capital of $100,000 and above, and nearly half of these have only $100,000 capital.
As has been shown, practically all of these small banks are in cities
and towns having a population of less than 10,000.
The only method by which the minimum capital could be raised
to $100,000 would be to bring about the forced merger or consolidation of about 18,000 country banks, probably reducing their number
to about 6,000. In the absence of branch.banking these new banks
would be in widely separated communities and that community
would be favored in which the bank was actually situated whereas
the other communities would have to suffer the inconvenience of
traveling to and from a distant bank or suffer the deprivation of all
banking services. I will submit, marked "Exhibit H," a table
showing the distribution of banking capital of all banks in the United
States.
In discussing the question of the reduction in the number of country
banks there should be borne in mind the danger of giving a single
local bank a monopoly upon the banking business of an entire community. If we accept the theory that no country bank should possess
less than $100,000 paid-in capital we must immediately face the conclusion that in order to provide enough business to suppor!, a country
bank of that size it would be necessary in many cases.for it to be the
only bank in the community. Monopoly of bank credit is more easily
attained under our banking system upon a small scale than upon a
large one. In a large city there is more likely to be several banks in
competition, but the condition has already arrived in several of the
small cities where there is only one bank left in the community.
This condition never operates to the best interests of the community
as a whole. Should we, therefore, adopt the expedient of reducing
the number of banks by increasing the minimum to $100,000, the
credit of hundreds of separate communities would be in the control,
respectively, of single independent local banks which would operate
without any local competition.
In connection with proposed remedies for the country bank situation it may be appropriate here to mention some of the aspects of
the relationship of country banks to large city banks as correspond-

BRANCH, CHAIN, AND GROUP BANKING

19

ents. There have been certain proposals put forward within recent
months which recognize the difficulties which small country banks
face in attempting to operate alone and independently, and which
suggest as a remedy an intensification of the correspondent system.
tinder this suggestion the country bank would through voluntary
cooperation draw closer to the large city banks and receive from them
through conferences and contact of personnel the proper guidance
in the direction of safe and sound banking. The technical banking
experience and approved metropolitan banking methods and services would be made available to all the correspondents of a given
metropolitan bank in so far as the country bank could and would
receive them, and the metropolitan bank would, as compensation,
in return gain a greater volume of banking business by virtue of the
acPeleration of the Pontacts with their country correspondents.
There has grown up over a long period of years the preseht system
of bank correspondents in the United States. As a general rule the
country bank is a correspondent of some New York bank, as well
as of other metropolitan banks in the large commercial centers. It
is a business relationship which facilitates the interchange of credit
and, with respect to New York Ci6y, large deposits of country banks
are from time to time carried with the New York banks for temporary investment. Disregarding, however, the operation of depositing
money on call in New York, the normal relationship between the
country bank and its city correspondent may be reduced to about
four elements: First, the deposit carried with the city bank upon
Which interest is paid to the country bank; second, the opportunity
afforded to the country bank to purchase securities from or upon
the advice of the city bank; third, the privilege given the country
bank of borrowing from the city bank; fourth, the opportunity
afforded the country bank of seeking the direction and guidance of
the city bank in questions of bank policy and bank management.
It is the last of these relationships which it is now proposed should
be developed more concretely to the advantage of the country bank.
In this connection, however, it should be observed that a single country bank may have city correspondents m several cities. To which
of these correspondents should the country bank attach itself—to
New York City for example or to St. Louis?
It should also be observed that the correspondent relationship
Is purely voluntary and therefore not enforceable as a 13anking policy.
There is no responsibility upon the metropolitan bank for the policies
and operating methods of its country correspondents. Neither is
there any obligation on the country bank to accept the advice of its
City correspondent. On the contrary, experience has shown that
the country banks feel completely independent of their city correspondents, being free at all times to change from one bank to
another. There is more concern upon the part of the city bank to
hold the business of its country correspondents than upon the part
of country banks to embrace the tutelage of the city bank.
The system of correspondent banks has been in full force and effect
throughout the postwar period in which we have witnessed small
bank failures at the rate of more than 500 per year. Each of these
failed banks was a correspondent of a New York metropolitan bank
and of other metropolitan banks. There was no obligation on these
City banks to protect the local depositors of their country corre-

20

BRANCH

CHAIN

AND GROUP BANKING

spondents and no such efforts were expected to be made. The correspondent relationship is strictly a business transaction in which
each party receives some advantage. It can easily be understood
how a constructive intensification of this relationship especially upon
the side of bank policy and bank management might prove of great
benefit to the country banks, but I do not see how the development
of such a relationship would prove any positive protection to country
bank depositors in case the country correspondent became insolvent.
In such a case the burden would have to be borne, as it is borne now,
by the community in which the country bank operates. It would
not be transferred to the broader shoulders of the metropolitan city
correspondent.
The city banks are naturally interested in the policies and management of their country correspondents but the amount of interest
taken and the amount of constructive advice given in each case
depends upon the value of the account of the country bank. The
credit accommodation extended by the city bank is based largely on
the credit balance maintained with it by the country bank.
The remedy most frequently suggested for the failure of small
banks is the inauguration of better bank management. The principal
advocates of this remedy are those familiar with or engaged in banking
as it is carried on by the large city banks. Their study of the small
bank situation—especially the small country banks—has shown
certain weaknesses in management, such as lack of a sound and
definite loan policy; the lack of adequate credit information; the
failure to build up an adequate liquid secondary reserve of securities;
a lack of adequate knowledge of the securities market; the failure to
obtain a diversification of loans, that is to say, too great a proportion
of the loans are made upon the same class of security or credit.
No one who has made a comprehensive study of small country
banks can deny that the above conditions exist. Their chief signifit,he.operations of the
cance, however, lies in their comparison with .
metropolitan banks. It has never been convincingly pointed out
exactly how these small country- banks could adopt these more
approved methods of banking. Educational campaigns have been
suggested as a means of bringing the situation home to the country
banker. In fact, discussion of improving country bank management
has been going on for the past 10 years with no very gratifying
results.
The truth of the matter is that there has been developed in the
United States, under the same banking laws, two definite types of
banking, namely, that carried on by the small country bank and that
of the large city bank. The independent country bank situated in
small towns and villages and serving a limited area, rural in character,
is necessarily restricted to only a limited type of banking.
On the other hand, the metropolitan city bank has become a most
complex instrumentality of finance. It does everything that the
country bank could do and engages in a multitude of activities
besides. It employs a large personnel and establishes different departments each under the administration of an expert in that field. The
president of a metropolitan bank is in the position of an executive of
a great business, supervising and directing the operations of its
various departments.

BRANCH, CHAIN, AND GROUP BANKING

21

A mere mention of the departments of such a bank conveys some
idea of the magnitude of its operations and of the great diversification
of its business. There is the commercial department embracing
commercial deposits and commercial loans with ramifications of management and procedure including the work of the loan committee and
the executive committee; the savings department which embraces the
Operations of a savings bank; the trust department with all of its complicated mechanism for the administration of every type of fiduciary
business and which has in recent years become one of the major activities of modern city banking; the securities department through
Which eligible securities are bought and sold—a business which has
grown to tremendous proportions since the war the publicity department which takes care of advertising and of giving the public news
from time to time with respect to the operations of the bank; the new
business department which centers its attention on the question of new
business for the bank in all of its departments; the foreign department
Which issues litters of credit, foreign exchange and conducts other
foreign business; some banks have a women's department and a
school-savings department.
How can we compare the operations of such a bank, with resources
above $50,000,000, m addition to its administration of many millions
of trust assets, with a country bank of $250,000 of resources in a town
of 1,000 population? To invite the small bank to adopt the efficient
methods of the large city bank would be to ask it to lift itself by its
own boot straps. As a remedy for country-bank failures the establishment of improved banking methods is theoretically sound but
impossible practically of general realization. The business is too
small in volume, too limited in diversity, and too circumscribed
geographically to create a normal motive for the establishment of
the high type of management possessed by the city banks.
In most of the discussions of branch banking the depositor seems
to have been lost from view. It is said that branch banking will
lead to a restriction upon local loans—that the borrowers will suffer.
To this theory. I do not subscribe. It is unreasonable to suppose
that banks will make substantial investments in branches without
any expectation /of developing the business of the branch. This
can not be done by draining the community of its cash. It can be
done only by rendering to that community a scientifically balanced
banking service including the making of loans as well as the receiving
, of deposits. Doubtless it will be developed during the course of
these hearings that there are many instances where the necessities
of a community have been such that the funds supplied by the
parent bank for loaning purposes have far exceeded those which have
been received in deposits.
Certainly it would be possible for the parent bank to develop a
diversified banking business to protect it against economic depression
in any one locality or in any one industrial activity or business
enterprise. I am, however, more concerned with the depositor,
especially the savings depositor, than with the borrower, and have
therefore approached the question of branch banking as a remedy
from the standpoint of safety to the depositor and to the local shareholder. It is the importance of this phase of the question which I
desire to bring before your committee for further study.

22

BRANCH, CHAIN, AND GROUP BANKING

There are great commercial centers in the various regions of the
United States. In these commercial centers there have been developed great metropolitan banks among which there have been no
failures during the period we have under discussion and no depositor
in those banks has suffered a loss. The laboring man and the small
wage earner in these cities is receiving a stronger protection and a
higher and better type of banking service than is possible for the
farmers and small business men who must do business with country.
banks. I have therefore put forward for further investigation and
study by your committee the question of the desirability,of bringing
these country banks into a more direct and closer relationship to
city metropolitan banks than is possible under any voluntary extension or intensification of the correspondent. relationship. If there is
permitted to grow up, through branch banking strong metrolopitan
banks in commercial centers outside of New York City with the right
to open offices in the rural economically tributary communities, it
would naturally follow that in time these small country banks would
to a very large extent become branches or offices of such city banks.
In this connection I wish to discuss for a moment the question of
the concentration of banking capital in the large cities. Under our
present system of banking there has already occurred a concentration
of banking capital in the commercial centers and more particularly
in New York City. The growth of our cities in population and in
commercial importance has naturally led to the growth of larger and
stronger banks. But as your committee knows,it is not only in banking that this concentration has taken place, but rather that banking
has followed the concentration of capital and centralization of management in other fields.
The modern city itself is in a much closer relationship to the outlying territory than was the case a few decades ago when communication and contact were dependent upon horse or intermittent railroad
transportation. Each one of us here to-day has witnessed the complete obsolescence of the slow and painful travel by horse on country
roads which have been replaced by paved highways radiating in every
direction from our large cities, upon which travel automobiles at high
rates of speed. Communication by telephone is now almost universal,
having largely displaced the slower methods of communication by
mail and messenger. I do not wish to take up the time of the committee with a sociological discussion of municipal development, but in
considering the question of concentration of banking capital in the •
large cities it is necessary to consider the new relationship which
exists between the city and the rural districts.
There were on June 30, 1929, 76 banks in the United States,
National and State, having each a capitalization above $5,000,000,
and there were an additional 335 banks with capital between one
million and five millions, making a total of 411 banks above the
$1,000,000 capital class. Under a regional system of branch banking
the number of banks in this class would increase through the pooling
of the capital of the smaller banks.
At the present time, as I pointed out in my annual report, 250
banks in the United States hold resources to the aggregate amount of
about $33,400,000,000. This is nearly one-half of all of the banking
resources in the United States. Twenty-four banks, National and
State, in New York City alone are capitalized at an aggregate of

BRANCH, CHAIN, AND GROUP BANKING

23

$677,014,000 and have combined resources of about $10,791,448,000.
This capitalization of the New York banks is almost comparable in
total to that of the 20,008 country banks situated in towns of 10,000
Population or less.
A comparison of the banking situation in 1900 with the present
shows with what rapidity the United States has developed in banking
resources. In that year there were 10,672 incorporated banks of all
Classes. The aggregate capital was about $1,150,000,000 and the
total resources about $12,000,000,000—the latter figure being less
IT more than $4,000,000,000 than the resources of all the banks in
'slew York City to-day. Within the short period of three decades
the banking resources of the United States have increased by 600
per cent. This great development in banking resources is reflected
in two aspects; first, in the increased number of country banks which
remained small, and, second, in the growth in size and diversification
of business of the large city banks. The latter are more prosperous
to-day than ever in the history of the country, whereas the country
banks are in a much less favorable position than they were 30 years
ago. The acceleration of the flow of trade to the large cities has been
one of the chief causes of the development of the modern form of
metropolitan banking.
THE TRADE AREA

In my annual report I suggested that it might be found feasible to
Permit national banks to extend branches into the trade area of the
City in which they may be situated. I realize that while the term
"trade area" itself is susceptible of definition, there may be found
some practical difficulties in mappmg out a given trade area. Theoretically of course every city, no matter how small, might be said to
have a trade area but it would prove no solution at all to the rural
hank situation to permit small country banks to establish branches
In such trade areas.
The trade area which I have in mind may be called the metroPolitan trade area. Such an area would circumstance the geographical territory which embraces the flow of trade from the rural
communities and small cities to a large commercial center. Branch
banking extended by metropolitan national banks into such a trade
area would natural give to these outlying rural communities and
smaller cities a strong metropolitan banking service.
I am not prepared to attempt to arrive at a legislative formula
Which would automatically delimit all of the trade areas in the
lipited States. It does not seem possible to meet this situation
With such a formula. When the Federal reserve act was before
Congress a similar situation arose with respect to the Federal reserve
districts. In that act Congress did not attempt to define the boundapes of the districts but provided that the districts should be approtioned with due regard to the convenience and customary course of
business and that they should not necessarily be coterminus with any
State or States. The Secretary of the Treasury, the Secretary of
Agriculture, and the Comptroller of the Currency acting as a comMittee were empowered to lay out the districts.
.The 12 Federal reserve districts thus laid out and the subdistricts
Within them as established by the Federal Reserve Board constitute

24

BRANCH, CHAIN, AND GROUP BANKING

to-day the only areas which have been delimited upon the basis of
the relationship of the flow of trade to banking services.
It may be found advisable to adopt a similar procedure with
respect to the present situation if it is determined that national
banks shall be permitted to have branches in the rural districts. In
this connection the question will naturally arise as to how far the
Federal reserve districts or subdistricts are applicable to this question of branch banking.
DECENTRALIZED BRANCH BANKING

It has been urged as a consideration against branch banking that
legislation permitting its extension to the rural districts would lead
to the concentration of all of the banking capital in the United
States in the New York banks and under the control of a comparatively small group of financiers.
It might .be possible theoretically to conceive of this situation
arising if Congress permitted the national banks to engage in nationwide branch banking at the present time, althciugh many students
of banking and many practical bankers are of the opinion that even
were nation-wide branch banking permitted by law its spread would
be a slow development out from the various commercial centers;
that the country is too large and its financial operations on too vast
a scale to permit of complete concentration in New York City.
The banking resources of the United States are constantly increasing
as the country develops industrially and commercially. At the
present time ,they aggregate about $72,000,000,000 and within
another decade may approach $100,000,000,000. With great commercial cities developing in various parts of the country outside of
New York, it would seem an extravagant prospect to contemplate
the control over these resources within a few hands in a single city-.
However, the proposal which I have brought for the consideration
of your committee would, it seems to me, clearly tend to decentralize
banking capital through a system of regional branch banking. The
metropolitan banks in the city of New York have always held a preeminent position and under any system of.banking which would follow the normal course of business they will continue to increase in
size and influence. Notwithstanding this aspect of the matter,
branch banking emanating from commercial centers outside of New
York City into surrounding trade areas would cause the New York
banks to decrease in relative importance. There would be concentration of capital but it would be a regional concentration with local
characteristics. Banks in Detroit, Cleveland, Boston, Atlantai
New Orleans, St. Louis, Buffalo, Minneapolis, and other such local
commercial centers would grow into institutions fully capable of
taking care of the financial requirements of their trade area communities. Instead of nearly all of the largest banks being situated in
New York City there would be in every such commercial center banks
whose resources would approach or exceed a billion dollars. Instead
of being a menace would not such banks become a source of pride to
the community in which they are situated, bringing prestige and new
business to the city and taking out to the rural communities a strong
and highl developed banking service with safety to the depositors
there?Would not such a system of branch banking lead to an active

BRANCH, CHAIN, AND GROUP BANKING

25

Competition for business which would naturally result in the local
Community obtaining cheaper and better banking service?
Some critics of our banking system take the view that we have too
many small banks and that one of the chief causes for bank failures
has been the issuance of an excessive number of charters by the State
and Federal Governments. Theoretically, of course, if no banks
Were chartered there would be no bank failures. There is no way by
Which the number of banks can be categorically determined in
advance and consequently the laws of all of the States and of the
Federal Government have left the discretion to the supervising
executive officials. It comes down to a plain question of human
Judgment. If no more bank charters were issued, for example, in
Communities where all of the banks had failed the Comptroller of the
Currency or the State banking superintendent as the case may be,
would have to take the responsibility of denying banking services to
such a community even though the new applicants for a charter
Possess the qualifications required by law and practice to carry on a
small bank. In view of this situation it can not be expected of the
supervising bank officials to take it into their hands without further
legislative sanction to reform the system of banking in the rural
Communities through the process of denying bank charters. My own
Point of view is that the rural communities are not supplied with
adequate banking facilities. I should like to see the people of every
community no matter how small have access to more than one strong
bank with the banks competing for business. All persons should
have the benefit which comes from a competitive banking service.
Pur present system of independent unit country banks can not provide
it. Would not the system of decentralized branch banking which I
have suggested meet this condition?
GOVERNMENT CONTROL

It is recognized that a system of branch banking such as I have
suggested would gradually bring about the development of greater
banking institutions in the inland commercial centers and in the larger
seaports of the country. These banks.would be strong enough to
re.sist the ordinary local causes of bank failures on account of the great
diversity of their business. The only danger of failure would be in
the management personnel and it is conceded that any bank or any
sort of business institution can be wrecked through mismanagement
and maladministration. There can be no absolute protection by law
or otherwise against this condition: It can, however, be so greatly
minimized by governmental supervision that the danger of any such
failure will be remote.
Should Congress adopt such a branch banking policy there should
be an expansion and an intensification of Government supervision.
There would have to be a more constant contact with management
policies than now obtains. The number of banks would be less and
it would be easier for the Government to supervise and examine more
Closely and more often the operations of such larger institutions. It
should be borne in mind that such a bank would have no difficulty
in securing capable management and that it would, on account of the
great value of good will, be sensitive to public opinion. It would not
9tish to encounter the just criticism of a Government official.

26

BRANCH, CHAIN, AND GROUP BANKING

Congress has always recognized the necessity of maintaining adequate supervision over the national banks. The Comptroller of the
Currency now has sufficient power to supervise the national banks
in so far as examination into their affairs are concerned. The time
and method as to examination is left to his discretion except that he
must under the law examine each bank twice a year. What other
powers the Government of the United States shoula exercise over such
larger institutions which would come into existence under the extension of branch banking I am not prepared at this time to recommend,
but should the committee desire to go further into this question the
office of the Comptroller of the Currency will be at its service.
GROUP BANKING

In conclusion I feel it necessary to make some remarks with respect
to a comparatively recent banking development which is coming to be
known as group banking. Before proceeding further, however, I
think that we should attempt to get clown to definitions. In current
discussions the terms "chain banking" and "group banking" are
sometimes used synonymous and sometimes as opposed to one
another. Frequently the phrases "chain and group banking" and
"chain or group banking" are used.
The term "chain banking" has been in use for many years in this
country to describe a condition in which a number of banks were
owned or controlled by the same individual or by a group of individuals. These so-called chains were situated very largely in the
rural districts and the member banks of the chain were principally
small country banks. This condition was and still is quite prevalent
in the agricultural regions of the West and South. Many of these
chains have come to disaster through the failure of all of the banks
which constituted them. During the many years this type of bank
ownership has been in existence it was not considered as a trend
toward a fundamental change in our banking system nor did it relate
itself to the question of branch banking. On account of the failures
of several of these chains the term "chain banking" began to carry
with it an element of disfavor.
The term "group banking" is of very recent origin and is being
used to describe what appears to be a major movement in our banking
system. The principal factor in group banking is that each group
is centered around a city or metropolitan bank through means of a
holding company, which owns the majority of the stock of each
bank, thereby creating a system of banks more or less integrated in
management with the central bank of the group. Its one common
factor with the older type of chain banking is that several country
banks may be owned by a single agency. In this discussion, therefore, I shall use the term "group banking" to mean the ownership
and some element of operating control of several banks through the
medium of a bank holding company.
Official figures have not been compiled which show the number and
distribution of these groups. The holding companies are incorporated under State law and the Government of the United States has
to information concerning their organization.
no immediate access'
However, I attach hereto a list of what appears to be the most important corporations which have acquired the stock control of a 0031.

BRANCH, CHAIN, AND GROUP BANKING

27

siderable number of banks and which are operating these banks under
a group system. This is marked "Exhibit I."
From the character and standing of the bankers and other business
Men engaged in some of the principal groups in this new group-banking movement I have no doubt that they will be able to work out a
System which will be profitable to the group company and give a
safer and better banking service to the communities in which they
OWn banks than was possible under the system of rural unit banking.
For reasons heretofore stated, I am not in a position to give to your
conunittee first-hand and authoritative information as to their
Operations.
I may say, however, that I naturally look upon this movement
from the standpoint of a supervising official of the Government
rather than from that of an operating banker, that is to say, I am
concerned not with the question whether the movement is profitable
but rather whether it is desirable from the standpoint of the public
as a system of banking. The movement is new—hardly a year old—
and your committee may find that it gives promise of better banking
than the system of rural banking now generally in force. On the
other hand, your committee may find that this new movement may
be regarded as a temporary and transitional development, constituta normal prelude or introduction to branch banking.
While perhaps my views may be immature, in view of the lack of
oPPortunity for an exhaustive study of a movement which is so new,
I am inclined to the view that group banking under its existing forms
le not desirable as a permanent system of banking. Where a group
le composed of both State and national banks, as well as of other types
of financial institutions it becomes practically impossible for any
supervising governmental official to ascertain authoritatively and
accurately the financial condition of the group as a whole. Each
corporation in the group is an independent legal entity, some responsible to State governments, and some, that is, the national banks, to
the National Government, while other State bank members of the
Federal reserve system are responsible to both State and National
Governments, and this creates a situation in which the public is not
sufficiently protected, in so far as it can be protected by governmental
authority. If a group were all national banks and the holding comP,any were placed under the visitorial powers of the Comptroller of
the Currency it would be possible, although difficult, to supervise the
Operations of the group. I may say, however, that if the Comptroller
Of the Currency be given visitorial powers over bank holding companies engaged in group banking, the Government would be in a
Position to obtain information as to their operations and would be in
e better position to regulate and control them by subsequent legislation should such action be deemed expedient.
In the case of branch banking the situation is different. Under
the regional plan which I have discussed there would be no need of
ah operating holding company. The parent bank would be the only
corporation in operation and it would have offices in various places
Within the trade area. There would be only one board of directors
and one set of corporate minutes. The formulation and initiation
of the policy for the bank would be subject to a single responsibility
and the Comptroller of the Currency (or the State superintendent

28

BRANCH, CHAIN, AND GROUP BANKING

in case of a State branch system) could at any time determine the
true financial condition of the bank with all its branches.
This concludes the formal remarks which I wished to make to the
committee,and I desire to express my appreciation of your consideration. I shall be glad to respond to any questions members of the
committee may desire to ask, and I shall be pleased to return at any
time your committee may desire. I wish also to offer to your committee all of the facilities of my office which may aid you in these
inquiries.
The CHAIRMAN. I want to express, Mr. Pole, the appreciation of
the committee for your splendid statement. I shall tell you noW
that the members of the committee will be given an opportunity to
ask you questions, and in all probability, after we have had an opportunity to study your statement, we may ask you to come before this
committee again. In the meantime, we appreciate your offer to
continue to cooperate with the committee as the hearings proceed
and give us any advice that may be of help to us.
Mr. Strong, have you any questions you desire to ask of the
comptroller?
Mr. STRONG. I regret I was detained and could not get in until
late and, consequently, did not have an opportunity to hear what
the comptroller had to say. I just heard his last remarks. However,
Mr. Comptroller, your belief is that in a branch bank, with one or
two hundred branches, you could accurately examine that bank with
the force that you have now?
Mr. POLE. I think not, Mr. Strong. The force would undoubtedly
have to be adjusted, to any new system of banking, which would
create branch systems all over the United States. However, we do
examine two banks now with over 100 branches each, quite satisfactorily.
Mr. STRONG. What do you mean by "quite satisfactorily"? You
mean to get an accurate estimate and knowledge of their condition?
Yes, sir.
Mr. POLE. Yes
many men does it require to do that, where
Mr. STRONG.
there are 100 branches?
Mr. POLE. That would depend entirely on the resources of the
bank. I could not answer the question without referring to a bank
which is in operation, as a branch system.
Mr. STRONG. Well, take the Bank of Italy.
Mr. POLE. We examine the Bank of Italy with about 40 men.
Mr. STRONG. How many branches has it now?
MT. POLE. Approximately 300.
Mr. STRONG. How long does it take those 40 men to exmaine
that bank?
Mr. POLE. It is what amounts to a continuous examination.
Mr. STRONG. They are there all the time with that bank and its
branches?
Mr. POLE. They are there practically all of the time with the
various branches; that is, they go from one branch to another, which
practically amounts to a contmuous examination.
Mr. STRONG. Do you think that is a satisfactory examination,•to
have to examine one branch and go to another and then to another?
Mr. POLE. That is only part of it.
Mr. STRONG. What is the rest of it?

111110
.7

BRANCH, CHAIN, AND GROUP BANKING

29

Mr. POLE. The rest of it is that when we go to a bank we first send
our examiners into the head office and the principal branches and we
have a form which is sent out to every branch in that system calling
for detailed information as to the operation of that particular branch,
Which is assembled at the head office, and we use that for the purpose
of compiling the main report. Having done that, we visit each branch
and check the figures back as of the date of the examination and examine it just as though it were an independent bank. I do not mean to
say that it is not difficult. It is difficult to examine an independent
bank. But all in all, it must be considered that it is easily possible to
examine effectively a bank with 100 branches, but not simultaneously.
Mr. STRONG. Well, you say in order to examine them, you have
to keep the examiners continuously on the job, going from one branch
to another.
Mr. POLE. Correct.
Mr. STRONG. Suppose the bank was not in good condition: Would
there be an opportunity to pass money or credit from one branch to
another and back to the parent bank during the time that these
examiners were passing from one bank to another, which you say,
takes the entire time?
Mr. POLE. You mean to send money to the head office of another
bank?
Mr. STRONG. Do anything to cover up those conditions which you
Would like to discover—passing credits, money, or anything in the
Way of securities.
Mr. POLE. I would say not in any material amount.
Mr. STRONG. How long does it take one of your men to examine a
branch bank?
Mr. POLE. It would depend entirely on the size of the branch.
If it were $50,000,000, it would take a great many men and a good
long time.
Mr. STRONG. Are there many branches with $50,000,000?
Mr. POLE. Yes, sir.
Mr. STRONG. How many of them?
Mr. POLE. I will say very few.
Mr. STRONG. You know what I am trying to get at. I am trying
to find out when your examiner goes to the ordinary branch of the
Bank of Italy how long it takes lam to examine that branch.
Mr. POLE. It is impossible for me to answer that. I do not know
What you call an ordinary branch. Some have $200,000 total
resources and some $10,000,000 or more.
Mr. STRONG. You know what you call an ordinary branch, do you
not?
Mr. POLE. I do not know what you call an ordinary branch. You
lean a small country branch?
Mr. STRONG. Of course, a small branch bank—one of the branch
banks of the Bank of Italy which exist all over California—one of the
300 or more.
Mr. POLE. Mr. Strong, I do not know whether I understand you
exactly. Of course, the Bank of Italy has branches all over the State
of California, but they vary in size from $200,000 up.
Mr. STRONG. How long would it take to examine one of the banks
With $200,000?
10013e-30—pr 1---3

30

BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. That would depend on its condition.
Mr. STRONG. Then you can not give this committee information
as to how long it would take to examine one of those ordinary branches
of the Bank of Italy
Mr. POLE. I shall be glad to give this committee categorical information on how long it has taken to examine any one of these branches.
Mr. STRONG. You say you have 40 men who are occupied on this
examination?
Mr. POLE. Used in an examination of the large California branch
systems.
Mr. STRONG. Forty men spending their entire time examining the
Bank of Italy, in this continuous examination.
Mr. POLE. You misunderstood me. I said when we come to
make an examination of the Bank of Italy, we probably employ
40 men at the start.
Mr. STRONG. That is a continuous proposition?
Mr. POLE. Not with the 40 men. May I furnish you with a
detailed list of the time it takes to examine each one of the branches
and the number of men?
Mr. STRONG. I shall be glad to have it.
The CHAIRMAN. Any figures you furnish on this matter will be
inserted in the record.
Mr. STRONG. The number of men and time it takes to examine
each branch of which I understand there are about 400. The point
I want to inquire into
Mr. WINGO. May I make the suggestion before he gets away from
the statement? The comptroller spoke about the resources of the
branches. I think it might be wise to include a statement of what
he means by "resources, and just what they are.
The CHAIRMAN. Mr. Comptroller, I should like to suggest, apropos
of what Mr. Strong said, that you put in a statement of the plan
under which the Bank of Italy is being examined by your department,
so that the committee may understand just how the examination of
one of these large branch banking groups is handled.
Mr. POLE. 1 understand perfectly, and I shall be very happy to do
that.
The CHAIRMAN. Particularly instruction from your office, which
have been set up as a plan for examining these banks.
Mr. WINGO. Might it be well—I do not know whether he wants
to do it in response to that statement—but in response to Mr. Strong's
question, to show the plan they have perfected; what safeguards they
have got, in a practical way, by examining, against, say, a conspiracy
of a number of officers or eniployees—take the Bank of Italy for
illustration—covering up a shortage by substitution, or a shifting
when you are checking one branch and before the time you get to
another branch, and have it there on hand.
Mr. POLE. I understand.
Mr. WINGO. I think possibly a great many men who will read the
hearings and a great many of the committee would be interested in
knowing, from an economic standpoint, how you have developed a
system of examination that guards against that difficulty.
Mr. POLE. Yes, sir.
The CHAIRMAN. Might I further supplement that it would be
profitable for the committee if you would make a statement also of
your present method of examining other big groups of banks.

5
I

9
f

BRANCH, CHAIN, AND GROUP BANKING

31

Mr. POLE. For instance, the National City Bank of New York.
The CHAIRMAN. Yes.
Mr. POLE. Of course the National City Bank of New York is not
one of the groups to which you refer.
The CHAIRMAN. Or a bank similar to that, whose branches are
confined to a city, inasmuch as the Bank of Italy is confined to the
State.
Mr. POLE. I understand what you would like to have. You
Would like to have included the method of examination of the National
City Bank of New York, whose branches are confined to the city.
The CHAIRMAN. Or the Chase National Bank. Or any other of
the large banks with many branches in one of our larger cities, so
that the committee will have an opportunity to know how your
examinations are carried out.
Mr. POLE. I will be happy to do that.
(The information requested will be inserted in the record at a
later date.)
Mr. STRONG. My purpose, Mr. Comptroller, in pursuing this line
of questioning, is that it seems to be a rather difficult proposition.
To put a force of men into the examining of a bank of 400 branches.
Which would preclude their passing of credits and funds and securities
from one bank to another if it was in bad condition and the same was
necessary to cover up lack of funds. I do not think, of course, the
Bank of Italy is in such bad condition—at least I hope not.
Mr. POLE. No.
Mr. STRONG. But here: Take a bank that was in failing condition
and was perpetrating fraud and doing all kinds of illegal and unjustifiable acts. Now with a big bank of 400 branches, and you go into
its examination with, say, 40 men. One bank examiner will take
Ine bank and go to another. That would cover but 40 branches.
There will be 360 that will not be visited until the 40 are examined.
ot seems to me it would be a rather difficult thing to detect any
illegal operation of that bank which was going on. That is the reason
I am approaching the question, which it would be very interesting to
have your conclusions on, together with a statement as to the method
of conducting the examinations. I have not had an opportunity to
hear your statement and I would like to waive further cross-examination until I have read it. So, with that understanding, Mr. Chairman,
I surrender the witness.
The CHAIRMAN. MT. Wingo.
Mr. WiNuo. I have no questions at the present time. However,
I might remind the comptroller that the question of a satisfactory
examination is one that is of a great deal of concern to some gentlemen.
Por illustration, one of your predecessors testified that he could not
satisfactorily examine a bank of the size of the bank of Italy at that
time, which had only about two-thirds as many branches as now, and
Possibly Mr. Strong had in mind that statement of his.
Mr. STRONG. Yes; Comptroller Dawes.
Mr. WINGO. He went into that situation some years ago when he
Was comptroller and took the position that it was almost impossible
to prevent these shiftings of assets unless you had a simultaneous
examination of the branches and an adequate force to check them up.
So) I suggest, in discussing this, that you go into that in detail and
show how you overcome that difficulty.

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BRANCH, CHAIN AND GROUP BANKING

Mr. POLE. Of course there is no doubt that should there be a general
extension of branch banking in this country, it would be necessary
perhaps to adapt a system of examination to it. However, that
would be an operating difficulty and I have no hestitation in saying
that, with the experience we have already had in the matter of the
examination of branches that, to a reasonable degree, we regard them
as satisfactory. It is true it is not as simple as examining an independent bank, but, after all, it is an operating difficulty that can be
met. It might be necessary to put on 400 men, to use an extreme
illustration, but if we did, the bank pays for it. While it is not easy
for me to convey to your committee just precisely the technical
details in which we proceed with a bank examination, it is a measure
which can be met and satisfactorily so.
Mr. WINGO. In other words, you are satisfied,from your experience,
that that is an administrative difficulty that may be overcome
satisfactorily?
Mr. POLE. I feel that way, and I feel that our examinations are
quite satisfactory. Of course, the banks themselves are very vitally
,interested in our examinations. In addition to the examinations
which we make,.the banks themselves have a traveling force of experts spot-checking everything that goes on in the system, and I
shall be very glad to furnish the committee with any information
along those lines that I think will be enlightening.
Mr. WINGO. Another thing. To-day there is not a very clear
conception in my mind—and I think that difficulty may be experienced by some others—of the distinction that you make between
group banking and chain banking. Do you,. at the moment, recall
a distinctive illustration of each that you might use or feel free to
use without embarrassment in connection with any individual case?
Mr. POLE. Perfectly so. I would say that in the chain—what
we call a chain of banks—there is in the State of Arkansas, as an
illustration, a chain of some 55 banks, which, I am informed, are
actually controlled by a single individual. .
Mr. WINGO. Now, you call that a chain. In other words, here
are 55 independent banking corporations that have separate local
corporate entities and one individual, whom we both have in mind,
owns a controlling interest in those 55 separate corporations. You
call that a chain?
Mr. POLE. Yes, sir.
Mr. WINGO. Now, give us an illustration of a group bank, as
contradistinguished from the chain.
Mr. POLE. An illustration of the group bank is where a holding
corporation is formed and that holding corporation proceeds to
purchase independent banks, usually within its trade area, either
through an exchange of its stock or for cash and the control of each
one of those banks is held through stock ownerships by the corporation.
Mr. WINGO. Now, I do not catch that difference. Take, in the
first instance, now, the chain bank: That gentleman owns the control
through an ownership of the stock of those 55 different corporations?
Mr. POLE. Individually.
Mr. WINGO. If he were to transfer that to the, let us say, A B C
Banking Corporation, and that corporation were to take over the

In•=1.1111

BRANCH, CHAIN, AND GROUP BANKING

33

controlling shares of stock of those 55 banks, you would call that a
group banking system?
Mr. POLE. Yes, sir; a group banking system.
Mr. WINGo. After all, the mechanics are the same; the ownership
Is the only difference, in that it is in one individual in one instance or a
group of individuals, whereas, in the other instance, the ownership
is in the control of a holding corporation? .
Mr. POLE. They are similar in characteristics.
. Mr. WINGO. Is that the only distinction—that which you have
given?
Mr. POLE. That is, I might say, about the only distinction, except
as to the methods of operation, which is all important.
Mr. WINGO. What are the differences in methods of operation?
Take the banks owned by the individual or controlled by him: What
change in the operations of those banks would there be if he would
transfer his holdings to a holding corporation and it became, in your
definition, a group bank operation? What change would o3cur?
Mr. POLE. In the case of the individual, who owns as an individual
the stock—the controlling stock—of these various banks, these banks
!tre usually—while under his domination to a certain extent—operated
Independently of each other. In the case of.a group-bank system,
the holding corporation has usually one main, large metropolitan
bank, and the management contact with these various members of
the group is very much more vital than in the case of the chain.
Mr. WINGO. Take the case we have in mind: I heard it rumored
Possibly that the individual had transferred to a corporation that is
under his individual control, as a matter of fact—did it not revolve
around a Little Rock bank that he controlled and did they not do
their business and was not their chief correspondent in Little Rock
that he dominated?
Mr. POLE. I think the group to which you have reference did own
shares in the bank in Little Rock and probably controlling shares.
Mr. WINGO. As a matter of fact, did not this individual control,
with his officers, attorneys,and employees,one big banking corporation
III Little Rock—was the president of it?
Mr. POLE. I am not informed as to that.
Mr. WINGO. A trust company?
Mr. POLE. I really do not know. .
Mr. WINGO. I think I catch the point of distinction, though. You
call it a group system where a corporation, as a holding company, has
a metropolitan bank and then controls, through stock ownership, a
Lumber of other banks—that while maintaining their separate corPoration entities, they also control these other corporations?
Mr. POLE. That is a very nice distinction. The principal difference
between a group and a chain is that the group always has some form
of central management while the chain has not.
Mr. STEVENSON. And that corporation
The CHAIRMAN. The gentleman from South Carolina is out of
order. He did not address the Chair.
,Mr. STEVENSON. Pardon me, Mr. Chairman. May I ask the
Witness a question?
The CHAIRMAN. You may.
Mr. STEVENSON. 'Ile holding corporation maintain a very strong
Supervisory control by auditors usually which audit at least once

34

BRANCH, CHAIN, AND GROUP BANKING

every two weeks the transactions of everyone in the group. Is not
that the rule?
Mr. POLE. I think that is generally the rule.
Mr. STEVENSON. Where one man merely owns the controlling stock
in a great many,:which you describe as a chain, that system is not so
rigidly enforced, is it?
Mr. POLE. I think that is more or less correct; they run more or
less independently.
Mr. STEVENSON. The stock being held by the corporation, which
they get from a State, are those corporations so organized as to be
liable for a stockholder's liability? You know, a State can grant
a charter and, in a great many cases, limit the things for which the
corporation can be liable.
Mr. POLE. Of course the national-bank stock in every case is liable
for assessment.
Mr. STEVENSON. The stockholder is.
Mr. POLE. Yes, sir; and if it becomes necessary to assess the
stock which is in the hands of a corporation, of course, we would
assess the corporation as you would an individual.
Mr. STEVENSON. Yes, sir.
Mr. POLE. If the corporation had no assets other than the stock of
the banks assessed of course it would be uncollectible.
Mr. STEVENSON. Yes, sir.
Mr. POLE. But a corporation would probably hold, in addition to
bank stocks, other securities, and I think a majority of those corporations which have already been formed could readily meet such
liability.
Mr. STEVENSON. I want to ask a question which has been referred
to here. You discussed pretty fully the question of putting the limitation on stock in banks to such a large amount as it would give a
monopoly in any one community; in other words, they would be able
to establish more than one bank. We are met with the same argument in the establishment of these branches, that the very strong
metropolitan banks could establish branches in all Communities where
a unit bank, which was trying to operate, would be run out of business
and the metropolitan bank, in that way, could acquire a monopoly.
That is the principal argument we meet. What is your view about
that? Is there a danger of that?.
Mr. POLE. There is no doubt, in my mind, that if branch banking
were permitted we would eventually have a branch banking system
and not very many unit banks. However, I think that is looking
pretty well ahead. Branch banking, under the regional system
would develop so gradually that would take many years before the
unit bank was entirely out of existence, iff it ever went entirely out of
existence.
Mr. STEVENSON. This question wises: When they get out will it
be the tendency or will it not—that is the argument that is used
entirely almost—to have the territory apportioned among the various
institutions that have the branches so that there will be a branch of
one bank in community A and no other branch of any other bank
would be placed there and the branch of another bank would be
established in community B. .That is going on and I think the comptroller is entirely familiar with it, in my State. The banks have
almost all failed except these banks—group and chain.

BRANCH, CHAIN, AND GROUP BANKING

35

Mr. POLE. And branch systems.
Mr. STEVENSON. Yes; branches also. We have them all operating,
and but for them a large part of our territory would be utterly bereft
of banks. They have apparently divided the State among themselves
and group A puts a bank in my town and group B puts a branch in
Darlington, 30 or 40 miles away, and so on, and they are leaving
each community with one bank, and that is the cry that is going to
be made, as I see it. However, unless they had done this, we would
have been in a terrible fix. It has done more to commit me to some
system of the kind you have described than anything I know of—
the practical effect.
Mr. POLE. I do not know what would happen, but I can easily
understand that in South Carolina the competition between branch
banking systems—and the two to which you have referred are branch
banking systems—the thing has not arrived at a point where competition is keen enough for banks to go in, each of them, in the same
place, because there are locations without banking facilities where
the opportunity is better and banking service is needed. Later on,
when South Carolina becomes properly covered with branch banks,
if it ever does, the .arrangement you referred to might not prove
attractive. I know in California branch systems are operating side
by side in numbers of towns, and there is no trade arrangement
between them, but they are in keen competition to give the best
banking service that is possible.
Mr. WINGO. Mr. Chairman
The CHAIRMAN. Mr. Wingo.
Mr. WINGO. I believe I will defer further questions to a later date.
I have really forgotten the line I was on.
Mr. DUNBAR. Mr. Pole, the Bank of Italy is an illustration of the
branch banking system. I understood you to state to Mr. Wingo
that the operation of those banks in Arkansas was an illustration of
the chain banking system?
Mr. POLE. That is correct.
Mr. DUNBAR. Now, then, I gathered the impression, when you
were talking about Arkansas, that it was controlled by individuals
rather than by a partnership or corporation.
Mr. POLE. By an individual.
Mr. DUNBAR. An individual?
Mr. POLE. Yes, sir.
Mr. DUNBAR. Is the Bank of Italy controlled by an individual?
Mr. POLE. No; it is controlled by, as far as stock ownership is concerned, a corporation.
Mr. DUNBAR. Then, that is. an illustration of a chain banking
System controlled by a corporation?.
Mr. POLE. That is a branch banking system.
Mr. DUNBAR. What is the difference between them?
The CHAIRMAN. Will you yield a moment?
Mr. DUNBAR. Certainty.
The CHAIRMAN. You were not here when we opened the hearings.
We are proceeding under a regular order. I mention this so that
you may know it. I am calling the members, according to their
seniority, to question the witness, and you will come on later. I beg
your pardon for interrupting you. I did not wish to interrupt you,
but I do want to see this program followed.

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BRANCH, CHAIN, AND GROUP BANKING

Mr. DUNBAR. Then you proceed according to the seniority of the
members of the committee?
The CHAIRMAN. Yes.
Now, Mr. Goodwin.
Mr. GoonwiN. Mr. Pole, in the establishment of a branch banking
system throughout the country, would you require legislation in the
several States so as to make them uniform?
Mr. POLE. I would not.
Mr. Goonwm. You think the National Congress has authority to
establish branch banking systems for the national banks without
legislation?
Mr. POLE. I understand from my counsel that is correct.
The CHAIRMAN. Mr. Goldsborough.
Mr. GOLDSBOROUGH. Mr. Pole, I understand from you, your view
is if the legislation, such as you. have m mind, were adopted by Congress, it would tend to disestablish the great concentration of banking
resources in New York 4nd tend to concentrate them in various centers, such as New York, Detroit, St. Louis, Baltimore, San Francisco,
and Dallas, and other places. . You do think, as I understand, that
it will tend to a centralization in those various centers?
Mr. POLE. Unquestionably.
Mr. GOLDSBOROUGH. Now, have you considered this question from
any other standpoint than the standpoint of bank technique; in other
words, have you considered the political implications which would
necessarily arise from the concentration of credit in a great center?
Have you considered it from that standpoint at all?
Mr. POLE. I have.
Mr. GOLDSBOROUGH. Let us assume, for the purposes of illustration—because I have no reason to suppose this will happen—but let
us assume that, in my own State, for instance, the banks of Baltimore were to get control of the resources and credit structure of the
rural communities, such as in southern Maryland, western Maryland,
and on the Eastern Shore of Maryland, which is the section that I
happen to come from. Did you apprehend that the Members of
Congress,for instance—I will take Members of Congress for purposes
of illustration. Do you have in mind that the Members of Congress
from the rural part of Maryland would not be representative of the
genius of their communities but would be dominated and controlled
by the financial system, which had its root and base in Baltimore
city? •
Mr. POLE. Well, I would not think so any more than it is the case
now. I think on the Eastern Shore of Maryland you have one of the
important systems of group banks.
Mr. GOLDSBOROUGH. I did not ask that question, but I do not
want to interrupt you. Just proceed, sir.
Mr. POLE. If I understand you, you mean would the interest in the
locality in which a branch might be situated be lost—would the interest be less in that locality—is that what you mean?
Mr. GOLDSBOROUGH. I mean what I attempted to say, but I may
not have made myself plain. What I have in mind is this, that all
the business in this country is done on credit, of course.
Mr. POLE. Yes.
Mr. GOLDSBOROUGH. You can not do business any other way,
because there is not enough money to go around.

BRANCH, CHAIN, AND GROUP BANKING

37

Mr. POLE. Yes, sir; at least 90 per cent done on credit.
Mr. GOLDSBOROUGH. Now,if this system, which you have in mind,
resulted in the concentration of credit and resources in these centers
which I have in mind—would not the political conditions in the
rural districts—would not those who are supposed to represent the
rural districts be controlled not by the sentiment existing in their
own communities, but by the powers in these centers of credit which
you spoke of?
Mr. POLE. I should say not at all.
Mr. GOLDSBOROUGH. You think not?
Mr. POLE. I should say not at all.
Mr. GOLDSBOROUGH. Why?
Mr. POLE. Because the local touch in these smaller communities
is not lost in any way. I thought that is what you had in mind. In
almost all instances where branch banks are operated or where group
bank are operated in small sections, there is almost always a lot of
interest in that local unit of the group.or the branch, and there is
usually a local advisory committee consisting of two or three people,
and I can not feel that there will be any such state of affairs as you
speak of.
Mr. GOLDSBOROUGH. You have never had—I beg your pardon. I
thought you had finished.
Mr. POLE. I do not know that I am in a position to speak very intelligently on that point, however.
Mr. GOLDSBOROUGH. You have not given that particular question
the same mature though as you have the questions which arise more
naturally in the mind of a mail.who has been a banker and who is
primarily concerned in the stability of a banking system?
Mr. POLE. I have given a great deal of thought to that and I reply
that I do not think there would be any such condition arising as you
suggest.
Mr. GOLDSBOROUGH. Now,you remember that two or three years
ago the Senate desired to investigate the public utilities, and that by
virtue of the enormous control which the public utilities had of the
political forces nationally, they, themselves, were able to direct the
course of the investigation and transfer it from the Senate to the Federal Trade Commission. That is, when I say they transferred it, they
were able to control the situation m the Senate to such an extent that
it was transferred from the Senate to the Federal Trade Commission.
I do not know whether you are familiar with that condition or not.
Mr. POLE. I understand your point of view there, but as the group
bank or branch bank has been developed up to the present point
I do not think it can be said that the interests of the local communities have been in any degree lessened; in fact, I think they have
been increased by the upbuilding of an institution which is necessarily one which appeals more to the people of that community by
way of local pride.
Mr. GOLDSBOROUGH. Now, would you be surprised if the suggestion were made that the influence of the city correspondent banks—
even the city correspondent banks—is felt very sharply by those
holding public positions such as an office as Representative m Congress, in the country? That is the condition. I do not want to say
that arbitrarily, but you would be surprised if the suggestion were

38

BRANCH, CHAIN, AND GROUP BANKING

made that that condition was felt already even when the relationship is only that of a correspondent bank.
Mr. POLE. Well, I can not conceive of such conditions as that,
Mr. Goldsborough, unless it would be through the channel of what
might be called controlled deposits.
Mr. GOLDSBOROUGH. Now, what I have in mind is this—that the
point of view of the local bank is dominated very largely by the
point of view of the city correspondent bank. That is what I have
m mind, and that point of view is always reflected out to the legislators.
Mr. POLE. I think that is one of the points that might be cured
by branch banking. At the present time the city correspondent is
probably the banking connection of a public utility. That public
utility has its plants and offices in various small towns in which
correspondents of the same bank may be located. The city correspondent, through a contact or through representation on the board
of directors of the utility company, would control that deposit and
it would reach out to the small community so that if you did not
behave, as a small banker, the city correspondent would probably
be able to control that deposit you had been receiving from the local
utility and place it elsewhere.
Mr. GOLDSBOROUGH. You say if the local banker did not behave.
Mr. POLE. Tithe local banker did not meet its wishes.
Mr. GOLDSBOROUGH. That is the idea. You hit the nail on the
nead the first time.
Mr. STRONG. There is no doubt about that.
Mr. POLE. That, however, I think, would be cured largely by the
branch banks, Mr. Goldshorough, because the city bank, which
controlled this important deposit., would project itself into this
community and it would have no independent unit. It would be a
matter of indifference, then, whether the deposit were placed at
headquarters or distributed among the local banks in the communities
from which it arose.
Mr. GOLDSBOROUGH. Mr. Pole, let us assume that, through a given
congressional district, you have these branch banks centered in some
great city, like Detroit, St. Louis, Baltimore, or New York, as the
case may be, and let us assume that your Representative in Congress
from that district—his views about finances were controlled by what
he deemed to be the best interests of his Congressional district, and
rural life in America. Let us assume that he felt that urbanization
was progressing too fast in this country; that he felt a large proportion
of city population was unassimilated into what we understand to be
American life: Now, then, what would happen to him and his
independent thought I am discussing—
Mr. POLE. I am not a politician, Congressman.
Mr. GOLDSBOROUGH. I have not finished the question, and I
should like to do so because I think it is important—what would
happen to him if he persisted in representing what he thought and
believed to be the true sentiment of his distnct.; continued to feel
it necessary for the rural districts to be independent politically in
order to control this condition in the cities I have mentioned? What
do you suppose would happen to him if he asserted himself, in view
of the fact that the district was covered by branch banks that represented the city point of view?

BRANCH, CHAIN, AND GROUP BANKING

39

Mr. POLE. Mr. Goldsborough, that is a hypothetical question
which it would be very difficult for me to answer.
Mr. GOLDSBOROUGH. It is not hypothetical. Those of us who have
been in politics know it is a very practical question.
Mr. POLE. I really could not answer that question.
Mr. GOLDSBOROUGH. One more question, and then I think I am
through. There is evidently pressure coming from various sources
for an extension of branch banking, because these things never become
politically acute or never become political issues until there is pressure
concentrated on Congress from one source or another.
Mr. POLE. Yes.
Mr. GOLDSBOROUGH. YOU will be surprised when I tell you that
at our first meeting—a thing which never happened before since I
have been a member of this committee—every member of the committee was in his seat when the gong sounded, and it was all because
of this proposed discussion on branch, group, and chain banking.
Would you feel that you could freely give your opinion as to where
the pressure is coming from for this extension of branch banking in
the rural districts?
Mr. POLE. I think I started a great deal of it myself, Mr. Goldsborough. I think, in addition to that, that the bankers associations
and the various bankers in the metropolitan centers
MT. GOLDSBOROUGH. Exactly.
Mr. POLE. Have realized that something is necessary to protect
the small communities against the bank failures which have occurred
in such large numbers over a period of years.
Mr. GOLDSBOROUGH. Then, your aspect of the situation is something like this: That this pressure is coming from the metropolitan
banks and not from the rural districts themselves and that the point
of view of the metropolitan banks is not selfish at all, but simply
for the purpose of helping and assisting the rural communities?
Mr. POLE. In a large measure I would say the latter is true in a
very large measure.
Mr. GOLDSBOROUGH. You think
Mr. POLE. May I answer that?
Mr. GOLDSBOROUGH. Yes.
Mr. POLE. At the same time there is considerable pressure coming
from the rural communities. There are many country bankers who
are in favor of branch banking.
Mr. GOLDSBOROUGH. That I am not prepared to dispute. I do
not know. It does not exist in any locality I am familiar with. I
Would say, Mr. Pole, as far as I am concerned, that since the beginning of the present Congress I have had a vast amount of correspondence on this general situation, and the only opposition to the general
Position which I have taken has come from large city banks.
Mr. POLE. Yes.
Mr. GOLDSBOROUGH. Now, the difficulty the rural man has is
something like this: He realizes when you control the credit of a
community, you control all the capital—and that is the answer—
and he is unable to feel that the attitude of the city banker is philanthropic. He is forced to feel that the city banker is conducting his
business as a business man should—for honest private purposes.
That to me is a very controlling interest. All the pressure, as far

40

BRANCH, CHAIN, AND GROUP BANKING

as I know, that is significant at all comes from the big metropolitan
banks.
Mr. POLE. I think there is pressure from hundreds of country
State banks, Mr. Congressman, and also I think if we could take a
poll of the number of people interested in a change of the banking
system, among those, thousands of people who have lost money in
those country banks, it is even more representative than the opinion
of the country banker. He is the man who usually bas been lost
sight of.
Mr. GOLDSBOROUGH. Don't you think, as a matter of fact, Mr.
Pole, there is already too great concentration of bank resources in
this country?
Mr. POLE. I would say that there is too much concentration of
banking resources. It would be fortunate if it could be decentralized.
Mr. GOLDSBOROUGH. Now,. Mr. Pole, I received this morning—I
do not want to get into individual cases, because I rather think that
is not the standpoint from which I want to approach the subject—
but I received this morning from some one in California, a deposit
slip which is used by the Bank of Italy and, on the back of it, it says
"Bank of Italy covers California," and then it has a map of California with the intersecting lines which show branches that exist in
that State. To me that is a very unusual document. I should like
the committee to see it, and will you pass it around, please—indicating
rather, I am afraid, a position of arrogancy on the part of the Bank of
Italy due to its undoubted control .of the banking resources of that
State. I did not imagine that.any institution would have the hardihood to issue a paper of that kind.
The CHAIRMAN. Have you any further questions, Mr. Goldsborough?
Mr. GOLDSBOROUGH. That is all.
The CHAIRMAN. Under the arrangement the committee made the
other day, we were to begin these hearings at 10.30 and end at 1
o'clock. It is now 5 minutes to 1. 11 hat is the pleasure of the
committee?
Mr. FORT. It seems to me before we go on with other witnesses
we really ought to finish any questioning by the members of Mr.
Pole, and the program on the floor of the House this afternoon is
almost insignificant, unless it has been changed since I came out. It
is nothing but a bill to change the mileage allowances and per diems
allowed witnesses summoned before House committees, and I think
the House could get along without us on that, and I wonder if we
could not go on this afternoon and get Mr. Pole's views thoroughly
developed before we take up the next witness we propose to call?
The CHAIRMAN. There was no intention to take up another witness
before the committee until we completed with Mr. Pole. I should
like to ask Mr. Pole if it would be convenient for him to come back this
afternoon at 2.30 or would he prefer to come back to-morrow morning
at 10.30 o'clock.
Mr. POLE. I have some very important engagements this afternoon, Mr. Chairman.
The CHAIRMAN. Under those circumstances, it is probably better
to adjourn until to-morrow.
Mr. BEEDY. Mr. Chairman
The CHAIRMAN. Mr. Beedy.

BRANCH, CHAIN, AND GROUP BANKING

41

Mr. BEEDY. Apropos the question asked by the gentleman from
Maryland (Mr. Goldsborough) as to where this pressure is coming
from for branch banking, do I not understand it to be your position,
Mr. Pole, that this pressure is an economic urge, the result of an
economic evolution and tendency in all lines of business, which is
now being voiced by bankers not only in the cities but in the rural
communities as well?
Mr. POLE. Precisely so.
Mr. BEEDY. And referring again to the question about centralization, you say there is already probably too much centralization of
credits. I presume you refer to the fact that to-day the great centralization of the credits and financial operations is in the cities of
New York and Chicago, possibly.
Mr. POLE. New York, Chicago, and St. Louis.
Mr. BEEDY. And do you not contend that the establishment of
Other branches by national banks would have a tendency to decentralize the concentration of credits, making more independent of the
three centers to which you have referred, the various other natural
industrial areas?
Mr. POLE. There is no doubt in my mind that that is what branch
banking would result in.
Mr. BEEDY. You would not contend that the policy which you
advocate would result in further concentration of power?
Mr. POLE. The policy which I advocate is a policy of further
decentralization.
Mr. BEEDY. But whatever you may claim for branch banking, I
understand you do not claim for it any guarantee of the reelection of
Members of Congress?
Mr. POLE. I think that covers my thought.
Mr. Fora. When will we get the exhibits to which you referred in
Your testimony?
Mr. POLE. They are not here. I have only the one copy with me.
The CHAIRMAN. In view of the fact that Mr. Pole has only one
S.et of exhibits, which are material to each one of us here, it will be
impossible for us, by to-morrow morning, to have an opportunity to
look over those exhibits and the fact that to-morrow is Calendar
Wednesday and our committee has the call, I want to raise the question with the committee, and I shall be glad to have a suggestion, as
to whether or not it would not be better to have the matter go over
until Thursday.
(Discussion off the record.)
The CHAIRMAN. Very well; we will adjourn to meet to-morrow
n?orning at 10.30, when the hearings will be resumed and be continued to 12 o'clock.
,(Whereupon, at 1 o'clock p. m., the committee adjourned until
Wednesday, February 26, 1930, at 10.30 o'clock a. m.
HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,
Wednesday, February 26, 1980.
The committee met in the committee room, Capitol Building, at
10.30 o'clock a. m., Hon. Louis T. McFadden (chairman) presiding.
The CHAIRMAN. The committee will come to order.

L

42

BRANCH, CHAIN, AND GROUP BANKING
STATEMENT OF JOHN W. POLE—Resumed

The CHAIRMAN. I would like to repeat what was said in the committee the other day as to procedure, before we began the hearings,
and also to state now, the Comptroller of the Currency being in the
midst of his testimony, that an invitation has been extended to the
Secretary of the Treasury to be here, or any members of his department; also the Federal Reserve Board has been notified of these
hearings and they perhaps will have the opportunity to appear next,
after which the officers and directors of the 12 Federal reserve banks,
and after them, persons connected with group, chain, and branch
banking operations. I want to make it perfectly clear, of course,
that during the hearings the committee will hear all phases of the
question.
Mr. SEIBERLING. You mean in the order in which you name them?
Mr. POLE. Group, chain and branch, in the order named?
together, collectively. I want to mention
The CHAIRMAN. No; all'
that there are on the committee two outstanding antibranch bankers
that we have knowledge of—Mr. Strong, of Kansas, and Mr. Goldsborough, of Maryland.
Mr. STRONG. Guilty as charged.
The CHAIRMAN. I presume there are others, and the chairman
would be glad if those members will confer with him as to any possible
witnesses against any of the branch, chain, or group banking proposals, or any other members of the committee that have suggestions
to make, so that we can get word to the witnesses.
Mr. STEAGALL. Let me submit an inquiry.
The CHAIRMAN. I should like to furnish my statement. There
are advocates of branch banking, but I do not know whether there
are any advocates of chain or group banking on this committee and
if those or any other members know of persons who would like to
be heard, the chairman would be glad to confer with those members,
so that their witnesses may be invited to appear before the committee.
Mr. STEAGALL. I want to suggest to the chairman that I thought
there were a number of members of the committee—and I say this
because the chairman seems to want to discuss the attitude of the
committee for the record—I thought it was understood there were a
number of members of this committee who were against branch banking, and I thought the chairman of the committee was among those
members.
Mr. STRONG. I thought there were 15 or 20.
The CHAIRMAN. The chairman was simply trying to arrange this
matter so that the members of the committee can confer with one
another and the chairman as to witnesses.
• Mr. LETTS. I assume no one would undertake to say that the chairman of the committee had polled those mentioned in favor of branch
banking—for myself, I want to say that I want to try to maintain
an open mind.
The CHAIRMAN. The chairman desires to state that he is not
intending to define the attitude of any member of this committee.
I am rather in hopes that the entire membership of the committee will
maintain a judicial attitude in regard to this whole matter until these
hearings are completed.

BRANCH, CHAIN, AND GROUP BANKING

43

Mr. HOOPER. I should like to put myself on record in the same way
Judge Letts has done. I came here to gain information and possibly
act on that information after it is gained.
Mr. STRONG. I shall reserve my decision until after these hearings
have closed, and then I shall render it against branch banking.
Mr. LETTS. That is what we call a truly judicial attitude.
Mr. STRONG. That is an attitude in favor of the people.
Mr. STEAGALL. In that connection, just a word: If members
declare their attitude—I do not think it is necessary that this all be
said—I think the members of the committee who have served with
me here for years will agree that I have an open mind in so far as the
information and arguments are concerned, and I hope I shall always
be that way. This subject of banking and finance, is, of course,
one of the most intricate things in the world and if I know myself,
I am the last man in the world that wants to deny himself any information that anyone wants to offer.
The CHAIRMAN. I have a letter from the Secretary of the Treasury
in answer to the invitation which the chairman sent him in regard to
these hearings which I think should be read at this point. It is dated
February 24, 1930.
(The letter is as follows:)
DEPARTMENT OF THE TREASURY,
Washington, February 24, 1930.
MY DEAR MR. CHAIRMAN: I have your letter of February 21 in which you
inform me that your committee will be pleased to hear my opinions in respect of
the study undertaken by your committee in pursuance of the authority granted
Under House Resolution 141, covering the subject of group, chain, and branch
banking.
In this connection I call your attention to the statement contained in my
Annual Report to Congress for the fiscal year 1929, which reads as follows:
"In banking, as in other enterprises of this country, there is increasing evidence
°I a movement toward larger operating units. The number of branches of banks
in operation has increased and more recently there has been a growth also in the
number of groups in which several independent banks are operated more or less
as a single system. Both of these developments reflect changes in the underlying
economic situation.
"Branch banking has always existed in this country to a limited extent in one
form or another. At the present time the Federal reserve act and the national
bank act, as amended in 1927, authorize national member banks to establish
branches in foreign countries and in insular possessions of the United States, and
all member banks to establish branches within the corporate limits of the center
in which the head office of the parent bank is situated arid in which State laws
Permit State banks to operate branches (with certain restrictions as to the size of
centers in which branches may be established by national banks.) At the end
of June, 1929, State-wide branch banking was permitted in nine States and in the
District of Columbia; branch banking in more limited form was specifically
Permitted in 11 States; and in 23 States the operation of branch systems was
sPecifically prohibited.
"In June, 1929, out of a total of 8,707 member banks in the Federal reserve
sYstem, 354 were operating 2,291 branches. This represents an increase of
130 branches during the year. On the same date 818 banks, including both
Member and nonmember, were operating a total of 3,440 branches, an increase
of 210 for the year. The development of branch banking which is permitted by
existing legal arrangements has facilitated the adaptation of banking facilities to
re9uirements of urban areas.
'More recently there has been a rapid increase in the organization of group
systems of banks. Such groups comprise one or more banks that are brought
Under unified control and some degree of centralized management through
acquisition by an individual or corporation of controlling interest in their stock
issues. Although technically each bank in a group is a separate corporation
°Aerating with its own capital funds and under the direct supervision of a local
board of directors, a certain degree of unity is achieved for the group as a whole.

44

BRANCH, CHAIN, AND GROUP BANKING

At the end of June, 1929, it was authoritatively reported that there were in
existence at the time 230 group systems of banks in the United States, which
embraced about 2,000 banks. Group banking is a means of accomplishing in a
measure the objects of more extensive branch banking systems than are permitted
under the Federal reserve act or under existing legal arrangements in most
States. Although banking groups may be expected in most instances to
strengthen the banks which they control, the organization of such groups places
great responsibilities upon the controlling interests, and is a matter of vital
interest to State and national supervisory agencies.
"In view of the fundamental economic situation which has given impetus to
the organization of group banking systems and to the growth in branch banking,
it is desirable that these developments be carefully studied. In the meantime
it is hoped that any further extension of group and branch banking organizations
will proceed with moderation, and that hasty legislation, either to liberalize or
to constrict limitations now in effect, will be avoided. Our banking structure,
the product of many years of experience, is part of an intricate economic fabric
whose parts are closely adjusted to one another, and a too rapid reorganization
would be likely to create serious and costly disturbances that would affect the
entire country.
"The time has come when it would seem to be wise to undertake a thorough
study of the situation with a view to determining the soundness of the present-day
tendencies, and more particularly the limits of the economic units within which
branch banking may be advantageously permitted."
I may add that because of the more direct concentration of responsibility I
believe that branch banking is on the whole sounder than chain or group banking,
but that even branch banking should be limited to definite economic areas.
As to what those economic areas should be, I am not prepared to state at this
time without further study or thought. I should prefer, therefore, to defer my
appearance before the committee until I have had an opportunity to study the
facts which I hope your committee will develop.
May I add that I think it fortunate that your committee has undertaken this
study at this time, and that I am confident that much good will be derived from
a careful ascertainment of all the facts in connection with the movement which
has been proceeding with great rapidity in the banking field.
Very sincerely yours,
A. W. MELLON,
Secretary of the Treasury.
Hon. Louis T. MCFADDEN,
Chairman Committee on Banking and Currency,
House of Representatives.

Mr. STRONG. I think the Secretary misstates the law at present
when he says that in States that permit branch banking the national
banks are permitted to have branch banks in the communities. That
is not the law. The law is that they are permitted to have branch
in the cities in which located.
Mr. GOLDSBOROUGR. Mr. Chairman, I move that we proceed in
the order outlined at the beginning of the hearings.
The CHAIRMAN. You had finished, Mr. Goldsborough?
Mr. GOLDSBOROUGII. Yes, sir.
The CHAIRMAN. Mr. Busby.
Mr. BUSBY. I had in mind asking a few questions with regard to
the effect of the different methods of banking on the people of the
country who use the facilities afforded by banks. My questions will
not be directed so much to the security of the stockholder and bank
operators and to the depositors as they will be to the borrowers and
users of the banks.
The statement of the comptroller gives us the information that
24 banks in New York City-Mr. FORT. Showed $10,791,000,000 of assets or resources.
Mr. BUSBY. Twenty-four banks, national and State, in New York
City alone are capitalized at an aggregate of $677,000,000 and have

BRANCH, CHAIN, AND GROUP BANKING

45

combined resources of $10,791,000,000. I will ask the comptroller
if that is not a considerable concentration of money and banking
resources of the country in one center?
Mr. POLE. Very obviously.
Mr. BUSBY. Now, much of the money and much of these resources
are gathered into New York City because of the fact that these banks
are used as correspondents of the smaller banks throughout the entire
Nation, is it not?
Mr. POLE. That is very largely true, Mr. Congressman.
Mr. BUSBY. Most of those funds placed there by banks throughout
the country, are used to make what is commonly known as brokers'
or call loans by the New York
are they not?
banks,
A very small proportion of the
Mr. POLE. Not most of them.
total of the deposits in New York banks is used m brokers' loans. As
a matter of fact, I think at the very peak only about two billion
dollars of the banks of New York City.
Mr. BUSBY. I find that on October 2, 1929, the brokers' loans in
New York City were $6,804,000,000. I find that as the crisis was
reached in the bond market or the stock market, that brokers' loans
had decreased $3,476,000,000, or 51 per cent of the amount of the
loans outstanding in October, 1929. Now I will ask the comptroller if that condition is not due very largely to the fact that the
credit and currency of the country is centered at that one point
through our system of banking?
Mr. POLE. I would not say that that fact is demonstrated by those
figures. It is true that the principal stock market of the country is
in New York and necessarily any trading would have to be there; so
the six billion of loans you are speaking of, I thank that, as far as my
recollection serves me, as much as $3,000,000,000, or 50 per cent of
them, were loans for others and loans for others represented funds,
of corporations and individuals, which were scattered all over the
United States and the world which have found their way to New York
for the purpose of being placed by the banks, but not for them, on
the stock exchange.
Mr. BUSBY. But for our system of banking and concentrating the
money and banking credits m New York City, would it be possible
to have the kind of financial catastrophe that we have had in the
stock market in recent months?
Mr. POLE. I should say that under any system of banking, it
might be possible to have a disastrous calamity on the stock exchange,
if the general public were disposed so to invest their funds. I can not
imagine that the difference in the system itself, such as I have suggested, would have a great deal of effect on the stock market, because
funds may be transferred to New York by corporations and individuals which may represent the major share of funds available, and
under any system they may be diverted to any point the holder of
such funds may direct them.
Mr. BUSBY. Does not our system of banking, and would not our
System of banking, if followed in the course you suggest, tend to
funnel the funds of the country into New York City as the center of
credit?
Mr. POLE. Our present system of banking, you mean?
Mr. BUSBY. Well, our present system of banking; yes.
100136-30-rT 1-4

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BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. Yes; I should say that it does, and I have that in mind
in suggesting that it might be that this situation would be corrected,
if the bank resources of the country were further decentralized through
regional branch banking.
Mr. BUSBY. I must say that I can not follow your reasoning in
trying to secure the result that you predict from the method that you
propose. But to give your proposition due consideration at this
point, the branch-banking system or the chain-bank system, which is
proposed, and whether these systems, or either of them, suggested by
you, would decentralize the currency to several points of the country,
and whether or not the situation we are talking about would not be
remedied any?
Mr. POLE. I can not imagine that the system of banking would
have very much effect on the New York stock market.
Mr. BUSBY. Well, if our system of banking carries money from
every bank in the country to the New York banks, it would naturally
have a tendency to cause those banks to make broker loans or call
loans, and thereby increase the tendency of the people to play the
stock market throughout the country.
Mr. POLE. Our present system of banking is conducive to funds
flowing to New York, which, of course, is the financial center of the
country. My suggestion to the committee in regard to a development of banks in the larger metropolitan centers, would cause the
funds in New York to be less concentrated. I would develop very
much larger systems all over the country, and the funds would be
employed locally.
Mr. BUSBY. Now, another thought: In 1919 to 1921, during the
deflating period, Mr. E. H. H. Simmons, in an address before the
Chicago Stock Exchange on May 9, 1929, states that the broker loans
were deflated to the extent of 60 per cent during that crisis. What
I am trying to understand is if the banking system does not tend
toward building up those periods of speculation on the New York
Stock Exchange, and, through a collapse of the pyramiding of the
prices of securities—whether that does not cause the financial
situation we find in the country to-day?
Mr. POLE. I should say not, Mr. Busby. I should say it is not
the fault of the system of banking which we have at this time.
Mr. BUSBY. I notice that last fall the paper values, within a
very short period of time, on the stock exchange depreciated
$35,000,000,000. Now, somebody lost that much financial standing,
did they not?
Mr. POLE. Not necessarily.
Mr. BUSBY. That is where the little fellows all got out, is it not?
Mr. POLE. You refer to them as paper profits?
Mr. BUSBY. That is, a bookkeeping status.'
Mr. POLE. I should say that it made no difference to a man's
actual net worth. He might have lost what he had won on the
market, but I would not say that he was any worse off in the end
than in the beginning through the loss of paper profits.
Mr. BUSBY. The banks did not lose anything during that period;
or, if they lost anything, it was very little during that period of
deflation m stock, did they? Do you recall?
Mr. POLE. The banks themselves were not speculating in stocks.
They were carrying customers, perhaps.

BRANCH, CHAIN, AND GROUP BANKING

47

Mr. BUSBY. And they dropped many customers during that period?
Mr. POLE. Well, I think perhaps the customers dropped the banks.
Mr. BUSBY. Well, you put it that way; but the customer is the
one who lost the money. Is not that true?
Mr. POLE. In a great many instances.
Mr. BUSBY. This may not appear to have any connection with
the subject the committee is considering, but yesterday you told us
of a few small losses by country banks. I say "small' in comparison with the great catastrophe we are passing over—the great catastrophe connected with the stock market collapse we are passing
over. Does not that situation grow out of the banking arrangements
of our country, and was that situation not just as effectively detrimental to the commerce of the Nation as the losses in the small
banks you are talking against?
Mr. POLE. No. I should say by no means.
Mr. BUSBY. If you can explain to me why we have come to this
period of financial distress not as a result of the New York Stock
Market collapse, and yet it does not affect the people as much as
the breaking of a few small banks, I shall be much obliged to you.
Mr. POLE. I think you misunderstand me. I did not say it has
not arisen from any such cause. It seems to me that the thousands
of small failures can not be brushed aside in any such light phrases.
Mr. BUSBY. I said comparatively, or I mean to say "comparatively."
Mr. POLE. Because that is the basis of my belief that a change in
our system of banking in this country, both national and State,
becomes necessary, by reason of those failures.
Mr. BUSBY. Just a moment on this: You say it is estimated that
7,264,000 depositors have contributed to the great total of more than
$1,700,000,000 of deposits in failed banks during the last nine years?
Mr. POLE. Yes.
Mr. BUSBY. And that 114,000 shareholders have suffered losses
through the suspension? Do you have any figures to show the amount
of the losses that were passed on to the depositors by reason of these
failures? You give the amount of the deposits, but not the amount
of the losses.
Mr. POLE. Yes. Of course, that is problematical at the present
time because the banks are still in process of liquidation and it would
be difficult to forecast any percentage of recovery which the depositors
might have.
Mr. BUSBY. That would run to the amount of
Mr. POLE. I could say that liquidation of the national banks—
and of course these are not national banks only; there are many more
State banks than national banks—our liquidation of the national
banks would be probably 65 or 70 per cent.
Mr. BUSBY. Of the amount involved?
Mr. POLE. Of the amount involved; that is,. as 763 is to 4,877, for
instance, of national to State banks, and I am not advised as to what
the liquidation on the State banks is.
Mr. BUSBY. Sixty-five per cent of the deposits involved in both
banks would be lost?
Mr. POLE. No; would be recovered over a period of many years.
Mr. BUSBY. I want to get through and I know the rest of you want
rue to. Another question that I should like to ask is
Mr. POLE. You understand that those are national banks?

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BRANCH, CHAIN, AND GROUP BANKING

Mr. BUSBY. Yes. A bank takes the depositor's money and the
depositor is at the mercy of the management of the bank—I say
mercy in the sensc that he is bound to accept their judgment and
management. Whit is your idea about its being fair and proper to
require banks to insure the people who deposit their money in the
banks against the loss of their money?
Mr. POLE. I think the idea is unsound.
Mr. BUSBY. What do you think about a general insurance to the
depositors by the banking institutions against loss where they place
their money in the bank for safe keeping?
Mr. POLE. Nothing at all.
Mr. BUSBY. You say it is unsound, having entire management of
the institution in the hands of the directors and bank officers—why
would it be unsound for them to assure the honest depositor that they
will honestly return to him that which he has honestly deposited,
when called for? I should like to know why it is unsound.
Mr. POLE. I would point to the practical experience of the States
of Mississippi, Kansas, Nebraska, North Dakota, Oklahoma, South
Dakota, Texas, and Washington.
Mr. BUSBY. I am not asking about the type of laws they have.
Mr. POLE. It is a form of a guarantee of deposits.
Mr. BUSBY. No; I am not asking about that.
Mr. POLE. The insurance would be a form of guarantee of deposits.
Mr. BUSBY. But not the form we have in my State—
Mr. POLE. I am not speaking particularly of your State. There
are no two laws in these States which are similar—yes; similar, but
not alike.
Mr. BUSBY. Let me explain the idea that I ftni trying to convey.
Mr.POLE. And that, without exception the principle has completely
fallen down.
Mr. BUSBY. The basis on which these laws were enacted is that the
banks, in a body and individually, shall contribute to a central fund
which shall be applied to the claims of depositors in failed banks in
the order in which the amounts have been adjudged proper claims
against the central fund, is it not?
Mr. POLE. A similar law has been in force in some States.
Mr. BUSBY. What I am referring to is a bank capitalized with
$50,000 stock and has $200,000 or even a million dollars in deposits,
why would it not be perfectly sound for that bank to take out an
insurance policy with some reputable insurance company, guaranteeing to the people who put their faith and trust in that bank, that this
bank will return to them that which it has received from them?
What would be wrong with that type of insurance?
Mr. POLE. What insurance company, in the first place, would insure $57,000,000,000 of deposits? How would you insure the deposits
of the Chase National Bank, which has $105,000,000 with $135,000,000
surplus and, roughly figuring, a billion dollars in deposits—you would
not discriminate between the large and small banks in regard to the
question of additional safeguards.
Mr. BUSBY. You ask a question in answer to my question. I am
sure a system could be worked out where the risk would be taken
over. But you can not expect people to come up with an insurance
proposition before you lay down a plan and provide a premium to
carry this, and almost every risk under the sun is being insured, and

BRANCH, CHAIN, AND GROUP BANKING

49

the smaller banks especially could be cared for in that way, and an
inspection of those banks be had by the insurance companies, and
you need not say that each bank should stand on a parity in the rate
of the risk that should be applied to that bank to insure it against
loss.
Mr. PciLE. The systems which have,been in force which contemplate the protection of the depositor have been universally unsuccessful. The price has to be paid by the going banks and it has often
been such a burden on them as to even put them out of business.
Mr. BUSBY. I know that system has been, but the system I am
talking about has never been tried.
• Mr. POLE. I would not like to express an opinion on any new
system which I had not had an opportunity to study.
Mr. BUSBY. My idea was that we would get new ideas on proper
procedure and that is the reason I asked the question.
Mr. POLE. I should say that, in the light of experience, any system
of insurance of deposits or guarantee of deposits is, in my opinion.
entirely unsound.
Mr. BUSBY. Out of respect for the other members of the committee
who want to ask questions,I shall desist.
The CHAIRMAN. The gentleman will have another opportunity
to ask questions later on.
Mr. Letts, of Iowa.
Mr. LETTS. Mr. Chairman
Mr. BRAND. Would you object to my asking two questions at this
point?
Mr. LETTS. Certainly not. Go ahead.
Mr. BRAND. I just want to ask Mr. Pole first: You can furnish and
will furnish to the committee, the amount of the franchise tax paid
by each of the 12 Federal reserve banks since the act was passed
and the organizations of the banks established, per year, and showing
the amount each one of these banks paid down to and including the
year 1929?
Mr. POLE. I shall be glad to do so, Judge.
Mr. BRAND. So that we will know what each bank has paid down
to and including the year 1929.
Mr. POLE. Yes, sir.
Mr. BRAND. This is a questiop I want information about: Of
course it is well understood by the big bankers and members of the
committee who associate with big banking institutions—but will you
define briefly the difference between group banking and chain banking
as compared with branch banking—either now or later on?
Mr. POLE. I think perhaps it would be very proper if I might use
the same language I used yesterday.
Mr. BRAND. I do not want you to do that. I heard that. Clearly
define what is chain banking and group banking as compared with
branch banking.
Mr. POLE. Chain banking consists of a number of banks in which
an interest, not necessarily a controlling interest, is owned by one or
More individuals.
Mr. BRAND. Individuals or individual banks?
Mr. POLE. Individuals. They have their separate corporate entity and operate entirely independently, but there is a greater or less
control by reason of the interest which is owned by the individual or

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BRANCH, CHAIN, AND GROUP BANKING

individuals, which more or less directs the policies of this chain of
banks.
The group bank is a number of banks. Fifty-one per cent or
more, usually, of the stock of each is owned by a holding corporation, and by reason of the ownership the policies of this group are
directed by this corporation.. In the corporation there is usually one
major bank from which the others radiate and the policies are directed
or influenced by the heads of those banks, who are usually the chief
interested parties in the corporation. Management control is the
principal difference.
Mr. BRAND. And these banks which you refer to own, as I understand, the majority of the stock in all the unit banks?
Mr. POLE. They may own the majority or all the stock except the
directors' qualifying shares.
Branch banking is different. A metropolitan bank, usually, with
branches scattered over its district. A single corporate entity.
Mr. BRAND. I understand what branch banking is. The other
two I did not clearly understand.
Mr. POLE. Have I made that clear, Judge?
Mr. BRAND. I think I understand them now.
Mr. STEAGALL. I was not here yesterday, much to my regret, having
been called to appear before the hospitalization board on a matter
of great interest to my State, and I did not get the benefit of the proceedings yesterday and I am not informed as to the rule which the
committee adopted with respect to the manner in which we should
proceed. I have no desire to interfere with the rule, whatever it is.
It is all right with me. But I have some questions right in connection
with the statement which Mr. Pole has just made. If it i3 desired
to go along on the line of subjects under discussion, I shall be glad to
proceed or wait, just as the chairman indicates, which would be more
in accordance with the rule.
The CHAIRMAN. The rule we are working under is to call on the
members of the committee according to their seniority. We are going
ahead under that procedure. In accordance with the rule adopted
yesterday, you are the next one on your side to be called. Mr. Letts
has now been recognized under that rule.
MT. STEAGALL. That is all right with me.
Mr. STRONG. Will you yield to me for a short question, Mr. Letts?
Mr. LETTS. Yes; but not for long.
Mr. STRONG. Mr. Brand, I want to suggest, in getting information
from the comptroller in regard to the amounts paid in excise or
franchise taxes by the national banks—I want to inquire whether it
would not be well to put in the record the amount of their earnings
and expenses.
Mr. BRAND. That would show the net income.
Mr. STRONG. I think that would be helpful to the committee.
Mr. LETTS. I have two or three lines of inquiry which I should
like to indulge in. The gentleman from New Jersey—Mr. Fort—
has informed me that he must be away to-morrow and would like
to go on to-day with his questions. However, there is one matter
that I should like to open up because Mr. Fort undoubtedly knows a
great deal about the matter and it is something that I think has a
pertinent connection.

BRANCH, CHAIN, AND GROUP BANKING

51

Yesterday I was very much interested in the line of que,tiolun
of the gentleman from Maryland—Mr. G91dsborough—and the
answers of the comptroller. The questions indicated that, in the
mind of the gentleman from Maryland, the plan to extend branch
banking presented some serious political dangers. I understood,
from the answers of the comptroller, that he was not greatly concerned about that matter and that perhaps he felt that the dangers
suggested were more apparent than real.
But I want to ask now whether or not the comptroller, upon an
assumed state of facts—and I want to get his opinion—assuming
that the issue in a State should be the control of the appointment
of the supervisor of banks, who would have the power of issuing
charters and the power of appointing inspectors and examiners and
directing the examinations, and that a banking interest might become so powerful that they could control the nominations in the
Primaries and elections of officers, and, in that.way, secure the person
desired for the important position of supervisor of banks. Would
You then say that the situation presented a political problem that
was a menace and ought to be avoided?
Before answering that question, I will say that I have tried to
embody in that question a state of facts that I think has existed. I
am told that, at the least gubernatorial election in the State of California, the Bank of Italy made a determined fight for Mr. Young,
who is now the governor of.that State, upon the issue that they
should know that the person in whom they are interested would be
the superintendent of banks. I understand he gets a salary of $10,000
a year and I understand that they expressed their desire and made the
request of every employee of their banks and of every branch that
they should see that Mr. Young was nomniated at the Republican
primaries for governor. I am told, too, that they went further than
that and made the request of their depositors. I am not so sure
of it. I think it can also be shown that, at the general election in the
fall, they sent out a ticket in which they expressed their preference
for every State office and for every congressional office and for Senator
in the United States Congress. The ticket that they espoused was
elected. Mr. Young was elected governor and the favored candidate
was made superintendent of banking.
Now, perhaps you can tell me how accurate those facts are and
Whether or not, if it is true, it does not, in fact, present a very serious
Political problem and show that perhaps there is a real danger, in a
political sense, such as was indicated by the gentleman from Maryland in his line of inquiry.
Mr. POLE. I have heard, Mr. Letts, that the appointment of a
superintendent of banks in some States is regarded as more or less
of a political appointment, but I am sorry.I can not answer you as
to the status quo of the political situation in regard to—
Mr. LETTS. If my facts are substantially correct, would you say
that there is presented a serious question as to the advisability of
the policy which you advocated toward the extension of the branch
banking system?
Mr. POLE. It is a question which would be exceedingly difficult
for me to answer.
Mr. LETTS. I will excuse you from that. But now, as I understand
the matter, we have been talking of the Bank of Italy. Now, there

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BRANCH, CHAIN, AND GROUP BANKING

is also what is called the Bancitaly Corporation. I do not know
that I have a correct understanding of that and so I want to inquire
of you—is that a holding company?
Mr. POLE. It migght be called a subsidiary company.
Mr. LETTS. I understand that the Bancitaly Co. holds a large part
of the stock of the Bank of Italy and of all of the branches.
Mr. POLE. I have no access to the books of the Bancitaly Co.
Mr. LETTS. Is the Bancitaly Co. a banking institution?
Mr. POLE. It is not.
Mr. LETTS. It is a holding company?
Mr. POLE. Yes. I presume it holds certain securities.
Mr. LETTS. Does it do more than hold stock?
Mr. POLE. I think that their charter gives them rather a wide
latitude. I, however, am not informed.
Mr. LETTS. They are not subject to examination?
Mr. POLE. No; they are not subject to examination by the Federal
Government.
Mr. LETTS. Are the Bank of Italy and the branches of the Bank
of Italy under national charter or State charter or both?
Mr. POLE. The branches are under national charter.
Mr. LETTS. How about the Bank of Italy?
Mr. POLE. The Bank of Italy is a national association and, necessarily, the branches are a part of the Bank of Italy—one branch being
just as much a part as any other branch.
Mr. LETTS. Is there just one charter?
Mr. POLE. Just one charter.
Mr. LETTS. And covers all branches?
Mr. POLE. Yes, sir; covers all branches.
Mr. LETTS. Now, I understand that more recently the Bank of
Italy people have organized the Trans-American Co. Can you tell
me anything about that?
Mr. POLE. Yes. I would not say that the Bank of Italy has formed
that. The Trans-American Corporation was formed a number of
years ago and is, itself, a holding company.
Mr. LETTS. That is organized, however, and operated by the sail-e
group of people?
Mr. POLE. I should say not. I should say that it has entirely a
different personnel.
Mr. LETrs. Distinct?
Mr. POLE. Distinct from the Trans-America Corporation—the
Bank of Italy personnel; yes.
Mr. LETTS. Is that personnel entirely different?
Mr. POLE. As far as its officers are concerned; I think so.
Mr. LETTS. Of course I have no knowledge of it and am asking
for information.
Mr. POLE. As far as my knowledge goes.
Mr. LETTS. My understanding is that the Trans-America Co. is
a holding company to put into operation the policies of the Bancitaly
Co., by extending beyond the State of California; that they intend
to reach out and do the same things in other parts of the country that
the Bancitaly has done within the State. Am I correctly informed as
to that?
Mr. POLE. I think, in the published statement of their assets,
which is made periodically, a number of stocks of banks over the

BRANCH, CHAIN, AND GROUP BANKING

53

country were included, among them being, for instance, the National
City Bank and the Chase National Bank—large banks and small
banks in different parts of the country.
The CHAIRMAN. Will you yield to me, Mr. Letts?
MT. LETTS. Yes.
The CHAIRMAN. I think it might be helpful, at this point, to
observe that the Trans-America Corporation is a Delaware Corporation and not only owns sufficient stock of the Bancitaly Corporation,
but a sufficient amount of stock in the Bank of America to control
the policies of each one of those corporations. The Bank of America
includes the Bank of America in New York and the Bank of America
in California.
Mr. LETTS. Well, I thank the chairman for that statement, and
I want to add this, that I havelnot very much knowledge about these
matters and am seeking information, and I am very happy to have
that statement.
The CHAIRMAN. I 'might add further that my understanding is
that the control of these various operations which were formerly
vested in the Bancitaly Corporation and the Bank of America, both
New York and California, as well as the firm of Blair & Co., are now
operated under the Trans-America Corporation or TransamericBlair Co. control.
Mr. LETTS. I wonder, Mr. Comptroller, if at some later time you
could supply us with the information to show whether or not the
Personnel in these corporations is the same, or just what the facts
are in respect to that.
Mr. POLE. I will be glad to go as far as I can. But may I suggest that perhaps you might wish to call a member of the official
family of the Bank of Italy and the Trans-America Corporation, and
they will be glad, I am sure, to give you full information on their
activities. I have no official information in regard to the corPora dons.
Mr. LETTS. My only thought was
Mr. POLE. Except the Bank of Italy which is a national association.
Mr. LETTS. I think it would be desirable to know whether or not
these companies are advancing along the same policy and whether
or not controlled by the same influences. Those are the things I
am interested in knowing.
I do not care, Mr. Chairman, to pursue this further at this time.
I do have one or two other things that I should like to go into, but
I shall be glad to yield to the gentleman from New Jersey, Mr. Fort.
Mr. FORT. I am sorry to ask the committee to break the standing
order, but I have an engagement for to-morrow of a year's standing
out of the city.
The CHAIRMAN.. You may proceed, Mr. Fort.
Mr. FORT. Mr. Pole, there has been some reference to the size of the
aggregation of banking resources in the city of New York. Is it not
true that in every major country in the world there is a concentration
of banking control and banking resources in what is called the financial capital of the nation, usually the same as the political capital,
because it is also the largest city?
Mr. POLE. I should say that that is true of the principal countries
of the world, as far as I know.

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BRANCH, CHAIN, AND GROUP BANKING

Mr. FORT. You said this morning the banks were not purchasing
stocks. It is true, is it not, that many State banks enjoy the power
of purchasing stocks?
Mr. POLE. My reference was only to the national banks.
Mr. FORT. It is also true that many, both State and national, banks
have what is called security affiliates through which they purchase
stocks.
Mr. POLE. That is largely true.
Mr. FORT. Is it not true that some chains of banks exist in States
where banks are permitted to own directly the stock of another bank?
It know it is true in my own State and I will make that statement.
Mr. POLE. I have no information on that.
Mr. FORT. With reference to the power aggregated in groups, there
is a rumor—I do not care to name the Federal reserve district—but
there is a rumor that in one Federal reserve district in this country
two bank-stock holding companies to-day own enough banks to give
them the voting power to elect the directors of the Federal reserve
bank in that district. Do you know whether or not that is a fact?
Mr. POLE. My belief would be that it is not the fact.
Mr. FoRT. It is possible, however, under our present loose system
of permitting groups and bank-stock holding companies, is it not?
Mr. POLE. It is a potential possibility.
Mr. FORT. You have heard the rumor to which I have referred?
Mr. POLE. I have not. I think I know the locality of which you
speak.
Mr. Fowl% That, if true, would be a very serious danger, would it
not, to confer on one banking group the power to control the board
of the Federal reserve bank in any district in this country?
Mr. POLE. I rather doubt it. You know how the Federal reserve
directors of a bank are elected?
Mr. FORT. If one group could control the majority of banks in
two groups, which elect the directors, they would control, would
they not?
Mr. POLE. There might be a possibliity of such a thing.
Mr. FORT. And you would regard it as undesirable that that
condition should exist?
Mr. POLE. I would.
Mr. FORT. And, in our general consideration of this situation, Nve
should endeavor to avoid that possibility?
Mr. POLE. I think so.
Mr. Foal% I take it in the great bulk of your discussion, Mr.Pole—
which I may say parenthetically is the strongest presentation of your
position that I have seen anywhere, and is a very fine one—you are
assuming that we have the power to permit national banks to extend
their branches throughout an economic area?
Mr. POLE. Yes, Sit.
Mr. FORT. But no law we could pass could extend the jurisdiction
of State banks beyond the States in which they are chartered?
Mr. POLE. No, sir.
Mr. FORT. So your idea looks to the strengthening of the national
bank system?
Mr. POLE. That is my one thought.
Mr. FORT. Your main reasoning is that we need larger and stronger
banks? Your main desire for having the branch bank system
extended
-

BRANCH, CHAIN, AND GROUP BANKING

55

Mr. POLE. I would not say that. I would say my main reason for
suggesting any change in the system is that we need stronger banks
and not necessarily larger banks.
Mr. FORT. I was using the two as almost synonymous. We do not
need stronger banks in the major cities, do we?
Mr. POLE. I would say that we do.
Mr. FORT. Still larger and stronger than the institutions known as
the National City in New York or the Continental-Commercial in
Chicago?
Mr. POLE. Not larger in the central reserve cities. I am speaking
of the country as a whole.
Mr. Fora. I am speaking of the central reserve cities. The banks
are now adequate to handle the banking needs of those communities?
Mr. POLE. As far as I know.
Mr. FORT. The aggregation—just parenthetically—the aggregation
of financial resources in New York is, in large part, due to the enormous foreign balances maintained there?
Mr. POLE. You speak of "foreign" as foreign countries? The
large part
Mr. FORT. A large part?
Mr. POLE. I think so.
Mr. FORT. It has been understood that $2,000,000,000 of foreign
money has been out on call during the last-NI I'. WINGO. You do not mean foreign nations?
\Ir. FORT. Deposited by persons living in foreign nations.
Mr. WINGO. But you did not mean foreign governments?
Mr. FORT. No. I was in a foreign country last year where I was
told very nearly every insurance company and banking company
had all its loose money on call in New York City. If a single city is
attracting practically the entire mass of this foreign money, it might
be wise to divert as much as possible of our domestic moneys elsewhere, might it not?
Mr. POLE. I think a decentralization, as far as possible, would be
advisable.
Mr. FORT. In connection with the policy you have advocated,
there is no general concurrence among the larger banks of the country,
is there?
Mr. POLE. I have not made a sufficient survey, Mr. Fort, to
answer that question.
Mr. FORT. I am not saying that that is anything against your
policy. Indeed, my own view is that we should legislate at this time
before there is any such concurrence and the resultant pressure upon
Congress.
Mr. POLE. I understand some New York banks are not expressing
themselves favorably toward a branch banking system.
Mr. FORT. But some of them are?
Mr. POLE. I know of no recent expression of opinion of a New York
Metropolitan bank in favor of rural branch banking, and I think there
are a great many others that have not expressed themselves favorably,
although, taking the metropolitan banks of the country as a whole,
I think there is a very strong feeling that some change in the system
of banking is necessary, and as far as I get it, the preponderance of
Opinion is in favor of some system of branches.

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BRANCH, CHAIN, AND GROUP BANKING

Mr. FORT. In connection with your general idea, which is to
strengthen the country's bank systems
Mr. POLE. Yes.
Mr. FORT. Have you given any thought to the idea of limiting the
size of the city where the central institution, which might have
branches in the country districts, could have its headquarters?
Mr. POLE. I have not given a great deal of thought to that, Mr.
Fort, and have deemed it best to leave that to the discretion of the
supervising officer under some general principle laid down by Congress.
Mr. FORT. I have noticed in your remarks that in two or three
places you speak of larger commercial banks outside of New York,
Mr. POLE. Yes.
Mr. FORT. As requiring strengthening—as desirable places to
centralize further banking power?
Mr. POLE.. Yes.
Mr. Fowl% Did you make the statement "outside of New York"
deliberately to exclude New York, or simply
Mr. POLE. I have made no particular reference to New York.
Mr. FORT. You used that phrase two or three times.
Mr. POLE. Outside of New York, but not in that connection.
My recommendation to Congress was that branch banking should be
extended within the trade area of a city in which a bank might be
located, the effect of which would be to develop a system around the
larger metropolitan centers, including the New York City trade area.
Mr. FORT. My own opposition to branch banking legislation three
or four years ago was, in large part, based on this: Rather than to
permit banks to have a number of branches in the cities, we should
forbid branch banking in the cities, but should extend them through
the country sections. It has seemed to me—and I wonder how much
thought you have given to it—that we might prevent the concentration of banking power—which we are all afraid of—in a few hands,
by adopting your suggestion in part; not by permitting the great
metropolitan Federal reserve city banks to have branches out through
the country, but by working toward the building of stronger banks in
the cities of forty or fifty thousand, which are scattered through
practically all the States, by permitting them to have branches
throughout their trade areas.
Mr. POLE. I should answer that by stating that the area must be
large enough to permit of ample diversification.
Mr. FORT. I agree that it must be large enough for such diversification.
Mr. POLE. And I doubt whether limiting it to the areas which you
suggested would in many cases enable the bank properly to diversify
its investments.
Mr. FORT. That, after all, is the problem that determines whether
a bank is sound or not—diversification of investments?
Mr. POLE. I think so.
Mr. FORT. Is there not a complete shifting of what is regarded as
good banking, or rather of banking necessity, in the last 20 years,
with the enormous growth of corporate enterprises in place of individual enterprises?
I have seen figures somewhere as of a recent date, that only 18 per
cent of the loans of all banks were on name paper.

BRANCH, CHAIN, AND GROUP BANKING

57

Mr. POLE. I could not say as to the figures, but I know that the
loans on corporate securities have increased.
Mr. FORT. SO, the banker must know the value of the securities
that are used as collateral in connection with the loans rather than
the character of the borrower?
Mr. POLE. That is true in the metropolitan banks.
Mr. Fora. But not in the country banks?
Mr. POLE. No, sir.
Mr. FORT. Have you given any thought to the provision that is
applied customarily to insurance companies by many States, which
requires a company to have not only its capital but surplus funds
Proportioned to its capital, before it can start operations?
Mr. POLE. There is no law requiring a national bank to have a
surplus when it starts operation. As a practical matter, it is rarely
that a bank does start without 10 to 20 per cent surplus.
Mr. FORT. I am getting at that now. If that proportion were
made larger and were made mandatory, without increasing the
loaning limit of the bank, might that not tend to strengthen the
country banks?
Mr. POLE. I think that such increase would tend to strengthen
the country banks, but it would be equivalent to saying that a bank
shall commence business with a larger capital.
Mr. FORT. Except that the capital controls the loaning limit. I
am suggesting a requirement for increasing the capital funds without
increasing the individual loan limits.
Mr. POLE. I think, regardless of whether the capital funds are
expressed as capital, surplus, or profit, it would be necessary, of
course, that a fair return should be made on it. There are many
communities where banking services are urgently needed that
Perhaps could not earn a reasonable income on a larger capitalization.
Mr. FORT. Now, about your shareholders' liability: In 'some
European countries, where they have an uncalled capital system, it is
required that the stockholder cover his liability for the balance of the
call by collateral, and the uncalled capital is then subject to call by
the directors without waiting for receivership. Would not something
of that sort reinforce our stockholders' liability provisions in this
country?
Mr. POLE. I think it would reinforce the stockholders' liability
to that extent.
Mr. FORT. And in many cases would it not avoid suspension if the
directors exercised their power to call for the capital the moment
they were in trouble?
Mr. POLE. In a comparatively few cases, but not generally, I
Would say, Mr. Fort. I explained yesterday—and I think you were
not here—that if the entire assessment on capital were collected, it
Would only mean 10 cents on the dollar to creditors.
Mr. FORT. On the liability?
Mr. POLE. On the liability.
Mr. FORT. But not 10 cents on the dollar on the total amount of
the losses?
Mr. POLE. We have the right of assessing that—
Mr. Fora. But you have collected only 40 per cent?
Mr. POLE. Fifty per cent average, I think, in the cases of insolvencies.

11.

58

BRANCH, CHAIN, AND GROUP BANKING

Mr. FORT. You take the view, do you not, Mr. Pole—well, I will
put it this way: It is the correct statement, is it not, that under
modern conditions, this Congress, through its control of the Federal
Reserve system, really has the power, if it sees fit, to lay down a banking code, and the States would have to follow it?
1\4r. POLE. There is no doubt in my mind that that is so.
Mr. FORT. We could do it by denying them membership in the
system and in other ways.
Mr. STEVENSON. I did not catch that last. What was it? You
stated there were a number of ways and you stated one of them.
Mr. FORT. A number of ways of forcing compliance by State
banks with any code we chose to enact.
MT. STEVENSON. I anft much obliged.
Mr. FORT. Has not one of the troubles been overpayment for the
purchase of other banks, in order to create branches—payments in
excess of value?
Mr. POLE. I know of no trouble that has arisen from that source.
MT. FORT. NO trouble?
Mr. POLE. No.
Mr. FORT. When a bank does buy a branch, through the purchase
of stock of another bank, does the comptroller's office require them
to write off everything down to the capital and surplus of the purchased bank?
Mr. POLE. When a national bank purchases a State bank?
Mr. FORT. Yes.
Mr. POLE. We do not have the authority to prevent a bank
from purchasing the assets and assuming the liabilities of a State
bank, but do approve consolidations, and we are always very careful
to see that the State bank is reasonably clean before we permit the
consolidation.
Mr'. FORT. Suppose they purchased a State bank at $500 a share
value for its stock? The actual capital and surplus value of that
bank is $250 and the balance is good will. Do you require them to
write those assets down to $250 instantly?
Mr. POLE. When they purchase the assets we have nothing to say
as to the arrangement between the banks. There is nothing to prevent a bank from paying for good will.
Mr. FORT. But do you allow them to carry that good will in any
form whatever?
Mr. POLE. Not in any form.
Mr. FORT. But some States still do?
Mr. POLE. I do not know that. It is not true as to national banks.
Mr. FORT. You talked somewhat concerning diversification of the
activities of modern banking, and made a very strong presentation—
that it is spread out into trust powers and security affiliates, and all the
rest of the powers that modern banks exercise. Does not that very
diversification of power, involving, as it does, through trusteeships,
the control of billions of assets in addition to the bank's own resources,
make centralization of the control of our banks an extremely dangerous thing in this Nation?
Mr. POLE. It does tend, of course, to increase the responsibility of
the larger banks, because the trust business is growing tremendously.
However, with a system of branch banking, where great banks would

—4111

1

BRANCH. CHAIN, AND GROUP BANFING

59

grow up in the metropolitan centers, that it tends to decentralize
that responsibility to a very large extent.
Mr. FORT. I have only time for about one more question out of
the number I wanted to ask.
If we ever authorize the program which you suggest, or any other
of the extension of branch banking, as a practical matter can we ever
unscramble it if we do not like it afterwards? For instance, if we
Permit bank a in St. Louis to establish branches throughout its trade
area embracing a large part of the State of Missouri, once established,
there is no way that that bank, in justice to the stockholders of the
bank, can ever be unscrambled?
Mr. POLE. As a practical matter, it would be difficult.
Mr. FORT. SO it involves a very major policy which should be
settled by the Congress of the United States rather than by the delegation of the authority to someone else? I mean, whether we should
have that?
Mr. POLE. I am thoroughly in accord with that.
Mr. FORT. I think, Mr. Chairman, that is all I have time to ask.
We have to adjourn in two minutes, if we have the call to-day. I am
sorry, as I have some other questions.
The ACTING CHAIRMAN (Mr. Strong in the Chair). You may
Proceed a little while longer, Mr. Fort.
Mr. FORT. Mr. Pole, in the failures that you spoke of yesterday,
I do not recall that you gave the proportion of failures between State
and national banks. Is that in any of your exhibits?
Mr. POLE. Not in any of the exhibits, but I made the statement
that it was in the ratio of approximately three to one.
Mr. FORT. In favor of which?
Mr. POLE. In favor of the national banks.
Mr. FORT. That is, the national banks were the one or the three?
Mr. POLE. The national banks were the smaller, in ratio, to the
number of banks that failed.
Mr. FORT. What is the proportion between national and State
banks throughout the country?
Mr. POLE. About 18,000 State banks and 7,500 national banks.
, Mr. FORT. Were the failures in the proportion of 3,000 State
hanks to 1,000 national banks?
Mr. POLE. Yes.
Mr. FORT. So that the failures—the percentage of failures of
Rational banks was as great as the State banks?
Mr. POLE. There wore 763 national and 4,877 State bank failures.
Mr. FORT. Now, that is what I am getting at; in other words, the
code of banking and the requirements of banking that we have set
uP for national banks, have proven more efficacious in preventing
bank failures than the general codes of the States?
Mr. POLE. By three to one.
Mr. FORT. So that we can start, in any of these proposals regarding
branch, group or chain banking, with the knowledge that one thing
that should be done for the banking systems of .the nation is to
tighten up either the supervision or the regulations or the laws
Under which the State banks operate?
Mr. POLE. That seems to be necessary.
Mr. FORT. Has the matter of the development of branch banking
g'one far enough so that it is possible for anyone to venture a guess

lbw

60.

BRANCH, CHAIN, AND GROUP BANKING

as to whether the loans made by the branches—that is to say, if
a given branch has deposits of 10 per cent of the bank's total resources
or deposits, is there any way through which, or could it be discovered
whether the depositor3 in that branch get ten per cent of the loans,
or not?
Mr. POLE. Are you including the groups of banks?
Mr. FORT. No; branches.
Mr. POLE. Yes; I should say it has gone far enough to show that.
I think the probability is that the california banks will make a
very satisfactory showing along that line. In a great many instances,
we shall find that there is far more money loaned to the community
than it furnishes in deposits, in order to stabilize conditions and
advance money to farmers, etc.
Mr. FORT. What would be a way to get at that fact statistically?
Mr. POLE. I should think the way would be to call witnesses from
either one of those banks, and I think those statistics will be right on
the tips of their fingers.
Mr. FORT. That would be very helpful. Increased capital requirements would accomplish one of the purposes you have in mind,
through limiting the number of banks, and thereby reducing overhead and increasing the possibility of profit?
Mr.POLE. Yes.
Mr. FORT. You spoke about the necessity of profit.
Mr. POLE. Limiting the number of banks but increasing the
number of banking offices would give the banks a wider opportunity
for earnings.
Mr. FORT. And, through the reduction of overhead, enable greater
profits. Now, what I have in mind is
Mr. POLE. Per deposits, for instance.
Mr. FORT. If we have now a small community struggling to keep
three $25,000 banks going and, by making the minimum capital
limit $50,000 or $75,000—the limit of capital in such a communitythe one resulting bank would have a far better chance of profit than
the three banks now?
Mr.POLE. Undoubtedly.
Mr. FORT. And, therefore, that would, to some extent, solve
this problem?
Mr. POLE. I think to some extent. Of course, those communities
would be denied what is very helpful, namely, competitive banking
facilities, we should not have a monopoly of the banking business
even in the small communities.
Mr. FORT. If we are going to suggest the idea of permitting branch
banks all through the trade areas of such a city as St. Louis, should
not we simultaneously prevent the consolidation of banks in St. Louis.
if you are after competition through the branches?
Mr. POLE. That is a big question, Mr. Fort.
Mr. FORT. I appreciate it, but I am trying to think through these
problems. If our object in permitting branch banking through the
trade area—and I am not hostile to your proposition—if our objirt
is to produce competitive banking in the smaller towns and cities
through having the branches of two different St. Louis banks located
there, and decentralizing these resources, should we permit two St.
Louis banks having branches in those towns to consolidate in St.
Louis?

1

BRANCH, CHAIN, AND GROUP BANKING

61

Mr. POLE. I am inclined to think in that case that the natural
economic development should be permitted to find the solution to
such a problem. I should like, however, to give further consideration
to that question.
Mr. FORT. Mr. Pole, there is a great deal of belief—and I do not
know whether there is any real foundation for it; it might only be
gossip—that if the stock, market deflation had not come just about
when it did the New York banks would have been reduced to approximately five or possibly four groups or individual institutions?
Mr. POLE. Through consolidations?
Mr. FORT. Through consolidations, purchases, mergers, and so
forth. I am not ordinarily afraid of large organizations, but would
You feel that we ought to, in establishing any such system of branch
banking through the trade
permit the banking of America,
by any chance, to get down into
areas,
so few hands as that might involve?
Mr. POLE. I doubt very much if that conclition would prevail for
very many years to come.
Mr. FORT. Should we adopt machinery that would permit it ever
to prevail?
Mr. POLE. I am not prepared to go into that at this time. That is
too large a question to answer without further study.
Mr. FORT. I appreciate your desire not to commit yourself to a
Proposition until you have reached a conclusion. I would not want
to do it, if I were in your place.
In connection with this matter of setting up branch systems, chains,
or whatever they may be, through purchase or absorption of smaller
banks by larger banks, have you given any thought to the wisdom
of requiring that absorption to be by the exchange of stock and not
Permitting cash purchases?
Mr. POLE. I think that that might be quite desirable.
Mr. FORT. That would remove the incentive to speculative profit
to individual insiders of the larger banks?
Mr. POLE. I think so. Of course, the methods now used are
frequently by the exchange of stock.
Mr. FORT. They are frequently, but there is a tendency to consider
the possibility of speculative profits to be made out of the smaller
banks through a sale for cash.
Mr. POLE. That is true.
Mr. FORT. And it would, in the long run, make those purchases be
considered solely from their economic worth, if all speculative deals
could be eliminated?
Mr. POLE. Yes, sir; if they could be eliminated.
Mr. FORT. In connection with all of this, does the comptroller's
Office feel that there should be any distinction between the requirements for the investment of savings deposits from those of commercial
deposits?
Mr. POLE. I think that the comptroller's office has never expressed
itself on that point. However, my own opinion is that inasmuch as
banks are privileged to require of a savings depositor as much as 30
or 60 days' notice of withdrawal, occasionally the 60-day clause is
invoked, which has the effect of giving the demand depositor a preference over the savings depositor. IV17 feeling has always been that
since the banks are privileged to require 60 days' notice on savings,
100136-30—n1-5

62

BRANCH, CHAIN, AND GROUP BANKING

that the investment of such savings should be segregated for their
benefit.
Mr. FORT. That is my idea, plus the idea that we have educated
the American people, in some States, at least, to the idea that a
savings bank is the ultimate of responsibility, and where the word
"savings" is used, we should not allow it to be depreciated in the
public mind by the possibility of savings depositors losing their thrift
money.
Mr. POLE. I think that is a very sound theory.
Mr. FORT. Have you given any thought, in connection with this
whole thing, to the major question of security affiliates and their
propriety in connection with modern banking?
Mr. POLE. A great deal.
Mr. FORT. Have you reached a final conclusion? If not, I do not
want to ask you to express any.
Mr. POLE. I have reached the conclusion that the comptroller's
office feels that it should have some supervisory powers over affiliated
corporations.
Mr. FORT. I have not reached a final conclusion myself, but I ani
asking this question simply to develop the idea.
Mr. POLE. It is possible that had we visitorial powers, we might
suggest some legislation.
Mr. FORT. Is it customarily the fact that the affiliated corporation
does its borrowing with the bank which it has the affiliation?
Mr. POLE. I think that is sometimes true.
Mr. FORT. If it is true that modern banking is increasing in loans
on collateral, is there not, in the combination of the security affiliate
and the bank—is there not danger in that situation of using the national
bank's resources for speculation in stock—through the affiliate?
Mr. POLE. By loaning to the securities company?
MT. FORT. Yes.
Mr. POLE. Of course, the loaning limit of the national bank would
be applicable to the securities company as well as to any other
corporation or individual.
Mr. FORT. On collateral?
Mr. POLE. On collateral; yes, sir.
Mr. FORT. And that loaning limit would be proportionate to its
capital?
Mr. POLE. The capital of the national bank.
Mr. FORT. The thing that is stirring in my mind—and I do not
know that I can make it clear--is this: Is there not danger from the
consolidation of the security affiliate and the bank, in the fact that
the market value of the security affiliate is directly reflected in the
market value of the bank stock, quite a tendency psychologically, to
transform a banker into a man who considers the fluctuations of the
security market?
Mr. POLE. Of course, the bare fact that the stock of a securities
company is frequently tied up with the stock of a national bank-the connection of course, is very close, and I think that the public
recognizes that: condition.
Mr. FORT. I do not want to talk about myself, but I happen to be
,
the .president of a security affiliate owned by certain insurance coinpalms of which I am the manager. Is there not a psychologies'
danger of the bank taking off the security affiliate's hands, perhaps,
its syndicated obligations that have not gone very fast to the publier

1

BRANCH, CHAIN, AND GROUP BANKING

63

Mr. POLE. It might be possible.
Mr. FORT. I have seen it happen.. You have spoken of the 10—to-1
relation between deposits and capital. In the customary acceptation, that is what it is assumed to be. Is there any necessity for the
change of that proportion in the case of branch banks—either way—
any necessity or propriety?
Mr. POLE. I should regard that as a fair capital requirement.
Mr. FORT. If your theory of branch banking, through the trade
area, is adopted, do you feel that the liability of sudden withdrawals
of deposits from a bank is greater or less?
Mr. POLE. I should say that they would be infinitely less.
Mr. FORT. Therefore, it might be possible for the bank properly to
increase the total of its deposits in reference to its capital?
Mr. POLE. I would not be in favor of that. I think, as a maximum, 10 per cent of the deposit liabilities should be required as
capital funds.
Mr. FORT. Capital and surplus?
Mr. POLE. Capital and surplus; yes, sir.
Mr. FORT. I think that is all.
Mr. STEVENSON. May I ask Mr. Fort to ask just this question on
that point—whether it is contemplated in the branch banking organizations, such as he refers to,.to segregate a certain amount of capital
to each branch, and allocate it so that the capital represents
Mr. FORT. I do not think that would be possible.
Mr. POLE. That would not be my idea.
Mr. STEVENSON. My own State has that provision. It is not in
our national act.
Mr. FORT. I want to apologize for taking so much time.
The ACTING CHAIRMAN (Mr. Strong in the chair). The committee
will stand adjourned until to.morrow morning at 10.30 o'clock a. m.
(Whereupon, at 12.20 o'clock p. m., the committee adjourned until
Thursday, February 27, 1930, at 10.30 o'clock a. m.)
HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,
Thursday, February 27, 1930.
The committee met in the committee room, Capitol Building, at
10.30 o'clock a. m., Hon. Loup T. M
. cFadden (chairman) presiding.
The CHAIRMAN. The committee will Come to order.
STATEMENT OF HON. JOHN W. POLE, COMPTROLLER OF THE
CURRENCY (Resumed)
The CHAIRMAN. Mr. Pole, you have, I understand, something you
want to put into the record in response to questions that were asked
of you yesterday.
Mr. POLE. Mr. Brand asked me for the earnings and expenses of
each Federal reserve bank and the franchise tax which had been paid
to the Government from 1914 to and including 1929.
MT. STRONG. IS that gross income?
Mr. POLE. Gross income and net income, and the amount of franrhise tax which has been paid to the Government.

BRANCH, CHAIN, AND GROUP BANKING

64

The CHAIRMAN. Without objection, it will be placed in the record
at this point.
(There was no objection, and the statements referred to are here
printed as follows:)
Earnings and expenses of Federal reserve banks-Gross and net earnings of Federal
reserve banks, and disposition made of net earnings, 1914-1929
[Figures for each Federal reserve bank are given in Table 831
Earnings

Disposition of net earnings

Year

Franchise
tax
or loss(-)
carried
forward

Trans-,
Profit (4')
paid to
ferred to
81. Govsurplus I , U.
ernment

Gross

Net

Dividends
paid

1914-15
1916
1917
1918
1919

$2, 173, 252
5, 217,998
16, 128,339
67,584,417
102, 380,583

-$141,459
2, 750,998
9, 579,607
52,716,310
78, 367,504

$217,463
I, 742,774
6,801,726
5, 540,684
5,011,832

$1, 134,234
48, 334, 341
70,651,778

$1, 139, 231
2, 703,894

922
+1.008.224
+309,413
1,158.715
------------

1920
1921
1922
1923
1924

181,296,711
122,865,866
50, 498,699
50,708,566
340,449

149, 294,774
82,067, 225
16,497,736
12, 711, 286
3,718, 180

5,654,018
6, 119,673
6, 307,035
6,552,717
6,682,496

82,916,014
15,093,086
-659,904
2, 545,513
-3,077,962

60,724,742
59,974,430
10,850,605
3,613,056
113,646

-------------------- ------------------ I
----------

1925
1926
1927
1928
1929

41,800,706
47,599,595
43,024,484
64,052,860
70,955,496

9,449,066
16,611,745
13,048, 249
32, 122,021
36,402,740

6,915,958
7,329,169
7,754,539
8, 458,463
9,583,912

as,

Total

904,628,021

515, 215,982 96,872,459

2, 473,808 ,
8, 464,426 I
5,044, 119 .
21,078,899
22,836,597
277,433,949

59,309 ----------818, 150 -----------•
-------249,591
2,584,650 ---------4,283, 231 ----------147, 109,574 -----------

franchise tax payments for prior years with.
Amounts paid as franchise tax for 1922 includes additional
surplus account on December 31, 1922, as follows: For 1920, $270,389; for 1921, $3,129,673.

drawn from

The CHAIRMAN. Mr. Seiberling, you are next on the list.
Mr. LETTS. I had not concluded, Mr. Chairman.
The CHAIRMAN. I beg your pardon. You had yielded to some
one.
Mr. Lrrrs. Yes;',yielded
I,
to Mr. Fort.
The CHAIRMAN. ery well; suppose you continue with your
questions.
Mr. LETTS. Mr. Pole, yesterday I asked you something about the
Bank of Italy and the Bancitaly Co. Do you regard the system out
there as a branch system, or is it a group system?
Mr. POLE. Branch system, sir.
Mr. LETTS. How do you distinguish between the two systems?
Mr. POLE. Between the branch and the group systems?
Mr. LETTS. Yes.
Mr. POLE. The group system is a number of individual, separately'
incorporated institutions, the stock of which is owned by a holding
corporation. A branch bank is a bank with branches located at
various points over the State, and the entire resources of the parent
bank are carried to any point where there may be a branch. These
branches are a part of the bank itself.
Mr. LETTS. To make it clear, the group system is composed of
separate identities, but the stock is controlled by one holding company-is that correct?
Mr. POLE. That is correct.

BRANCH, CHAIN, AND GROUP BANKING

65

Mr. LETTS. Would you say, then, that the system in California
is a pure branch system, or is it a mixture? Is it not true that most
of the stock, or a large part of the stock, of the Bank of Italy is held
by the Bancitaly Co.?
Mr. POLE. I am not informed as to where the stock of the Bank
of Italy is, but I think it may be chiefly held by the Trans-America
Corporation.
Mr. LETTS. Assume that some considerable part is held by either;
assume that the control is held by the Bancitaly Co. or the TransAmerica Co., would you not say that it is in effect a group system
just as much as if each of these branches were separate entities?
Mr. POLE. I would say not, because the stock of the Bank of
Italy may be held by as many as 16,000 or 20,000 different people
and in part by the Trans-America COrporation.
Mr. LETTS. I am assuming that the control is so held.
Mr. POLE. That is the control of a single bank.
Mr. LETTS. I understand, but that single bank involves the consideration of many branches.
Mr. POLE. You must regard that as a single bank.
Mr. LETTS. Yes; that is true.
Mr. POLE. A single corporate entity.
Mr. LETTS. But, as to the practical effect, is it not the same as
if the branches of the Bank of Italy were separate entities controlled
by the policies of the Bancitaly Co.?
Mr. POLE. It might be said that there are some similar characteristics, but different in that a bank, the stock of which is held as
a member of a group, has a separate board of directors; it has a
separate set of minutes; it has a separate set of officers and is operated to all intents and purposes as an independent unit, whereas
the Bank of Italy is a corporation in San Francisco, which has its
various offices scattered over the State, but just as much a part of
the organization as the head office itself is.
Mr. LETTS. The group system, to be effective, however, would
Place the control of the stock of the members in the holding company?
Mr. POLE. Yes; usually.
Mr. LETTS. And that places the power, the directing policy, with
that holding company?
Mr. POLE. That would not be admitted by the groups, I think.
They claim that each group is aul independent unit and acts indePendently through its local directors.
Mr. LETTS. I can see that there would be,fi, great advantage in that,
in having the policies of the members con7tfolled as far as possible by
those that are familiar with conditions in the country or community,
but that independence could only exist so long as it did not come m
conflict with the policy of the holding corporation.
Mr. POLE. It could not exist indefinitely. Of course, the board of
directors is elected by the shareholders, and if the corporation held
the majority of the shares at the annual meeting, they could elect
their own directors, who would elect their officers, and their policies
Would thereby be enforced.
Mr. LETTS. Assuming that the holding corporation buys up the
Controlling stock, it would always have the power to control the election of directors, would it not?
Mr. POLE. Yes; undoubtedly.

ii

66

BRANCH, CHAIN, AND GROUP BANKING

Mr. LETTS. And in that way they get this power.
Mr. POLE. Yes.
Mr. LETTS. And that power could be political, as I indicated
yesterday, or it could be economic, and reach out in a great many
ways.
Mr. POLE. And be quite effective.
The CHAIRMAN. Would you yield there, Mr. Letts?
Mr. LETTS. Yes.
The CHAIRMAN. I would like to ask Mr. Pole whether there is not
an embodiment in this particular situation that you referred to of
unit banking, branch banking, chain banking, and holding company
banking?
Mr. POLE. There is in what might be called the Trans-America
group, Mr. Chairman, but I am speaking of the Bank of Italy as a
separate corporation.
The CHAIRMAN. In that you have national banks and you have
State banks.
Mr. POLE. In the Trans-America Corporation?
The CHAIRMAN. Yes; and you have international banking as well.
Mr. POLE. I am informed that that is true. Of course, I have no
means of knowing officially what the Trans-America Corporation
holds in the way of bank stocks.
The CHAIRMAN. In other words, here is an illustration of the
different forms of banking which this committee are inquiring into;
this is a typical instance where all the elements that enter into our
inquiry are embodied in one group.
Mr. POLE. Within the Trans-America Corporation?
The CHAIRMAN. Within the Trans-America Corporation.
Mr. POLE. Yes.
The CHAIRMAN. That is all.
Mr. POLE. That may be correct, but not within the Bank of Italy.
- Mr. LETTS. The point I want to make clear is this, that when we
see the Bank of Italy and its operations and its policies, we have not
seen the whole picture; we still have to go back of the screens and see
the Bancitaly Corporation or the Trans-America Co. and understand
the policies that control from those sources?
Mr. POLE. There is a picture back of the Bank of Italy, undoubtedly.
Mr. LETTS. You have advocated the extension of the branchbanking system. Would you safeguard that in any way to prevent
the policies of the parent Ikank and the policies of the branches to be
controlled by an inner grou'R, somebody back of the screens, in that
manner?
Mr. POLE. I would recommend some such authority be given.
Mr. LETTS. And could that be safeguarded in some such way?
Mr. POLE. I think it would be possible to work out a plan.
Mr. LETTS. Is there any way to prevent any stockholder from
selling his stock to whom he might wish?
Mr. POLE. There is no way I know of, Mr. Congressman.
Mr. LETTS. Then a holding corporation could acquire it, if the
possessor of the stock were willing to sell?
Mr. POLE. Yes.
Mr. LETTS. So at this time at least we have that danger before us.
In other words, if there is a danger in group banking, we ought to

BRANCH, CHAIN, AND GROUP BANKING

67

avoid that danger if we are going to branch banking as a system to
be preferred.
Mr. POLE. I have suggested in my report to Congress that there
Should be given to the comptroller some supervision over these
holding corporations.
Mr. LETTS. The holding corporations are not under national
charter.
Mr. POLE. That is true.
Mr. LETTS. And so Congress could not give you that supervision.
Mr. POLE. Well, I think that in so far as they held stocks of a
national corporation, it might be possible for Congress to do so.
Mr.',Errs. Now; just to follow that thought a little further, I am
aware of the tendencies of the times, I think toward centralization
of power, political, economic, and financial. We see it in the control
of the power resources of the country; we see it in the distribution of
foodstuffs and merchandise; is it not quite conceivable that some
very small group could control the policies of the power corporations,
such as the American Gas & Electric Co., for instance, and control
the policies of the great food distributing companies and other
merchandising corporations? Now, while you feel that the system
that you advocate, of extending branch banking, would decentralize
bankmg resources, is it not quite apparent that we are centralizing
M a very much greater degree the power to control production, to
control distribution and price, and are we not putting the consuming
Public at the mercy of a comparatively small group of persons that
May financially be able to do the very thing that I am speaking of
by uniting their forces?
Mr. POLE. Through a branch banking system?
Mr. LETTS. The control of the banking policies of the country, the
control of power, the control of the distribution of foods and all that
sort of thing always cause me to think back to the time of Roosevelt; he became a great hero because he went out with the "big stick"
to break up combinations, which he did in the interests of the consuming public; and, now, are we not drifting very rapidly in the other
direction, and is it a wholesome indication?
Mr. POLE. I think, under the plans I have suggested to Congress,
that the result of the extension of the branch-banking privilege would
cause to spring up all over the country large organizations, and what
Might be termed local centralization.
Mr. LETTS. I understood that to be your recommendation.
Mr. POLE. I think it would be decentralized as far as the largest
cities of this country are concerned.
I do thing, also that consideration might be given to the question
of consolidations of these large units after they had been formed.
Mr. LETTS. And to interlock their directorates?
Mr. POLE. And to interlock their directorates. I think it is an
•
important phase of it.
Mr. LETTs. I understand your thought hi that connection, but as
soon as you have decentralized by encouraging the development in
St. Louis, Kansas City, Omaha, and other places over the country,
would not some one come forward immediately and combine those
large units?
Mr. POLE. That is what I have in mind, that perhaps some restrictions should be put on such consolidations. Of course, that is going
on now, in the form of group banking.

68

BRANCH, CHAIN, AND GROUP BANKING

Mr. LETTS. Now; can you tell me what the fee system is that is
employed by holding companies—if I make that clear by the question?
Mr. POLE. What the fee system is?
Mr. LETTS. Yes. I do not know that I have a clear understanding of it, but I think that some such system as this prevails, that they
not only realize upon the stock of their subsidiaries which they hold,
but they charge their subsidiaries a fee for service and in that way
make the holding companies really profit-taking devices and they
can be so operated as to permit the subsidiaries to show only moderate
earnings and to make the big money flow into the holding company.
I understand that is accomplished by some kind of a fee system.
They charge for some kind of service, but what that service is I do not
know; I do not know whether it is a convenient device or just what it
is, but I would like to have some light on that.
Mr. POLE. I know of no such arrangement, Judge.
Mr. LETTS. Mr. Pole, you have advocated diversification. How is
that accomplished among the members of a group or in the branches
of a banking system? Is it by shifting the paper from one institution to another?
Mr. POLE. I think that is one way it is done among members of a
group; the sale of paper by one bank to another.
Mr. LETTS. Every bank would have a reasonable amount of paper
of this character and of the other character so as not be loaded up,
as in my part of the country, with real-estate loans entirely, or something of that kind; that would make the paper of the bank more
diversified and more liquid?
Mr. POLE. Such funds are shifted in a group system. Of course,
there is not much doubt but what the management corporate of
these groups would see to it that nothing happened to any member of
the group, and in that respect it has something of the protection of
the branch banking system.
Mr. LETTS. Now; the members of groups could be both national
banks and State banks, and be located in various States?
Mr. POLE. Yes.
Mr. LETTS. And subject to different States' laws?
Mr. POLE. Yes.
Mr. LETTS. And the Comptroller of the Currency would have
jurisdiction over some, but not over others?
Mr. POLE. Yes.
Mr. LETTS. Is that a wholesome situation?
Mr. POLE. Quite unwholesome.
MT. LETTS. Can it be corrected?
Mr. POLE. I think it can not except with difficulty. We do enter
into arrangements with the superintendents of banks of the States in
which members of a group or chain may be situated, and arrange
to examine these banks at the same time with the State authorities.
Having done that, we compare notes and arrive at our conclusions
after consultation, but it is difficult to make these arrangements.
Mr. LETTS. At least it would be possible to shift good paper from
a bank in one State to a weak bank in another State, and perhaps
from a national bank to a State bank, or the reverse of that, so that
you would not have the power to examine fully nor would a State
examiner have the necessary power to do that?

BRANCH, CHAIN, AND GROUP BANKING

69

r. POLE. That is correct. That is particularly true of the chain
banks.
Mr. LETTS. And it could be of the groups?
Mr. POLE. It could be of the groups. If we suspect anything of
that kind going on, and there are usually evidences of these things,
we arrange to take care of such a situation but it is subject to those
very difficulties to which you refer.
Mr. LETTS. And that would operate, in a group system or a chain
system, to prevent an examiner, whether from your office or from
a State department, really to find that a bank is in fact insolvent?
Mr. POLE. It might operate that way. However, in justice to
these important groups, I might say that I think the majority of
them endeavor to operate their system either under the national law
or the State law, and if they are not all under one system, when
they acquire them, they usually have it in mind to convert them so
as to operate under a single system as far as possible.
Mr. LETTS. In the conduct of banks under the group system, and
the chain system, where paper is shifted from one bank to the other,
does the bank which transfers the paper indorse it or not?
Mr. POLE. The custom is not to indorse it. However, there is
usually a moral responsibility recognized.
Mr. LETTS. But that is not a responsibility that could be enforced
in the interest of creditors?
Mr. POLE. There might be such an arrangement.
Mr. LETTS. You would have to show an agreement,.either express
or implied, in order to do that?
Mr. POLE. Yes.
Mr. LETTS. Or negotiations of some character if they did indorse?
Mr. POLE. Yes.
Mr. LETTS. Then there would be a contingent liability would
there not?
Mr. POLE. Yes.
Mr. LETTS. And what relation would that contingent liability have
to the matter of rediscounts?
Mr. POLE. That would be limited—an indorsement of that kind
Would be limited to the capital stock of the bank under section
5202. The bank could not become liable to another bank in excess
of its capital.
Mr. LETTS. Now, in these systems, is it recognized that a member
bank will have the power to reject undesirable paper that is offered
to it, or would the parent organization have power to thrust that
Paper upon the member bank?
Mr. POLE. It would have no power to thrust paper onto a bank.
It would be within the power of the bank to refuse any paper, because
it is a separate corporation and acting under a separate board of
directors, and the practice to which you refer is not at all a common
Practice except under perfectly legitimate proceedings.
Mr. LETTS. I am leading to this point: If in a system of that kind,
group system or chain system, it was found that some part of the
aYstem was going to fail, that some banks were going to fail, they
Would have the power of strengthening some and making a selection
as to which ones would fail and which would survive. In other
Words, they would be able to determine what communities would

L

70

BRANCH, CHAIN, AND GROUP BANKING

suffer the loss and what ones would gain by the manipulation, would
they not?
Mr. POLE. Technically that is correct.
Mr. LETTS. But you do not apprehend that such a thing would
happen?
Mr. POLE. As a matter of practice, I can not conceive of any member of a group failing unless the group as a whole failed.
Mr. LETTS. That would be true of chains, but it is not necessarily true of groups, is it?
Mr. POLE. Not necessarily, but it is quite likely that the group
could not permit any of its members to fail without endangering
them all.
Mr. LETTS. In other words, is it not possible that the group plan
might be a matter of convenience to the strong and result in disadvantage to the weak, and that applies not only to the banks but to
the communities which they serve?
Mr. POLE. Of course, the group system of banking is more or less
new. I think it has only been in effect not to exceed two years, and
nothing like that has so far developed.
Mr. LETTS. That reminds me of something I overlooked. I
intended to ask you how long the Bank of Italy has been in building
itself up to its present proportions?
Mr. POLE. Oh, 15 years. I reserve the right to correct that.
The CHAIRMAN. Will the gentlemen yield?
MT. LETTS. Yes.
The CHAIRMAN. Might I suggest that the real coming-out wily
of the Bank of Italy was at the time of the earthquake disaster in
San Francisco, in 1906?
Mr. LETTS. At any rate, it showed a very rapid development,
did it not?
Mr. POLE. Quite rapid development.
Mr. LETTS. In the examination of a branch bank, will the public
have detailed information with respect to the condition of the
branches, or will they get aggregate results of all the branches?
Mr. POLE. The statement which is issued by the Bank of Italy
exhibits the condition of the bank as a whole, without reference W
any particular branch.
Mr. LETTS. Suppose that the banks out in Iowa were in a systefl1
of that kind, a branch bank system; would it be possible for the
people to Iowa to know the real condition of the Iowa bank?
Mr. POLE. Of an individual branch?
MT. LETTS. Yes.
Mr. POLE. No, I think there would be no such information available to the public.
Mr. LETTS. Do you think there would be no occasion for it?
Mr. POLE. I do not think there would be the slightest occasion for
it. The full strength of the bank would be carried to the farthest
hamlet in Iowa.
Mr. LETTS. In your prepared statement of a few days ago, you /0
effect made a statement that a supervising bank official is always
reluctant to close a bank, and you intimated that your office operated
along that line, and that State bank supervisors naturally have the
same attitude toward State banks, and further on in your statement

BRANCH, CHAIN, AND GROUP BANKING

71

you made the statement that oftentimes supervising officials are surprised that the bank has failed.
Mr. POLE. Did I say that?
Mr. LETTS. No, I am mistaken. You said that "The supervising
official may in many cases not be surprised that the bank has failed,
and the executive officers of the bank and perhaps the local board of
directors have been struggling for months or years to keep the bank
open, and the actual failure comes as a complete surprise and a shock
to the depositors, and in most cases to the shareholders who are not
officers or directors of the bank." .
That is some of your language; is it not?
Mr. POLE. Yes.
Mr. LETTS. Now, I think that is the stand taken by banking
departments, but I have never been able to see the philosophy of it.
I have seen cases where banks have been kept open, where the examiner and the members of the board and the officers of the bank all
knew that the bank ought to close, and yet up to the very hour of
closing such banks took such deposits as were offered by the public.
I have seen cases where it has been found that banks ought to be
closed, and yet they were reluctant to do it and struggled along, as
you indicate here, for months or years to keep them open. Is this
fair treatment to the public?
Mr. Pole, I notice that in some part of your formal statement you
stated that your principal concern and interest is in the depositor,
but does a policy of this kind operate to the advantage of the depositor? I have seen a number of little banks out in Iowa fail after they
had paid two and sometimes three assessments of 100 per cent in the
endeavor to keep the bank open, and they finally had to lose them.
Mr. POLE. Yes.
Mr. LETTS (continuing). Very much to the disadvantage of the
shareholders, and conducted in a manner that kept the public in
Ignorance of the condition, and the bank would go on accepting the
public's money, to the ruin of the depositors, and I have often wondered how a policy of that kind really can be justified. In other
words, why should a banking institution, when it is found by the
examiner to be weak and insolvent and unable to
ahead, not be
closed? Why is not that the fair thing to do, having in mind the
interests both of the shareholder and the public?
Mr. POLE. Of course, if a bank is found insolvent by our department it is closed. However, banks fail through many different
causes. It may be that the assets of a bank are in the opinion of
the board of directors and in the opinion of the examiners good but
Slow. The directors will frequently come down in a body to Washington and insist that the examiner is too drastic in his classifications,
that these loans are collectible, that they understand the people of
the community, that they know all about them and that we do not.
That means that the bank is probably in a very frozen condition, but
not insolvent. There may be an unusual demand for funds, but by
reason of the frozen condition of that bank they are unable to realize
fast enough to meet the demands and the bank has to close regardless
of the fact that it may be considered by us and by its own board of
directors as solvent, as a
institution.
Mr. LETTS. Do your examiners
goinginququire
ire into the policies of banks,
or only as to the assets of banks?

go

72

BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. We go into every phase of the bank's operation.
Mr. LETTS. I am unable to speak concerning national banks, but I
know the policy prevailed for many years in my State of State institutions hiring some one to run the bank who could not live on the pay
that was given him, and where he was encouraged by the directors
to take on every kind of a side line that is imaginable, to write
insurance, fire and life, to negotiate loans on land with the insurance
companies, to connect himself with some automobile agency, to the
point where in a comparatively short time he would have personal
transactions that he as a bank official must deal with and where his
opportunity for personal gain was entirely at variance with the
welfare of the institution that he represented.
In other words, say that a man wanted to buy a farm, and he wished
to borrow more than the farm could reasonably carry; he would be
permitted first to negotiate a loan with some insurance company, and
the bank official would get a commission, doing that as an individual,
and then perhaps he would tell the borrower that he did not have
security enough and that he ought to have more fire insurance, and
then he writes the fire-insurance policy and tells the borrower that he
had better carry more life insurance, and he writes that policy and
gets fees and commissions all along the line. Some customer of the
bank may be buying an automobile, and a bank official finds it
convenient to accommodate that customer at the bank if he buys the
right kind of an automobile, and all that sort of thing.
Now, is there not some way that we can protect the public against
that kind of banking?
Mr. POLE. In the course of our examinations, if we find that the
outside duties of any officer interfere with the proper conduct of the
bank, it is naturally a matter of criticism, and we try to have those
matters of criticism corrected.
Mr. LETTS. Would it not be a wholesome thing if we had something
in the law, and also in our State laws, that would prevent officials to
pass upon loans and deal with the public who may be engaged in any
business that would give them an interest which is contrary to the
welfare of the bank?
Mr. POLE. I doubt whether that would be a practical thing in a very
small bank. In the more important banks, I think that is a usual
policy.
Mr. LETTS. Mr. Chairman, that is all I have to ask at this time.
Some time later I may wish to examine Mr. Pole a little with respect
to his analysis of land depreciation in the agricultural sections of the
country, but I do not care to do that at this time, if I may have that
opportunity at some later time.
The CHAIRMAN. Yes; the members will be given a chance to do
that after we have carried out this routine.
Mr. Steagall is next.
Mr. STEAGALL. Mr. Pole, the picture drawn by Mr. Letts respecting the small realizations going to depositors in insolvent banks
hardly represents the situation as applied to the national system,
does it?
Mr. POLE. The liquidation of national banks, I think the report
of insolvent division shows, is about 65 per cent.
Does that answer your question?
Mr. STEAGALL. Well, that is the average?

BRANCH, CHAIN, AND GROUP BANKING

73

Mr. POLE. Oh, yes, that is the average.
Mr. STEAGALL. SO I guess.that answers that question.
Somewhere I saw—maybe in one of your recent reports—that the
liquidations completed of national banks that were insolvent showed
a realization of 79 per cent, leaving a loss of 21 per cent on eight
hundred and some odd number of banks liquidated during the past
10 years. Is that right?
Mr. POLE. I do not carry that figure in my mind. I will be glad to
insert that in the record, Mr. Steagall.
Mr. STEAGALL. What I was attempting to do is to refresh your
memory on that point. I may be in error about it, but somewhere
in a hurried looking over of your report or something else—unless
I am confused in my recollection—I saw those figures, that the
losses in the banks where liquidation had been completed were 21
per cent. It impressed me very much. And, if that is true, 65 per
cent would not quite do justice.to the situation, would it?
Mr. POLE. On that hypothesis, you are correct.
Mr. STEAGALL. Now,since my reference to your report was made—
if it was your report—would you adhere definitely to.the statement
that only 65 per cent had been realized?
Mr. STEVENSON. Here are the exact figures. It is 70 per cent.
The CHAIRMAN. I would suggest at this point that the statement
appearing in the comptroller's report on this matter be placed in the
record, and without objection that will be done.
(There was no objection, and the excerpt referred to is reproduced
below.)
NATIONAL BANK FAILURES

During the past year receivers were appointed for 79 national banks. Of this
number, 72 were failures and 7 appointments of receivers were made in order to
enforce stock assessments necessary to be paid under contract to succeeding
institutions which purchased the assets of the bank, sold under a guarantee from
stockholders, paying creditors in full. Of the 72 actual failures, 2 were restored
to solvency, leaving 70 to be liquidated by receivers. This compares with 54
actual failures for the previous year, 2 of which were restored to solvency, and
the appointment of receivers for 7 banks to enforce stock assessments. The
capitalization of the 79 banks for which receivers were appointed during the
Past year was $6,575,000, compared with the capitalization of the 61 banks for
Which receivers were appointed during the previous year of $4,135,000.
The total of assets of the 79 banks for which receivers were appointed during
the past year, including additional assets acquired after suspension, was
$62,612,500. Stock assessments in the amount of $5,440,000 had been levied as
of September 30, 1929, by the comptroller against the shareholders of these banks.
The records of the division of insolvent national banks of the comptroller's
office do not show as a failure the suspension of the First National Bank of
Lagrange, Tex., with assets of $1,213,812.02. The suspension occurred April 30,
1929, and the bank remained in the hands of an examiner in charge until May
20. 1929, on which date it resumed business.
• During the past year two banks, each with assets of over $12,000,000, became
Insolvent, and the receivers were appointed. Immediately arrangements were
Made with local institutions for the purchase, at par and interest, of such of the
assets of the failed banks as were considered acceptable to the purchasing banks.
The results were that in the first institution 50 per cent was made immediately
available to its creditors, and in the second 60 per cent was immediately paid,
thus relieving the local financial situation at once. Since such sales of assets,
funds have been accumulated for payment of additional dividends of 25 per cent
to the creditors of the first-mentioned bank, who received a first dividend of 50
Per cent, and funds have been accumulated for payment of additional dividends
of 30 per cent to the creditors of the second-mentioned bank, who received a first
dividend of 60 per cent, thus assuring the payment of 75 per cent and 90 per cent,
respectively, to the creditors of these banks within 12 months after their failure.

74

BRANCH, CHAIN, AND GROUP BANKING

This new method of liquidation has been followed in several smaller failures,
and has proved most effective in relieving at once the acute financial situations
which follow bank failures.
From the date of the first failure of a national bank in the year 1865 to October
31, 1929, 1,313 national banks were placed in charge of receivers. Of this number, 72 were restored to solvency and permitted to resume business, leaving 1,241
to be administered by receivers. Of these so administered, 426 (26 less than
reported at the close of 1928) are still in process of liquidation and 815 have been
entirely liquidated and the trusts closed.
The capital of the 1,313 insolvent national banks at the date of failure was
$143,670,420. The capital of the 72 hanks that were restored to solvency was
$12,180,000. The capital of the 426 banks that are still in receiverships is
$32,524,500, and the capital of the 815 banks that have been completely liquidated was $98,965,920.
The book value of the assets of the 1,241 administered receiverships, including
assets acquired after suspension, aggregated $853,993,969, in addition to which
there were levied against shareholders assessments aggregating $92,315,740.
Total collections by receivers to September 30, 1929, from these assets, including
offsets together with collections, from stock assessments, amounted to 56.01 per
cent of the total of such assets and stock assessments. The disposition of such
collections was as follows:
Collections:
Collections from assets, including offsets
$485, 442, 981
Collections from stock assessments
44, 614, 817
Total

530,057, 798

Disposition of collections:
Dividends paid to creditors on claims proved aggregating
$464,838,227
279, 772, 948
Payments to secured and preferred creditors, including offsets
allowed and payments for the protection of assets
200, 336, 130
Payment of receivers' salaries, legal and other expenses
33, 259, 329
Cash returned to shareholders
4, 167, 798
Cash balances with the comptroller and receivers
12, 521, 593
Total
530, 057, 798
In addition to this record of distribution there were returned toshareholdersi
through their duly elected agents, assets of a book value of $16,211,624.
The 426 banks that were as of October 31, 1929, still in charge of receivers and
in process of liquidation had assets, including assets acquired subsequent to their
failure, aggregating $339,517,557. The capital of these banks was $32,524,500,
and there had been levied by the Comptroller of the Currency to September 30,
1929, stock assessments against their shareholders in the amount of $28,924,500.
The collections from these assets, including offsets, together with collections from
stock assessments, amounted to 52.24 per cent of such assets and stock assessments as shown by receivers' last quarterly reports under date of September 30,
1929. The disposition of such collections was as follows:
Collections:
Collections from assets, including offsets
Collections from stock assessments
Total
Disposition of collections:
Dividends paid to creditors on claims proved aggregating
$189,388,731
Payments to secured and preferred creditors, including offsets
allowed and payments for the protection of assets
Payment of receivers' salaries, legal and other expenses
Cash returned to shareholders
Cash balances with comptroller and receivers
Total

ha.

$178, 488, 168
13, 999, 442
192, 487,610

86, 493, 085
82, 323, 457
10, 799, 475
50
93
21,0
12, 5
350
192, 487,610

_AJ

BRANCH, CHAIN, AND GROUP BANKING

75

From the date of the first failure of a national bank in 1865 to the close of
October 31, 1929, 887 receiverships were liquidated and the trusts closed, or the
affairs thereof restored to solvency. Included in this number are the 72 banks
restored to solvency (2 in 1929) and 103 that were liquidated during the year
1929. These 815 banks,had assets, including assets acquired subsequent to their
failure, aggregating $514,476,412. The capital of these 815 banks was $98,965,920
and there were levied by the Comptroller of the Currency stock assessments
against their shareholders in the amount of $63,391,240. The collections from
these assets including offsets, together with collections from stock assessments
as shown by receivers' final reports amounted to 58.41 per cent of such assets
and stock assessments. The disposition of such collections was as follows:
Collections:
Collections from assets, including offsets
$306, 954, 813
Collections from stock assessments
30, 615, 375
Total
Disposition of collections:
Dividends paid to creditors on claims proved aggregating
$275,449,496
Payments to secured and preferred creditors, including offsets
allowed and payments for the protection of assets
Payment of receivers' salaries, legal and other expense
Cash returned to shareholders

337, 570, 188

193, 279, 863
118, 012, 673
22, 459, 854
3, 817, 798

Total----------------------------------------------- 337, 570, 188
The average percentage of dividends paid on claims proved against the 815
receiverships that have been finally closed, not including the 72 restored to
solvency, which paid creditors 100 per cent, was 70.19 per cent. If offsets, loans
paid, and other disbursements were included in this calculation, the disbursements
to creditors would shqw an average of 79.13 per cent.
Expenses incident to the administration of the 815 closed trusts, such as receivers' salaries, legal and other expenses, amounted to $22,459,854. or 3.88 per
cent of the book value of the assets and stock assessments administered, or 6.65
Per cent of collections from assets and stock assessments. The assessments
against shareholders averaged 64.05 per cent of their holdings and the total
collections from such assessments as were levied were 48.29 per cent of the amount
assessed. The outstanding circulation of these closed receiverships was $38,060,477, secured by United States bonds on deposit with the Treasurer of the United
States of the par value of $40,506,920.
During the year ended October 31, 1929, 103 receiverships were closed in addition to which 2 banks were restored to solvency. The total assets of the 103
receiverships, including assets acquired subsequent to suspension, aggregated
$44,924,790. The capital of these banks was $5,225,000, and the total assessments
against shareholders levied by the Comptroller of the Currency aggregated
$5,225,000. The collections from these assets, including offsets, together with
collections from stock assessments as shown by receivers' final reports, amounted
to 54.72 per cent of such assets and stock assessments. The disposition of such
collections was as follows:
Collections:
Collections from assets, including offsets
$24, 911, 473
Collections from stock assessments
2, 532, 490
Total
Disposition of collections:
Dividends paid to creditors on claims proved aggregating
$25,714,590
Payments to secured and preferred creditors, including offsets
allowed and payments for the protection of assets
Payment of receivers' salaries, legal and other expenses
Cash returned to shareholders
Total------------------------------------------------

27, 443, 963

12,653,830
12,561,313
2,224,420
4,400
27,443,963

76

BRANCH, CHAIN, AND GROUP BANKING

The average percentage of dividends paid on claims proved against the 103
receiverships that were finally closed in the year ending October 31, 1929, not
including the 2 banks restored to solvency which paid creditors 100 per cent, was
49.2 per cent. If offsets, loans paid, and other disbursements were included in
this calculation, the payment to creditors would show an average of 65.86 per
cent. Expenses incident to the administration of these 103 trusts, such as
receivers' salaries, legal, and other expenses, amounted to $2,224,420, or 4.43 per
cent of the book value of the assets and stock assessments administered, or 8.1
per cent of collections from assets and stock assessments. The assessments
against shareholders averaged 100 per cent of their holdings and the total collections from such assessments as were levied were 48.46 per cent of the amount
assessed.
The financial operations of the division of insolvent national banks from September 30, 1928, to September 30, 1929, were as follows:
Collections:
Cash on hand Sept. 30, 1928
$13, 158, 682
Collections during the year, including offsets
46, 802, 886
Total
Disposition of collections:
Dividends paid
Secured and preferred claims paid
Expenses paid
Returned to shareholders in cash
Cash on hand -----------------------------------------Total

59, 961, 568
28, 939, 840
15, 863, 280
2, 632, 455
4, 400
12, 521, 593
59, 961, 568

Mr. POLE. May I answer categorically? [Reading:]
If offsets, loans paid, and other disbursements were included in this calculation,
the payment to creditors would show an average of 65.86 per cent.

Mr. STEVENSON. I read it [reading]:
If offsets, loans paid, and other disbursements were included in this calculation
the disbursements to creditors would show an average of 79.13 per cent.

Mr. POLE. What are you reading from?
Mr. STEAGALL. That is in the report of the Comptroller of the
Currency for December, 1929. That is where I got my figures.
Since seeing this, I remember definitely where it was.
Mr. POLE. What page is that?
Mr. STEAGALL. On page 24, in the third paragraph from the
bottom of the page.
Mr. STEVENSON. That includes offsets, and the other excludes
them; that is the only difference. The actual payment in cash was
65 per cent.
Mr. POLE. I will be glad to insert the facts in the record. I think
we may assume, for the purposes of your inquiry, however, that it is
between 65 and 70 per cent.
Mr. STEAGALL. Mr. Pole, I would not fora moment attempt to put
my judgment about technical matters of this kind against yours, but
I think I was justified in the conclusion I reached from the statement
in this report. I suggest that you read it again.
Mr. WING°. If the gentleman will yield, may I read this statement
and possibly it will show where Mr. Ste agall got his idea?
On page 24 of the Report of the Comptroller of the Currency of
December 2, 1929, about the middle of the page, under that tabulation of figures, there is this statement:
If offsets, loans paid, and other disbursements were included in this calcula
on the disbursements to creditors would show an average of 79.13 per cent.

a

V
a:

BRANCH, CHAIN, AND GROUP BANKING

77

Possibly that is what the gentleman from Alabama has in mind.
It illustrates the old story that you can take figures to prove anything.
Mr. STEAGALL. That statement includes everything, and means
that the creditors got 79.13 per cent.
Mr. POLE. In 815 banks which have been liquidated, 70.19 per
cent was paid to general creditors. If preferred and secured claims
are included the average would be 79.13 per cent.
Mr. STEAGALL: That is right.
Mr. POLE. And the other figure which I read has reference to the
more recent ckosing of receiverships during 1929.
Mr. STEAGALL. I am speaking of the 815 banks completely liquidated out of 1,300 and some number?
Mr. POLE. Roughly, yes.
Mr. STEAGALL. The fact is, Mr. Pole, that the best standard or
guide that could be found on that question, that is to say, on the
question of the amounts realized to creditors of national banks that
are insolvent and liquidated, is the actual experience gained in
liquidations and so the record shows that national banks, insolvent
and liquidated completely, have paid 79.13 per cent.
Mr. POLE. Yes, sir.
Mr. STEAGALL. According to your report.
\Ir. POLE. Yes.
:\Ir. STEAGALL. Of course, that report was carefully compiled?
Mr. POLE. Yes.
Mr. STEAGALL. And is better than off-hand recollection?
Mr. POLE. Yes; of course, that includes offsets, the debtor's own
deposit as against his own loan, loans paid, and so forth. Otherwise
it v;13.uld be 70 per cent.
Mr. WINGO. May I interrupt and point out that that statement
also includes the payment of lecervers' salaries and legal and other
expenses of $22,459,854, does it not?
Mr. POLE. That is correct.
Mr. WINGO. Of course, it is fair to say upon the other side that it
included a stock assessment of $30,615,375, less cash returned to shareholders of $3,817,798, which I suppose represented the amount of the
assessment which was in excess of the actual requirements.
Mr. POLE. That is right.
Mr. STEVENSON. But the creditors themselves got 79.13 per cent.
The man who owed $100 and had on deposit $1,000 got the offset;
he received $900.
Mr. POLE. In the course of time. In some cases it covered a
period of years.
Mr. STEAGALL. In that calculation, the expense of liquidation
amounted to 6 per cent plus, did it not?
Mr. POLE. Six per cent plus.
Mr. STEAGALL. So that my statement that the losses were only 21
per cent was correct.
Mr. STEVENSON. Will the gentleman yield?
Mr. STEAGALL. Yes.
Mr. STEVENSON. You mean the loss to the depositors, do you not?
Mr. STEAGALL. Yes. I am not talking about the stockholders.
We are talking about those who dealt with these stockholders; and we
are not worrying about them.
100136-80—pr1-6

78

BRANCH, CHAIN, AND GROUP BANKING

I want to ask you, first, in order to refresh my own recollection,
how far back these liquidations go?
Mr. POLE. That is from the beginning of time.
Mr. STEAGALL. That is my understanding.
MT. STEVENSON. Since 1865.
Mr. STEAGALL. That is what I understood to be the fact.
Now, how much was the total loss during that time to depositors
in the banks completely liquidated?
Mr. POLE. May I supply those figures later?
MT. STEAGALL. Yes.
(The figures referred to are as follows:)
Dividends paid to creditors on claims proved, aggregating $275,449,496,
amounted to $193,279,863, showing a loss to general creditors of $82,169,633.

Mr. STEAGALL. Mr. Pole, I dislike to repeat matters that have been
discussed here extensively day before yesterday when I could not be
present. I had to attend a meeting of the hospitalization board.
I will try to avoid things that I feel sure have been covered and will
read the record on those things in the hearings later; but I want to
ask you this: There has been an increase in the number of insolvent
banks during recent years, has there not?
Mr. POLE. Quite a marked increase. I can give you the exact
figures, if you would like to have them.
Mr. STEAGALL. If they have not been inserted in the record, I
should very much like to have them. I want to avoid repetition;
but if they have not been put in, I would like to have them.
Mr. POLE. They are in the exhibit.
Mr. STEAGALL. If they are, it is not necessary to encumber the
record, and I do not desire to do that; but there has bden a large
increase.
How long has this increase existed or how long since it began?
Mr. POLE. There appeared to be rather a definite beginning,
which was about 1920, I should say.
Mr. STEAGALL. Let me ask you this: Do you mean to say there was
an increase in 1920 as compared to the entire period of national
banking experience prior to that time?
Mr. POLE. Commencing about 1920 to 1921.
Mr. STEAGALL. Yes, sir. How did the percentage of the failures
run during the years after the inauguration of the Federal reserve
system down to this period of 1920?
Mr. POLE. Before 1920—much less pronounced than since 1920.
Mr. STEAGALL. I do not believe I made myself quite clear in my
question. What I was seeking to develop in the question was this:
Whether or not there was an immediate increase of insolvencies
following the inauguration of the Federal reserve system or was
there a decrease for the first six years prior to this period of 1920, in
which you say the increase began.
Mr. POLE. I would say there was a normal number of failures UP
to 1920.
Mr. STEAGALL. And what you mean when you say a normal
number is that the national bank system moved along about as
usual?
Mr. POLE. Yes, sir.
Mr. STEAGALL. ID that regard?

11

BRANCH, CHAIN, AND GROUP BANKING

79

Mr. POLE. Yes, sir. I shall be glad to furnish detached list of
failures.
Number of bank failures each year ended June 80, 1904-1920, inclusive
State and National
private
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913

,
102
57 I
37 1
34
132
60
28
56
55 I
40 •
1

20
22
8
7
24
9
6
3

8

6

State and
private National

Total

122
79
45
41
156
69
34
59
63
46

1914
1915
1916
1917
1918
1919
1920
Total

Total

96
110
41
35
25
42
44

21
14
13
7
2
1
5

117
124
54
42
27
43
49

994

176

1,170

Mr. STEAGALL. One of the prime purposes and thoughts back of
the enactments of the Federal reserve law was to furnish, a reservoir
and supply of credit that would make bank failures less frequent,
was it not?
Mr. POLE. I do not think that was one of the purposes of the
Federal reserve system to.make.bank failures less frequent. It was
to give banks greater latitude in their loaning power and greater
ability to serve the needs of the country. As to bank failures, I do
not think it contemplated that the Federal reserve banks would
undertake to keep the banks from becoming insolvent.
Mr. STEAGALL. No; I do not mean that it was the business of the
Federal reserve system to keep banks from becoming insolvent, but
it was my understanding always that the philosophy underlying the
Federal reserve act was that we would have a credit reservoir to which
resort could be had in time of emergency and that one of the benefits
to follow would be that a bank in distress would have somewhere to
go to get relief and tide over the period of difficulty?
Mr. POLE. It did serve such a purpose.
Mr. STEAGALL. Now, I understood you to say it did not; that
following the enactment of the Federal reserve law, things moved
along as they had and there had been no effect on the national bank
System in that regard.
Mr. POLE. If we had not had the Federal reserve system I do not
know what would have happened. There is no doubt the Federal
reserve system did render great assistance to banks which, of necessity,
would have had to go to their correspondents and there is a question
whether they could have been accommodated. The Federal reserve
funds were used quite liberally, as I am quite sure you know.
Mr. STEAGALL. That is the thought I had. I have some limited
information, I think, regarding the benefits extended by the Federal
reserve system in its early operations—cases of emergency, which,
as I have thought must have saved banks from failures in many
instances which otherwise would have gone to the wall.
Mr. POLE. The Federal reserve banks of the various districts put
many banks in funds which enabled them to stay open, whereas,
otherwise, they might have closed.
Mr. STEAGALL. It has been one of my reasons for my devotion to
the Federal reserve law, that it has granted relief in emergencies,

17T80

BRANCH, CHAIN, AND GROUP BANKING

so often, and, I thought, in a very helpful way. Such was true for
a while, I am sure.
Well, that brings us down to this point, that the fact that we had
this increase in failures or insolvencies certainly is not due to defects
inherent in the Federal reserve system itself?
Mr. POLE. By no means.
Mr. STEAGALL. It has grown out of conditions, whatever they may
be, that have brought about these insolvencies, notwithstanding the
relief facilities afforded by the Federul reserve banks in time of
emergencies.
Mr. POLE. That is true.
Mr. GOLDER. Will you bring out, if you please, the relationship of
the failures of the number of banks, other than member banks,
compared with State banks, during the same period?
Mr. STEAGALL. That is some information we ought to have in this
record. I suppose, in some of these reports somewhere it is to be
found. I would imagine that had been developed before now.
The CHAIRMAN. Will you yield to me?
Mr. STEAGALL. Yes, sir.
The CHAIRMAN. Can you furnish that information, Mr. Comptroller?
Mr. POLE. Yes.
• The CHAIRMAN. Then, without objection,it will be put in the record
at this point.
Number and deposits of all banks in United States I at the end of June, 1920, and
number and deposits of banks that suspended from January 1, 1921, to December
31, 1929
I
Member banks
Total all
banks

Nonmember
banks
National

State

NUMBER OF BANES
Total number of banks in operation at
the end of June, 1920
Number of banks that suspended from
Jan. 1, 1921, to Dec. 31, 1929
Ratio of banks that suspended during
1921-1929 to total banks in operation
in June, 1920 (per cent)

30,079

8,025

1, 374

5,640

763

231

lb. 8

9. 5

M.8

DEPOSITS
Total deposits of all banks in operation
at the end of June, 1920
$41,445,376,000
Deposits of banks that suspended from
Jan. 1, 1921, to Dec. 31, 1929
1,721,402,000
Ratio of deposits of banks that sus.
Pended (luring 1921-1929 to deposits
of all banks in operation in June, 1920
(per cent)
4.2

17, 148,231,000 $8,224, 105,000
355,780,000

138,450,000

816,073,040,000
1, 227, 172,000

2. 1

Exclusive of Alaska and Island possessions (60 banks .

Mr. GOLDER. Mr. Steagall was bringing out the fact that the
Federal reserve was in nowise responsible for the increase in failures
and I think if we can show an equal number of failures outside of
the
Mr. STEAGALL. I think it properly comes in line with the suggestion you made.
Mr. WING°. You mean other than member banks?

BRANCH, CHAIN, AND GROUP BANKING

81

Mr. GOLDER. Other than those connected with the Federal reserve system.
Mr. STEAGALL. As I remember your testimony yesterday—and I
will ask you to repeat it because there is no harm in repeating that—
what is the proportion of failures of national banks, in the national
system, as compared with the State banks?
Mr. POLE. During the period—
Mr. STEAGALL. Take the last 10-year period, since this failure
situation has been so accentuated.
Mr. POLE. There were 750 national banks against 4,700 State
banks. The ratio, in proportion to number of banks, was approximately three to one.
Mr. STEAGALL. Now, do you mean to say that the proportion—
that the failures would be about one national bank out of seven
State banks that failed?
Mr. POLE. Between six and seven. If you do not consider the
fact that there are twice as many or nearly three times as many
State banks as national banks
Mr. STEAGALL. I am leaving that out of the first question. There
is about one national bank to six or seven State banks to fail?
Mr. POLE. Yes; about one to six or seven.
Mr. STEAGALL. What proportion of the national banks have failed
as compared to the proportion of State banks that have failed; in
other words, what percentage of the national banks have failed in
this 10-year period or 9 years or whatever it is?
Mr. POLE. Approximately 9 per cent over the 9-year period ending
1929.
Mr. STEAGALL. Here is what I am talking about: You have given
rue the percentage of the national banks that have failed as 9 per
cent. That is what I want. What per cent of the State banks have
failed during that same period?
Mr. BUSBY. I call your attention to page 4 of your first statement,
in which you have that all figured out. The answer is 71 per cent.
Mr. STEAGALL. 71 per cent? No; those figures are not right.
Mr. BUSBY. Seventy-one per cent that failed were State banks.
Mr. WINGO. That is not the question he asked.
Mr. STEAGALL. What I want to know is what per cent of the
State banks have failed?
Mr. STEVENSON. That is a very important item.
Mr. POLE. Twenty-two per cent of all State banks in existence
June 30, 1920.
Mr. STEAGALL. About twice the percentage of State banks have
failed as compared with national banks?
Mr. GOLDSBOROUGH. Will you find out at this point, what percentage of the banking resources failed?
Mr. STEAGALL. I am coming to that. What was the percentage
of the resources involved in the national banks that failed as compared with the resources of the State banks that failed? If you can
p_ut the figures in the record—I think it would be more direct to ask,
What were the resources of the national banks that failed, and what
Were the resources of the State banks that failed.
Mr. POLE. Your former question—there were 9 per cent of the
national banks that failed over the period in question and 22 per
cent of the State banks. That is in answer to your former question.

BRANCH, CHAIN, AND GROUP BANKING

82 •

Mr.STEAGALL. My next question is, What were the resources of the
national banks to fail first, and next, What were the resources of the
State banks that failed?
Mr. POLE. I shall have to furnish that.
Mr. STEAGALL. Then, when you furnish the amount in dollars
and cents of resources of the national banks that failed and the
State banks that failed, in that connection give also the amount of
resources of the entire national system and the entire State system.
Mr. WINGO. And also reduced to a percentage basis in both
instances.
Mr. POLE. We have that information but I do not happen to carry
it in my head.
Mr. GOLDER. I think on page 28 you will find the requested information in this report.
Mr. STEAGALL. Just let Mr. POLE furnish that information.
Mr. POLE. I will be glad to furnish it.
Mr. STEAGALL. Mr. Pole, we have had, this year, I believe you
said, 155 failures.
Mr. POLE. We have had 155 up to February 21. There were
three additional national-bank failures this week and several additional State banks.
Mr. STEAGALL. At that rate, how many bank failures will we have
this year?
Mr. POLE. Well, that would be about 100 a month, would it not?
Mr. WINGO. I figure, if you take the first seven weeks of the year
and continue at that ratio, it would be 1,140 for the year.
Mr. POLE. Yes.
Mr. STEAGALL. What proportion of these failures down to the
21st, I believe you said it was, are national banks? In other words,
how many national banks have failed this year up to that time?
Mr. POLE. Twenty-one.
Mr. STEAGALL. How many of these 155 were banks of less than
$100,000 capital? Have you those figures?
Mr. POLE. One hundred and thirty of them.
Mr. STEAGALL. We had two in my State of more than $100,000
this year.
Mr. POLE. I will be glad to furnish that information.
Classification of banks suspended during the period January I to February 21t
1930, according to capital stock
Number of banks with capital stock of—

Non
State
Total, National
member
bank
all banks banks members
banks
_

Less than $100,000
$100,000
• Over $100,000
Not available

130
8
15
I2

14
4
4

3
1

113
4
10
2

Total

155

22

4

129

I Private banks.

Mr. WINGO. If the gentleman will yield
MT. STEAGALL. Yes.

BRANCH, CHAIN, AND GROUP BANKING

83

Mr. WINGO. The fact remains that the great bulk of failures this
year, like they have been for the last nine years—for the immediate
nine years preceding—are mostly small country banks?
Mr. POLE. Almost entirely small banks.
Mr. WINGO. That is the striking fact that I think would interest
us, that the largest part of the failures are among what you class as
country banks.
Mr. POLE. Yes.
Mr. WINGO. And very few large banks failed?
Mr. POLE. Very few.
Mr. STEAGALL. I want to ask you where these failures have
occurred, speaking geographically?
Mr. POLE. This year, you are speaking of?
Mr. STEAGALL. We are discussing now the whole thing—this nineyear period we are talking about.
Mr. POLE. Taking the total number of banks on June 30, 1920, as
a llo(asis, in the State of Vermont, there were no failures.
In the District of Columbia there were no failures.
In the State of New Hampshire there was one failure.
In the State of New Jersey there were three failures.
In the State of Massachusetts there were six failures, or 1.3 per
cent.
In the State of Connecticut there were three failures, or 1.4 per
cent.
In the State of Maine there were three failures, or 1.9 per cent.
In the State of New York there were 26 failures, or 2.5 per cent.
In the State of Pennsylvania there were 40 failures, or 2.6 per cent.
In the State of Maryland there were 11 failures, or 3.9 per cent.
In the State of California there were 31 failures, or 4.3 per cent.
In the State of Delaware there were two failures, or 4.3 per cent.
In the State of Ohio there were 55 failures, or 4.8 per cent.
Of all the banks which were in existence in 1920 in the State of
Rhode Island three banks failed, or 6.3 per cent.
In the State of Kentucky there were 43 failures, or 7.4 per cent.
In the State of Wisconsin there were 75 failures, or 7.7 per cent.
In the State of Illinois there were 138 failures, or 8.6 per cent.
In the State of Alabama there were 32 failures, or 9.1 per cent.
In the State of Nevada there were 3 failures, or 9.1 per cent.
In the State of Virginia there were 45 failures, or 9.2 per cent.
In the State of Michigan there were 66 failures, or 9.4 per cent.
In the State of Mississippi there were 34 failures, or 9.6 per cent.
In the State of West Virginia there were 34 failures, or 10 per cent.
This is of all banks in existence, State and national, June 30, 1920.
This number has failed:
In the State of Indiana there were 115 failures, or 10.9 per cent.
In the State of Tennessee there were 66 failures, or 12.1 per cent.
In the State of Louisiana there were 34 failures, or 12.7 per cent.
In the State of Utah there were 18 failures, or 13.5 per cent.
In the State of Washington there were 56 failures, or 14.2 per cent.
In the State of Oregon there were 43 failures, or 15.5 per cent.
In the State of Kansas there were 223 failures, or 16.5 per cent.
In the State of Missouri there were 296.failures, or 17.9 per cent.
In the State of Texas there were 299 failures, or 18.9 per cent.
In the State of Arkansas there were 95 failures, or 19.5 per cent.

84

BRANCH, CHAIN, AND GROUP BANKING

In the State of North Carolina there were 125 failures, or 20.1
per cent.
In the State of Colorado there were 89 failures, or 22.1 per cent.
In the State of Minnesota there were 411 failures, or 27 per cent.
In the State of Oklahoma there were 266 failures, or 27.7 per cent.
In the State of Nebraska there were 339 failures, or 29.3 per cent.
In the State of Iowa there were 528 failures, or 29.9 per cent.
In the State of Arizona there were 27 failures, or 31 per cent.
In the State of Idaho there were 72 failures, or 32.4 per cent.
In the State of Wyoming there were 60 failures, or 30.5 per cent.
In the State of Georgia there were 319 failures, or 43.2 per cent.
In the State of Montana there were 203 failures, or 47.1 per cent.
In the State of North Dakota there were 429 failures, or 47.8 per
cent.
In the State of South Carolina there were 227 failures, or 49.2 pet
cent.
In the State of New Mexico there were 62 failures, or 50 per cset•
In the State of South Dakota there were 394 failures, or 56.8 per
cent.
In the State of Florida there were 190 failures, or 71.7 per cent,
of all the banks which were in existence June 30, 1920 to 1929,
inclusive.
Mr. STEAGALL. I do not suppose you are prepared, at the moment1
to give the figures on the last year and this year, geographically, and
if you will put them in your statement, I will be glad to have them.
Mr. POLE. These figures for the last year?
Mr. STEAGALL. For the last year; yes, sir.
Mr. POLE. I can give you them now.
Mr. STEAGALL. Very well, sir. I did not suppose you had them
on hand.
Mr. POLE. Six hundred and forty banks failed in 1929. By Federal reserve districts, none of them failed in the first district; 6 banks
failed in district No. 2, 3 banks failed in district No. 3, 14 banks failed
in district No. 4, 59 banks failed in district No. 5, 117 banks failed in
district No. 6, 93 banks failed in district No. 7, 44 banks failed in
district No. 8, 84 banks failed in district No. 9, 193 banks failed in
No. 10, 11 banks failed in No. 11, 16 banks failed in the twelfth
Federal reserve district, making a total of 640 banks.
Mr. WINGO. May I interrupt the gentleman right there?
Mr. STEAGALL. Certainly.
Mr. WINGO. In connection with these statistics, at this point, .1
want the record to carry a citation to your exhibits E and F. Exhibit
E shows that the bank suspensions during the 8-year period, 1921 to
1928,inclusive—that 88.6 per cent of those failures or suspensions were
in banks of $100,000 and less capitalization, and as to sizes of towns
in that same period, 87.7 per cent of those failures occurred in towns
of 5,000 and less in population; in other words, 88 per cent plus were
banks of $100,000 and less capitalization, and 87.7 per cent were in
towns of 5,000 and less population.
In other words, the great bulk of failures were small banks in
small towns.
Mr. POLE. That is correct.
Mr. GOLDER. I should like to ask if the principal causes of most of
these failures were loans—mortgages on land values?

1

a

37
fi

fi

BRANCH, CHAIN, AND GROUP BANKING

85

Mr. STEAGALL. The gentleman asks, or desires me to ask, if the
Principal cause of the failures was loans on land values. You spoke
of frozen assets and, of course, we understand to some extent, at
least, that is covered by loans on real estate or tied up in real estate.
Mr. POLE. I referred to frozen assets in the particular illustration
Which I drew at that time.
Mr. STEAGALL. Yes, Sir.
Mr. POLE. I would not say that the causes of the bank failures
are in large part, or in an important part, on account of real estate
loans or loans based on real estate. This is not the controlling
factor.
Mr. STEAGALL. Are you familiar—I am sure you are—with the
legislation passed two years ago, or about that time—I will not give
the date—in which we permitted national banks to increase the
amounts of their loans on real estate?
Mr. POLE. That was under the McFadden bill?
Mr. STEAGALL. Yes. Do you remember the increases permitted
by that act? The figures escape my mind. Some of us favored it
and some did not, but finally the legislation went through. I do
not mean to play the role of "I told you so," but I was one of those
Who did not think it was the proper thing to do.
Mr. POLE. There was no change in the law with respect to the
ftppraisals of real estate or its loaning value. There was a difference
in the length of time for which a loan on real estate might run and
the aggregate amount of loans on real estate which might be made
With respect to the savings deposits, the amendment being to allow
a bank to loan up to 50 per cent, whereas formerly it was 33% per
cent.
Mr. STEAGALL. I though the former amount was 25 per cent, but
I am sure you remember the figure better than I do.
Mr. POLE. Yes.
Mr. STEAGALL. So evidently we did not help the situation with
that legislation. Mr. Pole, as I understand you, you regard the
independent unit banking system, as compared to branch banking,
chain banking, or group banking, as the best banking system for
our country in so far as the system can function efficiently and meet
the demand for banking facilities.
Generally speaking, you think that is the banking system to be
desired? If I understand your position, you do not think that the
System, as we have it, has worked successfully and you think there
Should be some changes?
Mr. POLE. That is my recommendation to Congress.
Mr. STEAGALL. Yes; but fundamentally you regard the unit system
as the best system, do you not?
Mr. POLE. Not fundamentally. I have a sentimental attachment
for it.
Mr. STEAGALL. But so far as it is practicable, that is the system
You prefer? In other words, we want to adhere to it and get away
from it only so far as developments make it necessary to do so.
Mr. POLE. The reason I want to get away from the present rural
banking system is that it does not offer protection to the rural cornMunities.
Mr. STEAGALL. But you would not want to get away from it any
further than it is necessary to do so in your judgment, in order to
take care of the situation?

86

BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. If it properly took care of the situation I would be in
favor of it.
Mr. STEAGALL. Putting it bluntly, if I understand your view—
and I am not finding fault with you for that view—but you have
certain reasons for your attitude. Whether those reasons are conclusive I do not know, but there are some reasons for the view that
you have that the present unit banking system, in the smaller communities, as manifested in our smaller banks, is defective, to say the
least, from some cause. I agree with you as to that, and it is to
remedy that that you would depart from the system, and, as I understand you, only so far as necessary.
Mr. POLE. That is the basis of my recommendation.
Mr. STEAGALL. That being the case, would not this be the logical
course to follow in our legislation—the unit system being the preferable plan—as you suggest, certainly for sentimental reasons among
others, it is the system to which we have been accustomed and it is
the system we have been taught to believe in and I think everybody
agrees, is preferable if it can be kept sound and practicable and made
to meet the requirements of the country—but that being true, I agree
with you in that there are defects in the present system, but the
unit system being preferable, should not we follow this course in our
legislation—that of trying, if we can, to perfect the unit system or at
least remove its defects and wherever it can be done to cure inefficiencies as far as possible and abandon the system only to the extent
that we find ourselves unable to save it and make it operate
successfully?
Mr. POLE. I would not be able to answer that question, Mr.
Steagall, unless I knew what plan you had in mind for perfecting it.
Mr. STEAGALL. I am not speaking about plans. I do not know
that I have any. I have some thought about it, but I should hesitate
to say that I have a plan to remedy a situation which is regarded as so
difficult. It might be presumptuous. I have some suggestions in
that connection which I think might be helpful. I would not say
I have a plan that would save it, but if we could eliminate the defects
and restore it I should think it the thing to do. Evidently the it
system of banking worked for many years all right, but somehow
recent developments have brought about difficulties that did not
exist for a long time, certainly difficulties out of proportion to the
difficulties encountered for a long period—if we can find these defects
and remedy them and get them out of the way, I think we might say
that we would all agree that is the preferable thing to do.
Mr. POLE. If we could make the unit system effective
Mr. STEAGALL. That is what I had in mind.
Mr. POLE. I think there would be no reason for any change.
Mr. STEAGALL. Let me ask you this: How do you account for the
increase in our difficulties in our unit banking system during this
recent period of years, since 1920, about which we have talked?
Mr. POLE. One of the important basic reasons is the fact that the
small country bank is not able to earn sufficient to take care of its
normal losses, its increasing expenses, and its diminishing business.
Mr. STEAGALL. It is a difficulty, however, that seems to have manifested itself only during these recent years?
Mr. POLE. It has been accentuated since the war.

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Mr. STEAGALL. The system worked all right down to the period
about which you were talking?
Mr. POLE. I would not say so. Iwould not say that any system
is working all right with the bank failures in any circumstances running into the hundreds. I think the difficulties of earning a proper
return on invested banking capital in small communities have greatly
increased since the war, but for a number of years before the war,
there was a tendency toward diminishing opportunities for the small
bank to make earnings. The cost of operations was getting heavier
and heavier as time went on and net earnings were decreasing, so
that the trend was not in the right direction. If a bank can not earn
a fair return on its capital investment, that bank is eventually going
to fail.
Mr. STEAGALL. Of course the system which has that inherent difficulty in it will bring trouble.
Mr. POLE. Undoubtedly.
Mr. STEAGALL. Now, you have answered my own thought, in my
own language. Unquestionably, generally speaking, the difficulty
Which has brought about the increase in failures, grows out of the fact
that banks have been unable to make the proper earnings—these
banks that have failed.
Mr. POLE. Sufficient to pay its increasing operating expenses and
its losses.
Mr. STEAGALL. What has brought about that changed condition?
How do you account for their inability to make sufficient earnings?
Mr. POLE. Well, there are a great many things.
Mr. STEAGALL. Let us talk about them. That is what I wanted
you to discuss.
Mr. POLE. In the first place, rates of interest in country banks
have not increased.
Mr. STEAGALL. You mean by that, of course, the interest received
by the banks on loans?
Mr. POLE. The interest received by the banks on loans have not
increased because, in small country banks, they have, for years, been
about as high as they could very well be.
The expenses of operating banks have been materially—very
Materially—increased. The opportunities of the country banks have
diminished in that the small town has become less of a factor by
reason of the improvement in roads and the quick transportation
Which takes people to the cities.to do their business and their banking,
frequently, instead of doing it in the small town.
..ty has been more or less
Heretofore, in years gone by, a commum
independent, with its locally operated utilities, its light plants, ice
Plants, and wagon factories, and so forth, all of which have been
removed and those things have gone to the cities and now are controlled by large corporations and those opportunities have been
removed.
There has been a change in corporate financing within the last 10
years. Heretofore large corporations and small corporations, similarly, would borrow seasonally, whereas now they have financed
themselves through reorganization of their capital structures. That
has removed the opportunities from the banks and such things as
that have made it very difficult for a bank to stay on an even keel.

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Mr. STEAGALL. You would not say that the difficulty has grown
out of the inability of the banks to make loans?
Mr. POLE. No, sir; they do not have any trouble in making loans,
but they generally have to be satisfied with loans of a different
quality—
Mr. STEAGALL. That is what you mean—not that they are not able
to make loans enough, but the loans they have now are not as satisfactory as previously?
Mr. POLE. Banks in small communities have to be satisfied with
small local loans and real-estate loans which frequently are slow and
unsatisfactory, resulting in a greater percentage of losses than in
years gone by.
Mr. STEAGALL. I remember having discussed with Mr. Williams,
who was Comptroller of the Currency, the matter of interest rates
which were being received by national banks. He issued some
stubborn orders regarding the enforcement of the law which prohibited a national bank from receiving interest in excess of the law
of the State in which the bank did business, and that was back at the
time of the inauguration of the Federal reserve system.
Mr. POLE. Yes; later than that; about 1918.
Mr. STEAGALL. Mr. Williams did that in 1915. That is a matter
about which I have some recollection, because I came to Congress
that year and I remember the first time I discussed it. A bank in
my district liquidated on account of that order and paid everybody
in full, including the stockholders. Many thought it was an unreasonable thing, but it was not. There has been no change in the interest
rates that banks receive since that order, as I have been advised.
Is not that right? So that that order fixing the limitation on interest
charges by the national banks went into effect some years prior to the
time that these increased insolvencies developed?
Mr. POLE. I think that order, Mr. Steagall, was not an important
factor in the return which a bank receives on its invested capital.
I think it had reference, as I recall it—and I do remember it very
well—as to whether or not a bank should be permitted to make a
minimum charge of $1 or 50 cents.
Mr. STEAGALL. I am speaking about the interest rates. I have
not yet reached the matter of charges on collection of checks. He
put into effect an order that the banks must observe the law. The
law did provide, long before that, that the banks should not charge
an interest rate above the interest rate charged in the State in which
it was doing business, and it had been discovered that it was violated,
and he put that order into effect in 1915.
Mr. STEVENSON. That did not affect State banks at all.
Mr. STEAGALL. No; but it did affect the national banks, all national
banks that were members of the Federal reserve system.
Mr. POLE. I would not say that that was a material factor. I do
not think the small banks generally observed it, and if they had, I do
not think it would have been an important factor.
Mr. STEAGALL. The deposits have substantially increased all
along, have they not?
Mr. POLE. They have not materially increased in the rural districts. They have, in the metropolitan districts.
Mr. STEAGALL. But not in the rural districts?
Mr. POLE. No; not anything like the proportion of increase in the
larger centers.

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Mr. STEAGALL. You referred a moment ago to the matter of charges
that the little banks impose for the collection of checks. That right
Was taken away from the banks about—now, when was it? You
remember it better than I do.
Mr. POLE. That was when the par collection system was put
into effect by the Federal reserve banks, two or three years after
the system went into operation.
Mr. STEVENSON. About 1917.
Mr. STEAGALL. What amount of earnings did that take away?
How did that affect the situation? . That is certainly one factor
entering into this matter of the ability of these banks to make
sufficient earnings to succeed properly.
Mr. POLE. I think it was the contention of a great many small
banks, Mr. Steagall, that it affected their earnings.
Mr. STEAGALL. That was a considerable item with the little
country banks, was it not?
Mr. POLE. It was probably a considerable item.
Mr. STEAGALL. That is what I had always thought. I have had
this statement made to me, and I do not say it is true, because I
am not sufficiently informed to pass on it, but the statement is often
made that many of these little banks get enough out of their collection charges to pay their salary accounts and a big part of their
running expenses.
Mr. POLE. I think that would be.true in very few instances, and
if they did, they were probably making exorbitant charges.
Mr. STEAGALL. I think that was true in some cases. I. think that
Wherever that was the case their charges should be regulated, but
evidently the taking away of collection privileges was one of the
• things that entered into the calculation, out of which grows their
ability to make earnings. Personally, I always thought that that
right should not have been taken away from the little banks. Maybe
I was unduly sympathetic and maybe my views were not always
sound, but I thought there should be a statutory regulation of the
matter to protect the public against unfair charges but not deny
them any aid and make them do the work for nothing, which was
generally for larger banks and wholesale houses.
Mr. POLE. Yes.
Mr. STEAGALL. There is a long story in that connection with reference to the legislation which was passed, which finally gave authority
to the Federal Reserve Board to enforce its will in that matter, but I
do not care to enter into that discussion now. I wanted to ask you
this: How much—and this is a matter I should not have to ask you
about, but I do not have the figures before me—how much of the
earnings of the Federal reserve system have gone in the Federal
Treasury since the inauguration of the system?
Mr. POLE. I supplied that information for the record this morning.
Mr. STEAGALL. Did you?
Mr. POLE. Yes.
Mr. STEAGALL. Then,I will not ask you to repeat it. Of course, it
Will be true, will it not, that the small return that a member bank
receives from the Federal reserve bank, which is limited to 6 per
cent, on its stock, is one of the items.that enters into the matter of
their inability to make sufficient earnings?
Mr. POLE. I should say by no means.

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Mr. STEAGALL. You think not?
Mr. POLE. I think not. Federal reserve bank stock is one of
their securities upon which they get 6 per cent and on which the yield
is better probably than the average yield on their total investments.
Mr. STEAGALL. They have to carry, in addition to that stock
Mr. POLE. That is another matter. I am merely speaking from
the standpoint of the investment in the Federal reserve stock.
Mr. STEAGALL. In addition to that, they carry 7 per cent of their
demand deposits and 3 per cent of their time deposits
Mr. POLE. In the Federal reserve banks; that is true.
Mr. STEAGALL. And on which they get nothing?
Mr. POLE. On which they get nothing.
Mr. STEAGALL. That would be one item, or course.
Mr. POLE. Yes.
Mr. STEAGALL. And it ought to be taken into the calculation and
in connection with their earnings?
Mr. POLE. Yes; that is a consideration.
Mr. STEAGALL. That, of -course, would apply only to banks that
are members of the Federal reserve system?
Mr. POLE. Yes, sir.
Mr. STEAGALL. And our greatest failures, of course, are not in the
Federal reserve system?
Mr. POLE. The greatest number of failures are of banks not in the
Federal reserve system.
Mr. STEAGALL. However, this is true, we are striving—those of ne
who have responsibilities as legislators or otherwise—for the improvement of the national banking system. Of course we would not
attempt to treat the State system as our pattern or anything like
that, and we, of course, are pleased that the national system can make%
a better showing. It has many advantages.
You discussed yesterday, with Mr. Busby, the matter of the
guarantee of deposits. I believe he suggested that an insurance
method might be advisable, but that did not appeal to your judgment.
Mr. POLE. Not at all.
Mr. STEAGALL. Would there be insurance facilities sufficient to,
meet the requirements if we should attempt to say to the national
banks of the country that they should insure their deposits?
Mr. POLE. I could not say about that.
Mr. STEAGALL. There would be at least some question about that,
would there not?
Mr. POLE. I am not informed as to what the insurance companies
can do.
Mr. STEAGALL. This difficulty would occur, however, would it not,
that if we put a law into effect now—now or six months or a year
from now—saying that all national banks must insure their deposits,
the practical effect would be to automatically close every bank that
was not able to get insurance, would it not?
Mr. POLE. I think that there are many banks over this countri
which enjoy such confidence on the part of their patrons that it
would make no difference to them whether they were insured or net;
Mr. STEAGALL. But if the law should require them to insure an°
insurance companies would not take them, they would have to g°
out of business?
Mr. POLE. Yes.

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'Mr. STEAGALL. There could be no law passed compelling insurance
companies to take them. So, the practical effect would be those
banks that were unable to pass muster before the insurance companies, would have to go out of business? And in that situation,
we would not have the friendly, helpful hand of the Comptroller of
the Currency, with his constructive and sympathetic attitude in
dealing with banks, to say whether or not a national bank should
close or not, but some inexperienced representative of an insurance
company in New York would go down to South Carolina or Alabama
and look into a bank and decide whether it should be closed or insure
its deposits and keep open.
Mr. POLE. They would have to decide whether or not it was a
good risk. I imagine there would be a few banks whose risk they
might not care to assume.
Mr. STEAGALL. You discussed yesterday the guarantee system as
it had been attempted in certain States. I do not care to go into that
in detail. I am taking so much of your time and so much of the time
of the committee I want to hurry along, but this is true, is it not,
that the State, as a unit, would afford much weaker facilities for putting into effect a guarantee system established and borne by the
banks themse es, than would be the case if the whole United States
should be m
the unit and the guarantee system undertaken by
the national nks of the whole country with its vast resources; it
would necessarily, of course,. be. stronger and beetter able to undertake that burden and responsibility. That necessarily would be ture,
would it not? I am not attempting to commit you to the idea that
they should do it. That is another matter, but certainly they would
be very much better able to do it than the weak little banks in what
some one said in one of the Senate debates—in one of our "backward" States?
Mr. POLE. Yes.
Mr. STEAGALL. Of course, in that event, you would have the entire
area of the United States, and a crop failure in one State would not
pull down the whole system, which can happen in a small State unit.
You would have all the big national banking system back of it which
would, of course, make it much less hazardous and burdensome for
them than would be the case where it was limited to the individual
States.
Mr. PoLF.„ Are you speaking of a guarantee of the funds by the
United States Government to cover all the States and all the banks?
Mr. STEAGALL. I am speaking of a guarantee systeni patterned
after those in the States.
Mr. POLE. That would be of the National Government?
Mr. STEAGALL. If the national banks themselves attempted to
guarantee their deposits as the State.ban.ks.have attempted to guarantee their deposits. I am not saying it is a desirable thing. Of
course there would be a vast difference with the vast United States
as compared with the small banks of small States.
Mr. POLE. I rather doubt that for the reason that if you are going
to penalize national banks any further they might go into the State
systems.
Mr. STEAGALL. I am not talking about that phase of it.
Mr. GOLDER. What do you mean by "guaranteeing deposits"?

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Mr. STEAGALL. A guarantee system patterned after the State
systems, and their systems had—and most of them with which I
have had any acquaintance—a plan by which each bank was assessed
so much annually to set up a fund out of which to realize sufficient
to take care of depositors when the bank was closed or something like
that. As a rule it seems not to have worked well in some of the
States.
Mr. POLE. That is true.
Mr. STEAGALL. I share the view
The CHAIRMAN. Will you yield to me?
Mr. STEAGALL. Yes.
The CHAIRMAN. I understand the State guarantee plan has failed
in every State in which it has been put into operation, and they have
discontinued it in every State except Nebraska, and Nebraska's
governor is calling a special session of the legislature now to repeal
that law.
Mr. STEAGALL. I have never had faith in the guaranty system as
the States have adopted it and I am not surprised that it has not
worked well. I am not fully informed as to how it has worked in
the various States and therefore I do not care to go into details about
that.
Mr. STEVENSON. Before you leave that point,
uld you mind
one question? I shall not be able to be in another o hese meetings
for a couple of weeks.
Mr. STEAGALL. I am glad to yield.
Mr. STEVENSON. On that very question yesterday the comptroller,
being asked about depositors requiring or being given security bY
banks, the comptroller expressed the opinion that it is not a sound
policy, with which I agree. But I want to ask the comptroller this:
Is it not the rule that the United States Government requires for
every one of its deposits, the bank to put up absolute security for its
money and pay interest on it?
Mr. POLE. That is true as far as the United States Government is
concerned.
Mr. STEVENSON. And we have our Government which supervises
this whole business insisting on a preferential provision for itself,
which is admittedly unsound for the other depositors. Is not that
true?
Mr. POLE. Of course every depositor in every bank is interested
in the safety of a Government deposit.
Mr. STEVENSON. To a small extent—a very small extent.
Mr. POLE. If you were to require the banks to give security to its
depositors that it would be very impracticable.
Mr. STEVENSON. It would simply force the banks to loan out ever,'
bit of their deposits in order to have the securities in order to place
the securities; in other words the bank would simply become a loaning
agency for the depositor and take the security and turn it over .o hire.
It is not a sound policy, and I have questioned, for a long time, the
justice of the United States Government stepping in here and having
an absolute preference over the small depositors when they require
absolute gilt-edged security for every deposit they make, and make
them pay interest on it.
Mr. POLE. It is the custom to secure public funds of all character'
not only the United States Government, but also municipal, State,
and county funds.

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Mr. STEVENSON. They did not use to. I have been in business tot
some 44 years, and in connection with the banking business until 15
years ago, when I got out, but they did not use to do that. They
have simply all followed the lead of Uncle Sam. Right now, all of
the States, counties, and municipalities, require securities for the
funds, but they have done it under the inspiration and example of
the United States Government.
That is all I wanted to ask and direct attention to. If the thing is
unsound, the United States Government is responsible for it, and I
think it is unfair for the strongest depositor you have got to have a
preference.
Here is man that carries $100,000 on deposits. He makes them
Put up United States bonds as security. Here, on the other hand, are
100 depositors with $1,000 each, and along comes some trouble that
breaks one of the banks. The fellow that has $100,000 on deposit and
able to lose it—he steps in and takes the cream and leaves the little
fellows with the skimmed milk. That is what happens, and it is not
right, but Uncle Sam is the author of that proposition. I do not
know when it was inaugurated, but it is wrong.
Mr. STEAGALL. I can see where the Federal Government is in a
little different category from the business man or the citizen in the
community who deposits funds. I think if I had Government deposits to make I would put them where I could realize on them immediately, in case it was desired..
Mr. GOLDER. Does not the ordinary depositor in the bank get the
benefit of the Government deposits? After all, the depositor goes to
the bank and borrows from the Government deposits and uses that
money in his business.
Mr. STEVENSON. But he gives 200 per cent security.
Mr. GOLDER. But if he fails—
Mr. STEVENSON. The Government does not lose anything.
Mr. SEIBERLING. I move that we proceed with the regular order.
The CHAIRMAN. Proceed, Mr. Steagall.
Mr. STEAGALL. I am willing to have the gentlemen interrupt me.
I am taking a lot of time I realize.
Mr. Pole, do you remember the Federal Reserve act as it was
Originally passed, embodied a provision providingfor the guarantee
of deposits in the member banks? Are you familiar with that pro'vision?
Mr. POLE. I am not.
Mr. STEAGALL. I mean as it passed the Senate?
Mr. POLE. No; I am not familiar with that.
Mr. STEAGALL. It is a fact that. the Federal reserve act, as it
originally passed the Senate, had in it a provision for the payment of
deposits on the earnings of Federal reserve banks. That provision
Was stricken out in conference. I have always felt that while we are
trying to legislate to protect the banks against one another and to set
up safeguards by which other people deal with banks, and while we
fire trying to take care of, as Brother Stevenson says, the Government
itself, we ought, if we could in a sound way, try to find a method of
taking care of the citizens who deposit in a bank for which the Government assumes responsibility.
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To me it looks hard that an old lady across the country should
carry her money to town that she has saved for her old age, and get
it out of her stocking in the old trunk in the corner, and takes it to
town and sees the bank with a sign "Member of the Federal reserve
system" and "National bank, a Government depositary"—the feeling is there, "This .is my great Government." The American flag
might as well be raised over that bank. She says, "Here is a safe
place for my earnings and better than out here where I might get
robbed, and I will put them there." The bank fails and she only gets
back 79 per cent—and in many cases nothing.
Mr. POLE. While it would he very desirable indeed to have the
depositors protected, Mr. Steagall, after all it is not a remedy for
preventing failures.
Mr. STEAGALL. Maybe not and maybe so, to some extent. It, is
unquestionably true, is it not, that a great many bank failures are
precipitated by a lack of confidence on the part of the depositing
clientele?
Mr. POLE. Yes; in some particular cases that is perfectly true.
That is not one of the basic causes for bank failures, however.
Mr. STEAGALL. Yes; I understand it would not remedy the inherent difficulties. We have just passed through this committee, and
it is now up in the House, a provision to punish a person who slanders
a national bank. It is recognized that an irresponsible person can
start a run on a solvent bank and precipitate a failure that vv-ould
involve the whole community and, of course, consequent loss in a
bank, because its assets have a very different value as a going concern from that which it was forced into liquidation. That often
happens.
Mr. POLE. Not often, but it does happen.
Mr. STEAGALL. If it were known that the depositors would be
protected, of course that would not happen.
Mr. POLE. No; it would not happen.
Mr. STEAGALL. I wanted to ask you this, with reference to the
guaranty proposition: If the earnings of the Federal reserve banks
that accrue by reason of their operation with their member banks
had been maintained as a separate fund, they could have taken care
of all these losses to depositors in member banks and still have had
large funds to go into the Treasury as a franchise tax, could they not?
In other words, have not the Federal rds,erve banks made enough by
reason of the operations with their member banks to much more than
pay losses which have accrued finally to depositors in member banks,
and still have funds left to go into the Treasury in the form of franchise
taxes?
Mr. POLE. I think the figures will show that.
Mr. STEAGALL. If that is true, then the reason the depositor can
not get his money back is because the system in which he has deposited
it has taken a part of the assets and earnings and paid it as a tax into
the Treasury.
Mr. POLE. I do not follow you on that.
Mr. STEAGALL. The Federal reserve banks make these earnings out
of the member banks—they raise three-fourths of it on the deposits
and stock of the member banks—and operations with them and the
assets of member banks consist in larger part of their deposits.
Mr. POLE. Yes, sir.

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Mr. STEAGALL. The Federal reserve banks make something like
75 per cent of the earnings by reason of their member banks?
Mr. POLE. On discounts.
Mr. STEAGALL. And they have paid into the Treasury much more
than enough to take care of the losses to depositors and still have
money left to pay into the Treasury. Mind you, that is money that
is made out of these banks in which these deposits have been placed.
It is a part of their profits, but instead of going to protect the customers
of the banks, it goes into the Federal Treasury.
Mr. POLE. But a small proportion of those profits would go to the
banks that failed. If you distribute the profits in proportion to the
amount of reserves carried a very large proportion would go to the
city banks.
Mr. STEAGALL. Very true; and I appreciate highly what you say,
but I am only speaking of the principle involved. To me it is a
sounder thing than this proposition of insurance, or to have the
banks attempt to impose upon themselves charges out of which to
set up a fund to take care of deposits.
I do not attempt to pass on that. I recognize it is a great question
and I am open to listen to the views and arguments of men who are
better informed than I am, but I have always thought, that we should
have a guaranty system for the national banks, and that the practical and sound way to do it would be to get that fund out of the
earnings of the Federal reserve banks, the profit of the Federal reserve banks made by reason of their operations with the member
banks and I think it should be done.
Mr. POLE. I do not think any guarantee of deposit system would
be sound—none that I have ever heard of.
The CHAIRMAN. It IS now 1 o'clock.
Mr. STEAGALL. I would like to go along with this discussion, but
I am not going to ask Mr. Pole to come back here.
The CHAIRMAN. Mr. Pole is coming back.
Mr. STEAGALL. If I had know that I would have desisted long ago.
The CHAIRMAN. We have not, by any means, finished with Mr.
Pole.
Mr. STEAGALL. I meant I did not want to ask him to return for
Illy particular benefit. I know I am in a field that there is no haste
in finishing up.
The CHAIRMAN. There are several members of the committee who
have not had a chance to question the comptroller.
Mr. STEAGALL. I thought I was the last man, and that is the reason
I have taxed Mr. Pole and the committee so long.
The CHAIRMAN. Under our plan, we will adjourn these hearings
until next Tuesday, at 10.30 o'clock a. m.
Mr. GOLDSBOROUGH. Will Mr. Pole return on Tuesday?
The CHAIRMAN. Yes; and on Monday, the committee hag a
hearing on the Federal farm loan act, the Letts bill.
Mr. STEAGALL. I have a bill here I have introduced repeatedly,
Which represents a crude idea I had, and followed up by a practical
suggestion which was made to me by a banker in Kansas City-, a
man who impressed me very much as a very sound banker and a man
of vast information. The bill provides that the Federal reserve
banks shall distribute their earnings that accrue by reason of their
operations with their member banks, to the member banks after

96

BRANCH, CHAIN, AND GROUP BANKING

first having paid all expenses, set aside their dividends and their
surplus, and so forth—and instead of paying a franchise tax into the
Federal Treasury, covering all of it it shall go back to the banks out
of which the money was made. It has occurredto me that that item
would be helpful to these smaller banks if they could get this larger
share of the returns on their stock in the Federal reserve banks.
Mr. POLE. I would be in favor of something like that.
Mr. STEAGALL. I am very glad to hear you say that. I have a bill
here that does that particular thing. It was my own idea, but I did
not have so much confidence in it, until after having heard it discussed
so much and having a suggestion made by Mr. Goebel in Kansas
City—who helped me put that into practical form, and I have always
felt that was one piece of legislation that would be helpful to the
smaller banks—and now that you agree with me, I am stronger in
my view of it. If we are not going to guarantee deposits I think
we should give a larger share of the earnings back to these member
banks that are being strangled, and rendered unable to function
successfully.
Mr. POLE. I am in perfect accord with that.
Mr. STEAGALL. In view of that, I will ask the chairman to let me
call up the bill and get it reported favorably and let us have action
on it.
The CHAIRMAN. The committee will stand adjourned until 10.30
o'clock, a. m., Monday morning.
(Whereupon, at 1 o'clock, p. m., the committee adjourned until
Monday, March 3, 1930, at 10.30 o'clock a. m.)

Group Banking

Branch, Chain

HEARINGS
BEFORE THE

OMMITTEE ON BANKING AND CURRENCY
HOUSE OF REPRESENTATIVES
SEVENTY-FIRST CONGRESS

•

SECOND SESSION
UNDER

H. Res. 141
AUTHORIZING THE BANKING AND CURRENCY COMMITTEE
TO STUDY AND INVESTIGATE GROUP, CHAIN
AND BRANCH BANKING

MARCH 4, 5, AND 6 1930

VOLUME 1
Part 2

UNITED STATES
GOVERNMENT PRINTING OFFICE
WASIIINGTON:1930

COMMITTEE ON BANKING AND CURRENCY
LOUIS T. McFADDEN, Pennsylvania, Chairman
OTIS WINGO, Arkansas.
JAMES G. STRONG, Kansas.
HENRY B. STEAGALL, Alabama.
ROBERT LUCE, Massachusetts.
CIIARLES H. BRAND, Georgia.
E. HART FENN, Connecticut.
W. F. STEVENSON, South Carolina.
GUY E. CAMPBELL, Pennsylvcinia.
T. ALAN GOLDSBOROUGH, Maryland.
CARROLL L. BEEDY, Maine.
ANNING S. PRALL, New York.
JOSEPH L. HOOFER, Michigan.
JEFF BUSBY, Mississippi.
GODFREY G. GOODWIN, Minnesota.
F. DICKINSON LETTS,Iowa.
FRANKLIN W. FORT, New Jerse y.
BENJAMIN M. GOLDER, Pennsylvanla.
FRANCIS SEIBERLING, Ohio.
MRS. RUTH PRATT, New York.
}AMES W.DUNBAR,Indiana.
PHILIP G. THOMPSON, Clerk,

Po

CONTENTS
Pare

Ne, Ron. John W., Comptroller of the Currency, questioning of

97
III

_

.allINNE

BRANCH, CHAIN, AND GROUP BANKING
HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,
Tuesday, March 4, 1980.
The committee met in the committee room, Capitol Building, at
10.30 o'clock R. m., Hon. Louis T. McFadden (chairman) presiding.
The CHAIRMAN. The committee will Come to order.
Mr. Strong moved that, until further change, the hearings on
House Resolution 141,beginning March 11, 1930, be held on Tuesdays,
Wednesdays, and Fridays instead of on Tuesdays, Wednesdays, and
Thursdays as previously provided for, and the motion was agreed to.
Mr. GOODWIN. I make the motion that hearings on H. R. 7752
commence next Monday, when the proponents of the bill may be
heard, and that the hearing be continued on the following Monday,
when the opponents of the bill may be heard.
The CHAIRMAN. This is a bill proposing to amend section 5219
of the Revised Statutes, which is the statute that permits the taxation of national banks by States.
(The motion was agreed to.)
The CHAIRMAN. We will now resume the hearings on the matter
of branch, chain, and group banking. Mr. Pole is here before us
this morning.
Mr. STEAGALL. Mr. Pole, I want to ask one or two questions
Just to complete some things I had in mind and to finish some figures
I had asked you to give. I took so much time the other day that
I do not intend to prolong the discussion this morning.
The CHAIRMAN. All right.
STATEMENT OF HON. JOHN W. POLE, COMPTROLLER OF THE
CURRENCY—Resumed
Mr. STEAGALL. You gave the percentages in connection with the
liquidation of banks where liquidation had been completed, giving the
amounts realized by creditors, in our discussion at. the last. session.
I want to ask you to give the total amount., in figures, covering the
losses sustained by depositors in banks as to which liquidations had
been completed. Will you let that appear with your other figures?
Mr. POLE. I have already included that in the record.
Mr. STEAGALL. Very well; I did not know you had.
Then I want to ask you, if you have it convenient., for the same
figures with reference to State banks that are members of the Federal
reserve system and that. have been liquidated.
Mr. POLE. It might be difficult to obtain those figures. I will do
the best I can.
97
•

98

BRANCH, CHAIN, AND GROUP BANKING

Mr. STEAGALL. I do not want to put any undue burden on you,
but I imagine the Federal reserve banks could have that easily
accessible.
Mr. POLE. But such information with reference to the State nonmember banks are not collected by the Federal reserve.
Mr. STEAGALL. I did not make myself understood.
Mr. POLE. That information would have to be obtained from the
State superintendents.
Mr. STEAGALL. I see that I did not make myself understood. The
State banks I referred to are those which are members of the Federal
reserve system and which have been liquidated.
Mr. POLE. Including national banks?
Mr. STEAGALL. Of course, you have the national banks, but you
know that there are many liquidations of State banks that are members of the Federal reserve system. Those liquidations are not
handled by your department, but by the State machinery, and it
occurred to me that if you do not have it the Federal reserve banks
would have the figures showing what had occurred in connection
with the discharge of the liabilities, or the amounts realized, in these
banks that are members of the Federal reserve system.
Mr. POLE. I will endeavor to obtain that.
Mr. STEAGALL. If it is convenient. I think it would fit very well
into the information we now have. The truth is that the figures
that we have would not be complete without this information. To
illustrate, I imagine that the collections in insolvent State banks are
about on a level with those realized in national banks, but I do not
know.
(The figures referred to are not available.)
Mr. STEAGALL. I wanted to ask you one other question in connection with our little banks, which of course I am peculiarly interested
in.
A question they often raise is in connection with their remittances
to the Federal reserve banks and the manner in which remittances
are placed to their credit at the Federal reserve banks. What I refer
to is this: In my district, for instance, a farming district, where there
is an accentuated demand for loans and where the banks are always
loaning to the limit as a rule when crop-moving time comes, they find
it difficult to keep sufficient balances to meet the demands and they
are forever complaining, many of them, that the Federal reserve
banks do not give them immediate credit for remittances as was the
custom on the part of correspondent banks prior to the inauguration
of the Federal reserve system. As I said, they complain a great deal
about that. It has been discussed here, but I am wondering if you
have any suggestion that you could make about that that would be
helpful in that situation.
Mr. POLE. I think the plan that has been worked out by the
Federal reserve bank is in crediting to the reserve account of a member
bank only collected funds is sound. Formerly banks were usually
given credit for checks and drafts immediately upon receipt.
MT. STEAGALL. That is right.
Mr. POLE. Those drafts, however, were frequently drawn on other
cities, and very likely were collected through a circuitous method, and
it was.very likely days before the funds were actually placed to the
credit of the Federal reserve bank there, and therefore I can not

3

BRANCH, CHAIN, AND GROUP BANKING

99

help but feel that the present system of giving credit only as funds
are collected is a sound one.
Mr. STEAGALL. Do the Federal reserve banks apply that same
rule when the operation is reversed? Is not that out of harmony
with their rule requiring member banks to remit without charge and
thereby of course giving immediate credit to them? .
Mr. POLE. Their reserve account is not charged with those items
until the bank has had time to remit for them, so that it is properly
balanced in that respect. There is no advantage taken by the
Federal reserve bank.
Mr. STEAGALL. It is a technical matter, and I do not attempt to
say that I should sit in judgment, but I have always sympathized
with these little banks in that connection.
The CHAIRMAN. Will you yield to me?
Mr. STEAGALL. Yes.
The CHAIRMAN. Apropos of this question, my attention was called
the other day to a practice in the third Federal reserve district, which
seems rather arbitrary in this respect, where I understand that the
Federal reserve bank is insisting that all member banks shall give
them an order which permits them to charge against their account
any items at any time that they see fit so to charge.
Mr. STEAGALL. I am coming to that very situation.
The CHAIRMAN. I was wondering if you were going to cover it,
and that is the reason I raised that question.
Mr. STEAGALL. Of course, as I look at the matter, it seems to
me that it creates a situation more or less confused. Take a smalltown bank that sends a check to the Federal reserve bank. They
have got to keep books of some kind, but I do not see how they
can keep their books straight with the Federal reserve bank if the
payment of those checks is to be deferred indefinitely.
Mr. POLE. They are not deferred indefinitely. They are deferred
in accordance with a schedule which is laid down by the Federal
reserve banks, and when checks are sent to the Federal reserve bank
from a member bank, the account of the Federal reserve bank is
charged in a deferred account. When the date arrived for the
transfer from the deferred account to the reserve account, such
entry is made and the account closed. It is not complicated.
Mr. STEAGALL. Maybe that is a technical matter that is plain to
the people who understand the technicalities of banking, but I had
thought it was more or less confusing for a bank to have a check
placed in its Federal reserve bank and not get credit for it then.
I have understood that the Federal reserve bank fixes an arbitrary—
and by arbitrary I do not mean that is is unfair; I am not passing
on that—standard of dates for different distances as to which these
checks are deferred.
Mr. POLE. That is correct. Their plan is to ascertain the exact
time which it takes to reach any particular point and the remittance
returned to the bank. Pending that time, which is two days, three
days or four days, as the case may be, that item is in "float," so
that the Federal reserve bank does not take credit when it sends an
item to a bank, nor does it give credit when it receives an item from
a bank unless it is on'.the Federal reserve bank itself. In other
Words, what is known as the "float" is eliminated, and it is a system

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001

BRANCH, CHAIN, AND GROUP BANKING

101

What would you think of that? There could not be any injustice,
in that, could there?
Mr. POLE. I would have to think that over.
Mr. STEAGALL. Mr. Pole, I had my attention called several times
lately to this kind of a stivation, and this follows what Mr. McFadden
suggested just now. There was a little bank in my district that was
closed. There has been a great deal said about the merits of that
situation, but I have no personal knowledge of it and no desire to
attempt to inject an opinion into that matter. It was a State bank
that was a member of the Federal reserve system. I have been informed, on what seems to be reliable authority that that bank, with
$50,000 capital and $30,000 surplus, owed only $38,000 to the Federal
reserve bank. The bank is situated in a community that suffered
very severely last year through floods, which were absolutely unprecedented in that county and in that section of the country. This
bank had, of course, in the main, farm paper. It owed the Federal
reserve bank maturities due some time around December 1. Some
weeks prior to the maturity of the paper, the bank was closed.
A customer of that bank would give a check, or give checks, which
would be cashed by the payee through another bank in this county. •
The bank that cashed the check would send it to its correspondent,
and the correspondent send it to the Federal reserve bank, and the
Federal reserve bank would send it directly to the bank upon which
it. was drawn. This bank would charge the checks to the accounts
of their customers, and surrender the checks to the customers, and
remit by cashier's check to the Federal reserve bank. In the meantime the bank upon which the checks were drawn was closed. The
Federal reserve bank took the balances maintained by this little
bank and applied them to their notes, which it is claimed were not
due. The Federal reserve bank then charged the checks back to the
next bank, and that bank to the original bank that paid them, and
that bank charged them back to the payees. The payees have surrendered their checks; they have been marked paid.; they are in
the hands of the makers and those checks are charged to them in
their accounts tit the bank that. failed. So the payee of the check
has not. got any check, nor any credit from the bank; he is left in
mid-air.
There are several cases exactly like that. I have an editorial front
a paper published in that county, and, by the way, the, editor of that
paper is an unusual man in point of ability, and a very conservative
man. I think he could write editorials creditable to any paper in
the country. I have not that editorial with me; it is in my office,
but with the permission of the committee, I will insert it in these
hearings in connection with what. I am saying right now.
(The editorial referred to is as follows:)
[From the Samson Lodger]
HEADS I WIN, TAILS YOU LOSE

(Whatever you may think of the following thoughts, do not attribute them to
a sore editorial toe. We have not been tramkd upon beyond having some
money tied up in the banks under liquidation.—Editor.)
Some things have been brought home to us with much severity as a sequence
of the recent closing of the two old Samson banks. One of them is the apparent
fact that the laws or regulations governing banks treat the individual depositor
as having no rights whatever, while banks, especially the Federal reserve system,

102

BRANCH, CHAIN, AND GROUP BANKING

are given every consideration. In fact, consideration of certain incidents would
in our judgment lead to a conclusion that all laws had broken down and it was
a case of might making right.
Each bank affiliated with the Federal reserve system is compelled to keep
on deposit with that institution 7 per cent of its demand deposits and 3 per cent
of its time deposits. This is entirely separate and apart from collateral for any
loans the member banks may obtain from the reserve system. Of course, it is
understood that any loans granted a member bank must be secured by approximately 200 per cent face value of security.
The purpose of this reserve is supposed by laymen to be to take care of the
balances against the member bank which arise through the collection of checks
on it. Heavy interest penalties are imposed upon any bank failing to keep its
reserve up to the mark.
One would naturally- conclude that when a member bank is compelled to close
its doors, that items passing through the Federal reserve bank and which have
been charged by the failing bank to its depositors' accounts would be paid by the
Federal reserve bank from the member bank's reserve so far as the latter would
permit.
However, it doesn't work that way. If there is the slightest reason to believe
that a member bank is shaky, it is alleged that the Federal reserve bank at once
begins charging back checks on that shaky bank to the banks depositing them for
collection. It does not use the shaky bank's reserve fund, but seizes this fund as
additional protection for the loans it has made the shaky bank.
It is alleged that this has been done in the case of at least one bank for more
than a week before the tottering institution actually had to shut up. This course
meant that checks which had been drawn by Mr. A and sent to other places
might have come back, been charged to his account and a warrant drawn on the
bank's reserve fund, eight days before the bank closed up and yet the money
would not be transmitted to Mr. A's creditor.
It is well settled law, it is alleged, that in a case like this the creditor has a legal
claim against the closed bank and that he has no claim against Mr. A. But here
comes in another quirk. Mr. A wanted to transfer some funds from a bank in one
city to a bank in another city. He drew a check on a bank we will call X and deposited it with bank Y. Y sent it through the Federal reserve system for collection. Bank X received the check charged it to A's account and sent a remittance
order. Due to the belief that bank X was shaky, the Federal reserve charged the
check back to bank Y. Bank Y charged Mr. A's account with it with the amount
of the check.
Now you see A's predicament. He can't file a claim against bank X, because
X has deducted the check from his account. He can't file a claim against bank
Y, because that institution simply says it has not received the money. The way
A looks at it (and this is an actual case), he has simply been held up and robbed
of that much money with absolutely no redress from anyone.
(Next week we will take up another phase of "Heads I win, tails you lose,"
provided we are not in jail for this one.)

Mr. STEAGALL. Now, Mr. Pole, how does that come about? I am
reasonably sure that I have painted this picture correctly, and you
can understand how that sort of thing will beget irritation, resentment,
and an unhealthy state of mind toward the Federal reserve banks
and toward the whole banking world, and I do not think it ought to
happen. I think something ought to be done about it.
Mr. POLE. On this state of facts, it would seem that it might be a
little unfair to the customer. At the same time, I think those settlements are usually made in accordance with court decisions.
Mr. STEAGALL. Let me ask you this: Would the courts uphold the
right of the Federal reserve bank to send these checks directly to this
bank that had failed for collection and,when the banks have balances
there to take care of the checks, to take those balances and apply
them to the payment of paper not due, and then charge those checks
back finally to the payee and make him lose that money? I do not
think the courts would uphold that. They may have some kind of a
contract covering such cases. Is it not regarded as negligence on the

BRANCH, CHAIN, AND GROUP BANKING

103

part of the Federal Reserve bank to send checks directly back to the
bank on which they are drawn?
Mr. POLE. You are asking legal questions based upon certain sets
of fact, which I am not prepared to answer.
Mr. STEAGALL. Maybe I should not have asked you that.
Mr. WING°. May I interrupt there? There has been a group of
complaints based upon the illustration that the gentleman from
Alabama (Mr. Steagall) has used. I thinjc it would be helpful to
the committee if the comptroller would have his counsel insert
in the record at this point spy court decision that holds that after
the drawer of a check has received it back and it has been cancelled,
that then the Federal reserve bank can go back on the indorsers and
make them liable. Of course, you can not make the drawer liable.
I would like to find some decision of some court that will hold that
what the Federal reserve bank has done in at least one instance was
legal. Of course, it was not tested in court, because the bank was
afraid to. You take the average country bank; it has no more
idea of bucking the Federal reserve bank—why, some of them are
even afraid to talk. They will talk to you confidentially, but they
are "buffaloed"; they are scared to death, most of them, and when
one case was brought to my attention I asked them, "Why do you
not sue?" The attorney said to me,"I suggested that to the board
of directors and they abhorred the very idea of getting into litigation
with the Federal reserve bank." They are in a precarious condition
now and they are afraid to protest.
Your counsel is familiar with this type of cases, and I would
like to have any court decision, either State or Federal, that has
sustained the Federal reserve bank in a proposition of this kind.
Mr. AWALT. On the basis of the facts stated by Mr. Ste.agall?
Mr. Wriino. You know the case I am talking about, where a
check was cleared through and subsequently the bank failed and the
Federal reserve bank realized on the remittance. There has been
at least one case that I know of where the Federal reserve bank went
back on the indorsers of that check, and when the first indorser went
back to the drawer, he said, "My money has been taken away from
me," and, of course, you could not bring suit against him.
The CHAIRMAN. Have you further questions?
Mr. WINGO. And I would like to have the court decisions on that
Point.
Mr. Pow. I think I understand what you want.
Mr. STEAGALL. That is the case I have in mind, and there are
numbers of those cases in this particular bank that I mentioned,
Which have been called to my attention.
The Federal reserve banks perform an enormous free service in the collection
of cheeks and naturally do not assume any liability except for their own negligence
and their guaranty of prior indorsements. Each year they collect nearly
900,000,000 checks amounting to approximately $300,000,000,000; and it would
be an intolerable burden to require them to guarantee the collection of all these
Cheeks or to absorb any loss which might be incurred without any negligence on
their part. They, therefore, act only as agents in the collection of such checks
and expressly reserve the right to send them directly to the banks on which they
are drawn and to receive remittance drafts in payment. They also reserve the
right to charge back to the account of the sending bank the amount of any check
for which payment in actually and finally collected funds is not received. Their
right to do so has been upheld in the following cases:

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BRANCH, CHAIN, AND GROUP BANKLNG

Craven Chemical Co. v. Federal Reserve Bank of Richmond (C. C. A., 18 F.
(2d) 711).
Fergus County v. Federal Reserve Bank of Minneapolis (244 Pacific, 833).
Chicago, Milwaukee & St. Paul Railway Co. v. Federal Reserve Bank of San
Francisco (260 Pacific, 262).
Transcontinental Oil Co. v. Federal Reserve Bank of Minneapolis (214 N. W.
918).
The trouble with the present system is a fictitious ruling of law which is very
well established but which results in injustice. I refer to the rule, when a check
has been charged to the drawer's account, it is deemed to have been paid and the
drawer is released, even though the bank on which it is drawn fails without
actually paying anybody. This results in a loss to the innocent holder of the
check and results in the drawer of the check having his deposit in the failed
bank paid in full to the extent of such check, while other depositors have to
share the loss ratably.
Where a bank fails without remitting for checks drawn upon it the situation
necessarily results in a loss to some innocent party. In such a case the rule
of equity should apply, that, where one of two innocent parties must suffer, the
one who made the loss possible is the one to suffer. In a case such as this, the
drawer of the check made the loss possible by selecting that particular batik to
do business with; and he should suffer rather than the man who did not select
that bank as his depository. Certainly, neither the Federal reserve bank nor
any commercial bank through which the check was sent for collection should
have to suffer the loss, unless the loss resulted from its negligence.
Under modern conditions, it is a physical impossibility for all out-of-town
cheeks to be presented across the counter and collected in cash in accordance
with the old common law rules, and the present method of sending checks through
the mails to the banks on which they are drawn and accepting drafts on other
banks in payment is the only way that I know of in which the great volume of
checks now used in the United States can be collected.
For the further information of the committee, I desire to call your attention
to the fact that the practice of the Federal reserve banks in giving member
banks deferred credit for checks which can not be collected on the day they are
received by the Federal reserve banks has been upheld by the courts in the case
of Pascagoula National Bank v. Federal Reserve Bank of Atlanta, 3 Fed. (2d)
465, 269 U. S. 537, 11 Fed. (2d) 866, certiorari denied, 271 U. S. 685.

The CHAIRMAN. Mr. Seiberling.
Mr. WING°. Before you commence, may I ask Mr. Pole one question, because I have a letter from a bank to-day that I want to answer?
What is your definition, or what would be your definition under
your proposal of a trade area for a bank? I will tell you what I have
in mind. In our country, Memphis, Kansas City, and St. Louis all
contend that Oklahoma, Arkansas, and Texas are their trade area.
Evidently you do not concur in that broad area?
Mr. POLE. No.
Mr. WixGo. What would be your definition of a trade area? In
what trade area would Arkansas be included?
Mr. POLE. The trade areas in my report to Congress were left to
the determination of Congress, as to what it considered to be the
proper trade area, upon the basis of the natural flow of business to
any metropolitan center.
Mr. WINGo. That would make Arkansas in the trade area of both
St. Louis and Kansas City.
Mr. POLE. As to how far that should reach out is a question for
consideration.
Mr. WINGO. Suppose it were left to you?
The CHAIRMAN. The thought occurs to me; might not Little Rock
be considered the center of the trade area for Arkansas?
Mr. POLE. Little Rock would naturally be the center to which
trade flowed. There would in each trade area be a point to which it
would flow naturally, a metropolitan center.

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105

Mr. WINGO. Do you know that from some points in my district you
can go to Kansas City or St. Louis quicker than to Little Rock, and
most of our wholesale trading and large banking is done with those
two cities. Since we are putting in the highways, we have relieved
that to a great extent, but until we developed our highway system,
Kansas City and St. Louis were nearer to us than Little Rock for
business purposes. Little Rock is growing rapidly as a trade area,
but as a matter of fact it is not a metropolitan center. Take the
wholesale trade; take the purchasers of shoes, hats, clothing, and the
marketing of hogs and cattle and cotton and things like that—they
do not go to Little Rock from my district.
Mr. POLE. Of course, Little Rock has a very definite trade area.
Mr. WINGO. Yes; Little Rock, a splendid city, has a very definite
trade area, and so has De Queen, and each town has a definite trade
area.
The CHAIRMAN. Mr. Pole, in view of the importance of this as an
integral part of your recommendation, I believe the committee would
appreciate it if you would briefly elucidate your thoughts as regards
trade areas. If you will do that I will ask that it be put into the
record at this point.
Mr. WINGO. The reason I asked you the question is that I have a
letter from a banker who states: "I am interested in knowing what
trade area my city would be put in. Would it be put in the Kansas
City or St. Louis trade area, and would my bank be taken over by a
bank in Kansas City or St. Louis?" He is figuring on the future.
I have written him what I thought was going to happen to him.
Mr. POLE. That is a very complex question, but I will be glad to
submit something to the committee on it.
(The memorandum on the subject submitted by the comptroller
is as follows:)
FURTHER DISCUSSION OF THE TERM "TRADE AREA'
ID the written statement which I read before the committee I devoted five
Paragraphs to the discussion of the question of the trade area to which I had
previously referred in my annual report to Congress. Without repeating the
Previous discussion I may say that it covered the following points:
(1) The trade area of a given city is that geographical territory which embraces
its flow of trade.
(2) Every city, no matter how small, has a trade area.
(3) A trade area sufficient to support a sound system of branch banking by it
given hank must be of sufficient area or of sufficient economic development to
Permit of the acquisition of a diversified banking business.
(4) No legislative formula has been prepared which would in itself delimit all
of such trade areas in the United States.
(5) A suggestion was made that Congress might find it advisable in determining
the actual physical !Units of the trade areas to follow a procedure similar to that
laid down in the Federal reserve act for the delitnitation of the Federal reserve
districts.
I have therefore in my previous statement to the committee covered this subject so far as the general principles are concerned. It is recognized that their
detailed application may present a multitude of practical questions many of which
we can not now foresee; that is to say, questions of boundary limits and adjustments of the boundary lines between trade areas. The fundamental principle,
however, seems to Inc to be absolutely sound that city banks of sufficient ability
be permitted in a more convenient manner than is now possible to serve the people
in the trade area tributary to the city in which the bank is situated. Mr. Wingo
has raised the question of the overlapping of trade areas; that is to say, a small city
may be situated within more than one trade area. It seems to me that this does
not present a serious difficulty. It would simply mean that in such a city there

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BRANCH, CHAIN, AND GROUP BANKING

might be branches of banks with head offices in different trade areas. This
might prove to be an advantage to such a city through increased banking competition.
As to the size of the parent bank, under such a branch banking system as I have
suggested, it seems advisable to consider the question of a minimum capitalization
as a condition precedent to the establishment of branches in the rural districts in
the trade area. In this respect discretion should be allowed the Comptroller of
the Currency to require a capitalization higher than the minimum, as he now
does with unit banks. Some trade areas are naturally more important and more
highly developed financially than others. A bank of one million capitalization
in some trade areas might be considered a large enough bank to support a branch
system, whereas in other trade areas it might be small by comparison. To support a system of branches within a trade area the bank should be of undoubted
strength and prestige in order to discharge the responsibilities which such an
undertaking entails. This situation would be met if Congress required a minimum capitalization for a branch banking institution of $1,000,000. Such a provision would automatically determine, to some extent, the size of the trade area
for branch banking purposes. They would have to be large enough, at least, to
support a bank of that size.
In the exercise of his discretionary power to require a greater capital than the
minimum, the situation presented to the comptroller would be relatively the same
as it is now. Two hundred thousand dollars is the minimum capital for national
banks in large cities, but the actual capital required in some important cities is in
excess of that amount. Trade areas would vary in their financial importance in
the same manner.
Mr. Wingo, in referring to the city of Little Rock in his State, has brought out
two very important considerations bearing upon he question of the extent of
trade areas. One was that by reason of the lack of arterial highways the metropolitan centers of Kansas City and St. Louis were more available to many portions of Arkansas than Little Rock, from the standpoint of the flow of trade, but
that under a system of modern highways leading from Little Rock that city
would become a metropolitan center. This is a clear illustration that what
constitutes a given trade area is a question of fact and while it is simple enough
to define the term "trade area" by statute, it is an entirely different thing to
make a practical application of that definition. It took only a few words to
define the principle upon which the Federal reserve districts were laid out, but
it took many months of careful study and investigation by executive officials to
lay out those districts.
The following is the language from the Federal reserve act:
"The districts shall be apportioned with due regard to the convenience and
customary course of business and shall not necessarily be coterminous with any
State or States. The districts thus created may be readjusted and new districts
may from time to time be created by the Federal Reserve Board, not to exceed
12 in all. Such districts shall be known as Fedreal reserve districts and may be
designated by number."
We may, for example, say that a trade area is that geographical area which
embraces the natural flow of trade from an outlying geographical territory to
and from a metropolitan center. The term "trade," it seems to me, as Mr.
Wingo has already suggested, must embrace the wholesale as well as the retail
purchase and distribution of goods and commodities. That is to say, the trade
area must have a rather definite economic autonomy.
Having, however, arrived at this definition it seems to me that Congress could
not go much further by way of legislative enactment lest too many conditions in
the law create a system of trade areas which would lack flexibility. Some
executive agency or some agency created by Congress should actually lay out the
trade areas.
Again it seems to me that it would not b6 wise to attempt to use the population
figures as a basis for determining the principle of the selection of the metropolitan
centers of trade areas. The size of a city may be no indication of its relative
economic importance to the surrounding community. Bridgeport, Conn., with
a population of 160,000 could not be considered an independent metropolitan
center but is tributary to New York City arid is within the New York City
trade area, whereas Shreveport, La., with a population of 81,300 might be found
to be the center of a trade area of the scope above discussed.
In the discussion of the question' of the term "trade area" I have several times
used the expression that in my opinion the trade area should not be in any case
greater or more extensive than the present Federal reserve districts. In saying

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107

this I was attempting to lay down a general rule, the Federal reserve districts
being the largest possible regional economic areas which we have established by
law. I have no doubt it is a fact that there are many trade areas of less extent
than the Federal reserve districts. That is to say, metropolitan centers with a
definite area of wholesale and retail trade in the surrounding country but within
a Federal reserve district. I realize, however, that there are metropolitan
centers situated so near Federal reserve district lines that the surrounding trade
area embraces territory in more than one Federal reserve district. In such a
case the trade area rather than the Federal reserve district lines should govern.
Kansas City is such an example.
Again it seems to me it must be recognized that trade areas and the development of metropolitan centers within them have come about without reference to
State lines. Very often the shape of a State may be a great influence in this
connection. For example, the State of Tennessee is long and narrow and its
three principal cities, namely, Memphis, Nashville, and Chattanooga, all have
trade areas extending into other States. The trade area of Spokane, Wash.,
extends into Idaho and Montana; of Omaha, Nebr., into Iowa and Missouri; of
Cincinnati, Ohio, into Kentucky; of Los Angeles into Arizona and Nevada; of
Pittsburgh into Ohio and West Virginia.
I wish again to emphasize the consideration that in mentioning the term 'trade
area" I am not presenting a new idea, but am suggesting that Congress avail
itself of an existing condition. The trade areas are already here. They have
grown up through years of development but are being more clearly defined under
modern conditions of communication and transportation. Metropolitan banking as it exists to-day reckons with the trade area. Rural banks in a trade area
are correspondents of the large city banks in the metropolitan center of that area.
Residents in the outlying rural communities, both business men and farmers,
transact business with such metropolitan banks. Many such inhabitants in the
outlying sections of the trade area carry their large deposit accounts with the
metropolitan bank and maintain only small balances with the small local bank.
The prosperous farmer or country merchant or manufacturer, even under present
conditions, deals directly with a metropolitan bank in his trade area with respect
to his most important financial transactions. In many cases the loaning limit of
the local bank is too small to meet his requirements, and recourse must be had to
the stronger city banks. This is particularly true as to corporations dealing in
farm commodities, lumber, mining, and the like.
Again, when an individual or a corporation in the rural districts wishes to
Purchase securities for investment recourse is had to the securities department of
the large city bank rather than to the local bank. Also, if he wishes to establish
a trust fund of any kind or to leave his estate in trust for his heirs lie goes to the
trust department of the metropolitan bank of the trade area and appoints that
bank as his trustee or executor rather than the small local bank in his particular
conununity. These two great fields of banking, namely, investment securities
and fiduciary business, are under our present banking conditions carried on almost
exclusively by the large banks in the metropolitan centers, in which respect they
serve the entire trade area. The local country bank is not in a position to offer
to its community adequate facilities as to these two types of business. Similar
examples might be mentioned as to other departments of large city banks which
also serve the entire trade area, such as the foreign department dealing in foreign
exchange and information about foreign business. It is apparent, therefore, that
the existing banking conditions in trade areas, even where no branch banking
and no group banking is in operation, are causing the cream of the banking business to go from all points in the trade area to the central metropolitan banks,
leaving the small local bank with the smaller, less profitable, and more restricted
type of business. The small bank is not acquiring a sound diversification of
business even in its own small trade area. Here, in my opinion, is the real cause
for the failure of small banks in the rural communities, and every other local,
immediate, proximate cause which may be assigned for a given failure must be
simply regarded as a secondary cause.
It seems quite clear, therefore, that there is no hostility among the people in
the rural communities toward the large city banks in the metropolitan centers
of their respective trade areas. On the contrary, the average citizen seems,
regardless of the question of the maintenance of a local independent bank, to
Prefer to do his most responsible banking business with a distant bank of the
metropolitan type rather than with the more conveniently situated local community bank. If all of this banking business which now goes from the outlying
districts of the trade area to the 'metropolitan centers could be forced back into

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BRANCH, CHAIN, AND GROUP BANKING

the local independent country banks the country banker might look to the future
with complacency. But that is an economic impossibility. It is the local community itself which is expressing a preference for the type of banking which the
large city bank can give.
Under the branch banking plan which I have suggested the same metropolitan
banks would take their services to these communities through a system of branches
and would afford to the entire community adequate banking facilities. In other
words the big loans as well as the small loans and the big deposits as well as the
little deposits would be made directly in the local rural community. Such a
community would also have immediate access to the securities department of the
large bank and to its trust and foreign departments in all of their ramifications.
I have therefore attempted to lay before your committee a suggestion which
would fit into the present economic trend and which would at the same time
preserve the outlying communities in the trade areas from the calamitous effect
of local bank failures.
The question has been asked by several members of this committee as to what
recommendations for legislation I would make with respect', to restrictions upon
the consolidation of branch banking systems in order to avoid the danger of
monopolistic control of banking within a trade area. In answer to this question
I wish to call attention to the statement l.made to the committee that the natural
economic development would ordinarily continue to create a competitive banking
situation within a given trade area. A banking institution must have the support
of local public opinion in order to succeed and it would seem natural that under
our system of issuing bank charters there would always spring up within a trade
area new banking institutions if there be enough business to support more than
one bank, such as certainly would be the case in any trade area large enough to
give a diversity of business sufficient to support the type of branch banking I
have suggested.
We are of course considering a possible future condition and the discussion of
the question of undue concentration of banking resources in a given trade area
under the plan of branch banking which I have suggested is necessarily academic.
However, the theoretical possibility of undue concentration must be admitted.
In the event of such branch banking legislation, how far Congress should go or
could go in attempting to guard against the possibility of a monopolistic control
of banking resources within the trade area I am not prepared definitely to recommend. I shall however, attempt to discuss several aspects of this situation.
The authority which Congress has already exercised over the consolidation of a
national bank with another national bank or a national bank with a State bank
under national charter would cover only one phase of the question. If the
Comptroller of the Currency denied the application of such banks to consolidate
under national charter upon the grounds of public policy they could forthwith
consolidate or merge under State charter and Congress would thereby be deprived
of all supervision and control over the institution so far as the office of the Comptroller of the Currency is concerned. If the State law gave to State banks branch
banking privileges in the trade area equivalent to those granted by Congress to
the national banks the concentration of banking resources to an undue extent,
if such a thing did take place, could be had under the State law if the State as a
matter of policy permitted it. If the State bank were a member of the Federal
reserve system and if it be true that Congress has the power to impose on State
member banks of the Federal reserve system the same restrictions as to consolidations or mergers which may be imposed upon national banks—and I am
not prepared to offer an opinion on this legal question but leave that to the
Federal reserve authorities—there would still remain the possibility of the consolidation of branch systems outside of the Federal reserve system. In other
words, would not such legislation have a tendency to drive the branch banking
institutions outside of the Federal reserve system where Congress would have no
control over them?
This brings up another important question and that is the desirability of
establishing a system of branch banks which would operate solely under the
national bank law and which could not escape Federal jurisdiction and the effect
of a Federal policy by switching over to State charters. What I have in mind is
that if the trade areas were based solely upon economic considerations—such
as was done in laying out the Federal reserve districts—and State lines disregarded, would not that be one way of holding branch banking institutions under
Federal authority and subject to Pederal control. They would remain National
banks in order to gain the benefits of operating across State lines. There may,
however, be other means of meeting this situation which do not occur to me.

L

BRANCH, CHAIN, AND GROUP BANKING

109

Under any reasonable system, however, it may be found that there will be trade
areas entirely within the boundaries of a single State and it is not clear to me
how Congress could control consolidations in those areas where the State law had
given equal or greater branch banking powers to the State banks. In other
words, how could Congress prevent a nonmember State branch banking institution.from consolidating with another nonmember State branch banking institution under the authority of the State law?
There have already been mentioned at these hearings three other means by
Which it might be possible for banking institutions to amalgamate their interests
or otherwise attempt to eliminate competition within a trade area.
(1) The purchase of assets and the assumption of liabilities by one bank of
another;
(2) The purchase of the control through acquisition of stock by a holding
corporation; and
(3) An agreement between banks not to compete within the trade area.
I shall take these up in order. In the matter of the purchase of the assets of
a national bank or a State bank by another national bank or the purchase of
the assets of a national bank by a State bank the Comptroller of the Currency
has nothing to say. It is a matter of contract between the institutions over
Which no power of control has been conferred upon the comptroller. Under
the present state of the law the comptroller would have no way of preventing
one branch banking institution from purchasing the assets and assuming the
liabilities of anoth3r such institution within the same trade area. That control could be given by Congress and that is a matter to which I invite your
consideration.
In the matter of the acquisition of control by holding companies a much more
difficult situation is presented. It is obvious that in the absence of restrictions
to the contrary it might be within the realm of possibility for a holding coinPany to acquire stock control over more than one branch banking system within
the same trade area. From a practical standpoint there would, of course, be
Many factors to be considered, such as whether it would be good business for
the holding company to attempt such control; whether the local branch system
Would be willing to enter into such an arrangement and other such questions,
growing out of the local .situation. In other words, the local conditions may
not favor such a purchase by an outside holding company. Nevertheless, the
Possibility of such control must be admitted.
This is one of the questions before this committee. It is not a situation created
by any position I have taken. It is not a future condition contingent upon the
Possible enactment of branch banking legislation. It is a present condition and
Is involved in the present group banking movement. Your conunittee will no
doubt have before it spokesmen from the leading group bank holding companies
and will obtain from them first-hand information and views which naturally I
am not in a position to give. I am not now prepared to make recommendations
to Cougress with respect to the ownership of national-bank stock or State member
bank stock by holding companies. When the committee has gotten along further
in these hearings and there has been developed more complete information with
respect to group banking I 'shall be glad to offer my further services to the
committee.
As to the third question, that of a gentlemen's agreement to eliminate competition within the trade area, such as has been mentioned by the gentleman from
South Carolina (Mr. Stevenson), I should not anticipate a general resort to any
such plan. The natural desire to build up a banking business within the trade
area would have the strongest tendency to lead all of the branch banking institutions to compete for business all over the trade area. It must also be borne in
Mind that under any such national banking plan of branches.within a trade area
the Comptroler of the Currency would have the discretionary power to permit
the establishment of a branch, and I can not think that he would cooperate
With any bank in eliminating competition. But assuming the possibility of such
a scheme, it might be advisable to consider the application of the antitrust
laws in the premises. On this point, however,I am not prepared to make recomMendations. The subject is new and largely hypothetical in its application to
the plan I have suggested. It might be time enough to deal with such a situation
after it may have arisen in any one particular trade area. It would always be
Within the power of Congress to deal with that situation.

The CHAIRMAN. Now, Mr. Seiberling.
100136-30—vm 1 PT 2-2

BRANCH, CHAIN, AND GROUP BANKING

110

Mr. SEIBERLING. Mr. Pole, in view of the fact that section 8 of
the Constitution of the United States provides that the Congress
shall have power—
To coin money, regulate the value thereof, and of foreign coin, and fix the
standard of weights and measures:
To provide for the punishment of counterfeiting the securities and current
coin of the United States.

And further, in section 10, that—
No State shall * * * coin money; emit bills of credit; make anything but
gold and silver coin a tender in payment of debts.

In view of this, do you think it was intended by the founders of our
Government that the National Government should have an absolute
monopoly in so far as providing a free circulating medium of the
money system of the country is concerned?
Mr. POLE. I understand the courts have so held.
Mr. SEIBERLING. Now, the importance of banking and its relation
to the happiness and contentment of the people in general is of greater
importance, is it not, than that of any other business of the country?
Mr. POLE. It is extremely important.
Mr. SEIBERLING. As a matter of fact, you can not buy milk for
your babies unless you have money or credit, can you?
Mr. POLE. Obviously.
Mr. SEIBERLING. Can you give me the total deposits in the banks
of the country at the present time?
Mr. POLE. May I set that out in the record?
Mr. SEIBERLING. Yes.
Mr. POLE. It is about $58,000,000,000. I will correct that for the
record.
Mr. SEIBERLING. Can you tell me what part of these deposits are
savings deposits and what part postal savings deposits and what
part commercial deposits?
Mr. POLE. May I insert those in the record also?
MT. SEIBERLING. Yes.
(The information referred to is incorporated below:)
Due to banks (demand balances)
$3,629, 197
Certified and cashiers' checks (including dividend checks), and cash
letters of credit and travelers' checks outstanding
837, 430
Demand deposits (other than bank and United States):
Individual deposits subject to check
$21, 427, 747
State, county, and municipal deposits
1, 960, 543
Certificates of deposit (other than for money
borrowed)
412, 593
Other demand deposits
549,281
Total
24, 350, 164
Time deposits (including postal savings):
State, county, and municipal deposits
418, 383
Deposits of other banks
•
133, 085
Other time deposits—
Deposits evidenced by savings pass books__ _ 24, 029, 247
Certificates of deposit (other than for money
borrowed)
3, 169,073
Time deposits, open accounts; Christmas savings accounts, etc
919, 877
Postal savings deposits
117, 952
Total

28, 787,617

BRANCH, CHAIN, AND GROUP BANKING
United States deposits (exclusive of postal savings)
Deposits not classified
Total deposits

111
286, 112
20, 121
57,910,641

Mr. SEIBERLING. Now,in a general way, to what class of people do
these savings deposits in the banks belong?
Mr. POLE. Usually to the less affluent members of society.
Mr. SEIBERLING. They are the clerks, the workingmen, and the
farmers who have put their money in the banks, saved it for a future
emergency if it should arise?
Mr. POLE. That is right.
Mr. SEIBERLING. Now, the banking system in reality provides a
great reservoir in which those who have surplus funds deposit them
for a rate of interest which the bank is willing to pay, which gives the
bank an opportunity to lend these funds to those who have insufficient
funds for a rate of interest which the bank is willing to take, is not
that right?
Mr. POLE. Yes; subject to the limit of State law.
Mr. SEIBERLING. The banking system, therefore, in a general way
fixes the rate of interest to be paid on deposits and also, subject to
the usury laws of the various States, fixes the rate which the borrower
has to pay?
Mr. POLE. That is true, except that the interest which may be
paid on time deposits is frequently fixed by statute.
Mr. SEIBERLING. In some States.
Mr. POLE. Yes.
Mr. SEIBERLING. There are States where the banks pay no interest
on deposits at all?
Mr. POLE. I know of none.
Mr. SEIBERLING. I think there are still such banks as that.
Mr. POLE. There may be banks, but they are not all the banks of a
State.
Mr. SEIBERLING. I know, but some banks.
Mr. POLE. Possibly some banks which do not take savings.
Mr. SEIBERLING. That depends on competition, does it not, in
their localities?
Mr. POLE. Yes, there might be some few banks.
Mr. SEIBERLING. If there is only one bank in a locality, it can
decline to pay any interest to the depositors, can it not?
Mr. POLE. They would have the right to do so.
Mr. SEIBERLING. Do you look upon deposits as the raw material
of the banking system?
Mr. POLE. Yes, to an extent, if you put it that way; but the
deposits are not the property of the bank.
Mr. SEIBERLING. Is there any other business that you know of
Where the managers of the business subject to local competition pay
the prices they wish to pay for the raw material, and sell the use of
it at the price they wish to charge to the one that wants it?
Mr. POLE. Banks receive deposits and loan them under highly
competitive conditions.
Mr. SEIBERLING. I want to go into the functions which the Govermnent performs in connection with national banks. Will you tell
me some of those functions?
I have some of them here, if you want me to assist you?

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BRANCH, CHAIN, AND GROI7P BANKING

Mr. POLE. Yes, thank you.
Mr. SEIBERLING. Well, the granting of charters is one, is it not?
Mr. POLE. Yes.
Mr. SEIBERLING. And the coining and printing of money is another?
Mr. POLE. Yes.
NI r. SEIBERLING. And that is done without charge, I understand.
Mr. POLE. Yes.
Mr. SEIBERLING. Who pays for the examination of banks?
Mr. POLE. The banks themselves.
Mr. SEIBERLING. Now, as to the passing of necessary laws for the
protection of the banking system, that, of course, is a matter that
the Government has to do. The Government has also provided a
Federal reserve system for the general benefit of all member banks,
whether national or State, has it not?
Mr. POLE. Yes.
Mr. SEIBERLING. And it has to maintain the gold standard so as
to secure the stability of money for the benefit of the banks, does
it not?
Mr. POLE. That is a governmental function. _
NI r. SEIBERLING. In view of all these facts, will you say that banks
can properly be classified as quasi-public corporations?
\Ir. POLE. I Wiftlid.
SEIBERLING. Are they not more so than any other quasiblic corporations that you know anything about?
Mr. POLE. In my opinion; yes.
Mr. SEIBERLING. Then proper facilities for banking are of more
importance to the people as a whole than transportation of persons
and freight or the proper means of communication—for instance,
railroads, express companies, and telegraph and telephone companies?
Mr. POLE. Banks are a most important factor in our economic life.
Mr. SEIBERLING: And, while banks are privately owned the same
as other public utilities, is not the nature of their business and the
relationship of their business to the Government such that they owe
a greater duty to the people at large in the matter of service than any
class of corporations which have been mentioned, and is not this
especially true since the people themselves, by their deposits, to a
large extent furnish the money which is reloaned by the banks to
borrowers?
Mr. POLE. That is correct.
Mr. SEIBERLING. Now, the proper and regular supply of money
at reasonable rates is necessary to keep industry going and labor
employed, and to purchase the products of the farm?.
Mr. POLE. Yes.
Mr. SEIBERLING. I want to ask you a question which is somewhat
academic, but I am interested in knowing what your judgment is
about it, and that is, what percentage of the bank's objective, in
your judgment, should be service to the public and what percentage
should be profit to stockholders?
Mr. POLE. That is academic, indeed.
Mr. SEIBERLING. Should it all be for the stockholders?
Mr. POLE. No, I think that the one is necessary to the other, that
the bank which gives no service probably makes very little profit for
the stockholders, because its business is built up on service in large
part. The profit to stockholders is so important that if the return

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were diminished to any very extraordinary extent, the chances are
that the bank stocks would not sell, people would not invest money
in bank stocks. In order to build a bank up to a point where it
becomes profitable and is able to make a return on its shares it is
necessary that that bank extend its facilities and offer every banking
service to the public.
Mr. SEIBERLING. I want to make it perfectly plain that I am a
director in the largest bank in my city, and have been for many years,
and that I am interested in the proper return for capital.
Mr. POLE. Naturally.
Mr. SEIBERLING. And I am here at all times to protect that, but I
would like to get your judgment as to what percentage the objective
of a banker should be with respect to service to his community, and
what the percentage should be with respect to profit gained for
stockholders.
Mr. POLE. Each is equally important.
Mr. SEIBERLING. Now, as to the attitude of banks and bankers toward a community, they can either develop a community or can
greatly restrict it by their policy, can they not?
Mr. POLE. It is to their interest to develop the community.
Mr. SEIBERLING. Do you think it is possible for this committee or
Congress to legislate properly upon the banking system unless it has
the whole picture?
Mr. POLE. I think that it is very necessary.
Mr. SEIBERLING. You have painted a very disastrous picture as to
the small banks in the South, Southwest, and Northwest, but you
omitted to paint the rosy picture in connection with the banking
business in the metropolitan centers, especially in the East, and in
order that we may have the entire picture, I desire to insert in the
record portions of a statement which I have here, but it will be in the
form of testimony.
Do you know who Ralph B. Leonard & Co. are, of New York?
Mr. POLE. I understand they are dealers in bank stocks.
Mr. FENN. May I ask what that paper is that Mr. Seiberling has?
Mr. SEIBERLING.. I am going to state what it is.
Ralph R. Leonard & Co. are very responsible brokers, are they
not, in bank stocks?
POLE. I do not know as to their standing in New York.
M r. SEIBERLING. You have heard of them, have you?
Mr. POLE. Yes.
Mr. SEIBERLING. They have a good reputation?
Mr. POLE. As far as I know.
Mr. SEIBERLING. I want to put into your hands here a statement
put out by Ralph R. Leonard & Co. dated in January, 1930, called,
"A 5-year analysis of New York City bank stocks."
Is it not a fact that this statement shows that the 25 national
hanks in New York ('iv, in the last five years prior to December
31, 1929, paid dividends to stocksholder at an average rate for all
banks of 70 per cent for the period upon their stock?
Mr. GOLDSBOROUGH. On the par value?
Mr. SEIBERLING. Yes.
Mr. POLE. I am not informed.
Mr. SEIBERLING. I will show it to you right here. This is the
average for all of the 25 national banks.

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Mr. GoonwiN. For a 5-year period?
Mr. SEIBERLING. Yes.
Mr. POLE. According to this statement, those figures seem to be
correct.
Mr. STEAGALL. May I interrupt?
Mr. SEIBERLING. No; I do not want an interruption, because I
have listened patiently to everybody.
Mr. STEAGALL. I just wanted to ask what date that was.
Mr. SEIBERLING. I gave the date; January, 1930.
Mr. STEAGALL. That covers last year?
Mr. SEIBERLING. Yes.
Mr. STEAGALL. That is what I wanted to get. They are very
interesting figures, and I wanted to get them in my mind.
Mr. POLE. The percentage paid in dividends—
Mr. SEIBERLING. The statement gives you the average, at the
bottom of it.
Mr. POLE. Average, 70 per cent.
Mr. SEIBERLING. That is for the 5-year period. If you want to get
the average paid per year, you divide that average by five.
Mr. POLE. Where does it say it is for the 5-year period?
Mr. SEIBERLING. On the front.
Mr. POLE. I see. Of course, I am not familiar with this.
Mr. SEIBERLING. You have your detailed earnings there for five
years.
Mr. POLE. Yes.
Mr. SEIBERLING. But before that you have the average dividend
for the period.
Mr. POLE. I see.
Mr. SEIBERLING. Now during the year 1929—and I am speaking
now of just the year 1929—these 25 national banks increased their
surplus and undivided profits account to the extent of $139,005,500,
in addition to an average dividend of $16 per share on the capital stock.
That is in the column marked "Average."
Mr. POLE. Yes, the average current rate of dividend was $16.
Mr. SEIBERLING. That does not take into account any stock
dividends declared during the entire period of five years and charged
against surplus acconut. There were some, but I can not pick out
the banks now. That does not take that into account.
Mr. POLE. In a good many instances.
Mr. SIEBERLING. Now, during the same five years ended December 31, 1929, the 34 trust companies paid an average dividend for the
period of 61 per cent of the par value of their capital stock, did they
not?
Mr. POLE. According to this statement; yes.
Mr. SEIBERLING. During the year 1929—and I am speaking now
only of the year 1929—the same trust companies increased their
surplus and undivided profit account to the extent of $587,966,300,
did they not?
Mr. POLE. I do not know exactly where you get that, but I assume
that is correct.
Mr. SEIBERLING. You have in the one column the surplus and
undivided profits of the banks for December 31, 1928, and also in the
other column for December 31, 1929, and I have had these figures
added up on the adding machine.

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MT. POLE. HOW much did you say?
Mr. SEIBERLING. They have increased their surplus and undivided
profit account to the extent of $587,966,300.
Mr. POLE. I do not know that I understand this statement.
Mr. SEIBERLING. It would take you too long to add those columns.
Mr. POLE. Well, I was going by the averages, that the difference
between the surplus and undivided profits on December 31, 1928,
and those for 1929 was about $10,000,000, and that, multiplied by
34—
MT. SIEBERLING. Would be $340,000,000.
Mr. POLE. $340,000,000.
Mr. SEIBERLING. That is the computation I made in the beginning,
but after adding them up on the adding machine, my secretary tells
rile that the amount arrived at is the amount I reached.
Mr. POLE. That should be more nearly correct, of course.
Mr. SEIBERLING. This increase in surplus and undivided profits
was in addition to the average dividends for the year 1929 of $13.40
per share on the par value of the trust company stock, and this does
not include or take into account any stock dividends during the
Period charged against the surplus account, does it?
Mr. POLE. I accept your statement as to that.
Mr. SEIBERLING. Now, taking that statement, can you give me
the capital stock of the National City Bank of New York City, and
the par value of its shares?
Mr. POLE. $110,000,000 capital; $20 par.
Mr. SEIBERLING. YOU divide $110,000,000 capital by $20 par,
and you get 5,500,000 shares, do you not?
Mr. POLE. Yes.
Mr. SEIBERLING. Can you tell me what the highest price was that
that stock sold for on the stock exchange during the peak of prices?
Mr. POLE. My recollection is something over $500.
Mr. SEIBERLING. It was $575 a share, was it not?
Mr. POLE. Yes.
Mr. SEIBERLING. Now, if you multiply the number of shares by
$575, you get a selling price of that stock—aggregate selling price—of
$3,162,500,000.
Mr. POLE. Yes.
Mr. SEIBERLING. Now, let us take the statement of the National
City Bank of 1929. Take its capital stock of $110,000,000 and surplus of $129,650,200 and add to that the deposits, $1,649,544,300.
You get an aggregate total of capital, surplus, and undivided profits
and all deposits of $1,889,194,500, so that it appears that, while you
Were enforcing the double liability against stockholders in many
banks of other sections of the country, the capital stock of this large
metropolitan bank was selling at an aggregate price equal to almost
twice the aggregate amount of its capital, surplus, and deposits.
That is correct, is it not?
Mr. POLE. Correct.
Mr. SEIBERLING. For the moment the country forgot the deposits
Were liabilities of the bank instead of assets, apparently?
Mr. POLE. I did not get that.
Mr. SEIBERLING. For the moment the country must have forgotten that the deposits of banks were liabilities instead of assets?
Mr. POLE. I think that is the case.

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Mr. FORT. I wonder if Mr. Seiberling will permit just one statement
in the record at this point?
Mr. SEIBERLING. Yes.
Mr. FORT. I think he wants properly to convey the picture. In the
market price of the National City Bank stock is included in the market
value placed on the National City Bank's companies?
Mr. SEIBERLING. I am going to get to that. These earnings are
also
Mr. FORT. The earnings of the two
Mr. SEIBERLING. I will get to that a little later. I desire to
take up now the individual cases of only three banks—the Chase
National Bank, the City National Bank, and the Guaranty Trust
Co.
The Chase National Bank has a capital stock, at par, of $20, I
believe.
Mr. POLE. According to this statement; yes.
Mr. SEIBERLING. And it had a capital stock on December 31,
1928, of $60,000,000; on December 31, 1929, of $105,000,000
Mr. POLE. According to this statement.
Mr. SEIBERLING. And it had a surplus and undivided profits
as of December 31, 1928, of $77,498,400, and, on December 31, 1929,
of $136,364,100.
Mr. POLE. That is in accordance with the statement.
Mr. SEIBERLING. I guess there are 77 cents to be added on there.
Mr. POLE. Yes.
Mr. SEIBERLING. Now, the deposits of the Chase National Bank
as of December 31, 1928, were $1,126,781,600, and the deposits as
of December 31, 1929, were $1,248,219,400.
They paid, during that year, 1929, $4 dividends. I say the
dividend rate is fixed at $4. They are paid in quarterly periods,
and I assume that is $4 a year.
Mr. POLE. Yes, sir.
Mr. SEIBERLING. YOU will note that the deposits of- the bank
increased only about $126,000,000 and the earnings of the bank,
according to the surplus and undivided profits, increased in the
neighborhood of $60,000,000. Now, how do you account for such
earnings as that, when the increase in deposits was so small?
Mr. POLE. I would not attempt to account for it, Mr. Seiberling.
Mr. WING°. Possibly through consolidations, Mr. Seiberling.
Mr. SEIBERLING. This statement figures the average on
Mr. FORT. And the call money.
Mr. SEIBERLING. I will get to the call money pretty soon. This is
figured on the average for the banks, whether consolidated or not.
Mr. WING°. 1 think a consolidation might account for that change.
Mr. SEIBERLING. Some bank had to make the money, you know.
They consolidated their deposits as well as their earnings. Now,
you speak of the National City Bank. The capital stock is $20, par?
Mr. POLE. Yes, sir.
Mr. SEIBERLING. Their capital stock as of December 31, 1928
was $90,000,000 and $110,000,000 December 31, 1929. The surplus
and undivided profits as of December 31, 1928, were $76,992,900,
and on December 31, 1929, were $129,650,200. Its deposits, December 31, 1928, were $1,349,024,400 and on December 31, 1929,

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$1,649,554,300. They also paid $4, a share on their 5,500,000 shares
of capital stock, which means a dividend of $22,000,000.
They increased their deposits $300,000,000, but increased their
surplus and undivided profits-29 plus 24,000,000 would be—
$53,000,000 for the year. You can not account for their earnings
by the small increase of deposits, can you?
Mr. POLE. I would not attempt to do that except to say that in
both of the instances which you mentioned, are included the earnings
of their affiliated corporations.
Mr. SEIBERLING. Whet is that?
Mr. POLE. Included in those earnings are the earnings of the
affiliated corporations.
MT. SEIBERLING. Yes.
Mr. POLE. And, of course, we have no means of knowing what they
are. They are certainly very material.
Mr. SEIBERLING. Well, now, we take the Guaranty Trust, that has
a pm. value of its stock of $100.
Mr. POLE. Yes: according to this statement.
1 r. SEIBERLING. And they had a capital of $40,000,000 at the end
uf 1928 and $90,000,000 at the end of 1929. Their surplus and
undivided profits, at the end of 1928, were $63,307,000. At the end
of 1929 they were $202,636,000.
Their deposits at the end of 1928 were $842,358,200: at the end of
1929 wore $1,309,289,600. They increased their deposits very much
More than the other banks did proportionately, but their increase in
surplus and undivided profits was approximately $140,000,000 for the
Year. Is not that correct?
Mr. POLE. That seems to be correct.
Mr. SEIBERLING. What would you say as to whether or not the
earnings of the banks in other Federal reserve centers of the country
Were comparable with the earnings shown by the New York banks?
Mr. POLE. Included in the earnings of the Guaranty Trust Co.
are also the earnings, I believe, of the Guaranty Co.
Mr. SEIBERLING. This securities company?
Mr. POLE. Yes.
Mr. SEIBERLING. What do you think of the wisdom of having large
banking corporations owning securities companies where a great deal
of their attention is given to speculation in stocks where they have a
great, interest in shoving stocks up on the market instead of attending
to legitimate banking business?
Mr. POLE. I think it would be desirable that some supervision over
the securities companies should be had in order that, we might ascertain the nature of their business by reason of the fact they are so closely
allied with the banks.
Mr. SEIBERLING. I want to go to the subject of call money rates.
I would like to ask you, if you know, who fixes-the call money rate,
and how it is determined from day to day?
Mr. POLE: I have very little information on that, Mr. Seiberling.
I would not attempt to answer that question.
Mr. SEIBERLING. Do you know that in past panics, the call money
rate has gone as high as 1 per cent a day?
Mr. POLE. I recall that it has gone to some fabulous figure.
Mr. SEIBERLING. And in another panic, it went to as high as 150
Per cent?

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Mr. POLE. Yes.
Mr. SEIBERLING. You do not know who fixes the call money rate?
Mr. POLE. Specifically I would say I do not.
Mr. SEIBERLING. I am very sorry because I wanted to find out.
Do you know, as a matter of fact, that New York does not have any
usury laws in connection with the call money rate?
Mr. POLE. I do.
Mr. SEIBERLING. The call money rate can go just as high as anybody who has the fixing of it wants to put it?
Mr. POLE. On loans of $5,000 or over.
Mr. SEIBERLING. New York does not have any usury laws in
connection with loans to corporations either, does it?
Mr. POLE. I am not familiar with the usury laws of New York,
Congressman.
Mr. SEIBERLING. I think their usury law in connection with corporations is the same as the law in Ohio, and that was put through
for the purpose of negotiating some loans out there and that is if the
directors authorize the loan, the corporation can not, thereafter, set
up, as a defense, usury for the benefit of the stockholders. I think
that is the New York law. Now, as to whether they have no usury
laws in connection with collateral loans as Mr. Fort suggests, I do not
know.
Mr. FORT. I know that the lowest rate on even time loans is frequently 9, 10, and 11 per cent—not frequently, but occasionally.
Mr. SEIBERLING. Do you know of many other States that do not
have usury laws that cover all kinds of loans?
Mr. POLE. I think recent laws have been passed in Pennsylvania
and possibly in Illinois with respect to call rates.
Mr. SEIBERLING. Taking off the usury from call rates?
Mr. POLE. I am under that impression.
Mr. SEIBERLING. Repealing the law so that there is no usury law
on call money?
Mr. POLE. There has been some change in the law in that respect.
Mr. SEIBERLING. Now, how high did the call money rate go in
New York during the recent stock escapade?
Mr. POLE. I think about 12 per cent, as far as my recollection goes.
Mrs. PRATT. I think it went as high as 15.
Mr. FORT. It was higher before the panic. It was about 15 or 16.
Mr. SEIBERLING. It did not reach its high point until after the
stocks commenced to decline, did it?
Mrs. PRATT. I think it was in August or September it was as high
as that.
Mr.SEIBERLING. If you know,I should like to have it in the record.
Mrs. PRATT. I will have to check that up.
Mr. SEIBERLING. I thought the call money went to as high as 20
per cent.
Mr. POLE. I do not recall.
The CHAIRMAN. It did go to 22 per cent last spring.
Mr. SEIBERLING. Don't you know, Mr. Pole, that this call money
rate affected every man, woman, and child in the United States that
had stocks on margin with the brokers, and that there were thousands
and hundreds of thousands of them?
Mr. POLE. I would say so.

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Mr. SEIBERLING. This call money rate was charged back on these
marginal accounts irrespective of the usury laws of the various States?
Mr. POLE. I am not informed as to that, Mr. Seiberling.
Mr. SEIBERLING. As a matter of fact, I will state that they were
charged back on the marginal accounts and if you did not like to pay
the rate of interest, you could let them sell your stock, but if you
wanted to carry it with the broker, you had to pay substantially the
call money rate, which varied from day to day—pay the call money
rate of New York.
That is, Mr. Pole, they charged you for the month for the average
of the call-money rate, whatever it might average. Do you know,
from your personal knowledge, whether that is true?
Mr. POLE. I have no knowledge of that.
Mr. SEIBERLING. There are probably others around here who could
tell us. That was my experience. How about you, Mr. Fort?
Mr. FORT. I did not have any accounts at the time, but I understand the practice in most legitimate brokers' offices is that they
charged the cost of the money to them, plus the commission. That
does not necessarily mean the call rate. They took their tune money
and call money and merged it and fixed the rates that way. Most
brokers did that.
Mr. SEIBERLING. The effect of the high call-money rate in New
York was to draw immense sums of money out of all banks of the
country and transfer them to New York, such withdrawals being
made by people who had large sums of money on deposit and corporations with large sums on deposit with banks paying only 2 or 3 per
cent on daily balances—they took their money out and withdrew it
and sent it to New York to get the call-money rate.
Mr. POLE. I think large amounts were invested that way.
Mr. SEIBERLING. Do you think, out of a city like Cleveland, as
much as $100,000,000 would be withdrawn and sent to New York?
Mr. POLE. I have no idea.
Mr. SEIBERLING. The effect of the withdrawal of money from the
local banks and sending it to New York to get the high call money
rate was to compel all the local banks to go to the Federal reserve
to get money, was it not?
Mr. POLE. It had that effect.
Mr. SEIBERL1NG. And that is what they did to an enormous
extent, did they not?
Mr. POLE. To some extent.
Mr. SEIBERLING. Well, then, we have this situation, that the callmoney rate caused an influx of tremendous amounts of money into
New York to be invested in the New York Stock Exchange at high
rates and withdrew it from local banks and the local banks had to
go to the Federal reserve to borrow money. What rate did they
Pay?
Mr. POLE. Money was ranging over last year from 4 to 6 per cent.
MT. SEIBERLING. But a great part of the time was below 6 per cent?
Mr. POLE. A considerable part of the time.
Mr. SEIBERLING. Is it also true that some banks borrowed money
from the Federal reserve, at the low rate of interest and sent it to
New York to be used at the call-money rate?
Mr. POLE. I thought that was your question.

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Mr. SEIBERLING. NO; I was not talking about banks but individuals and corporations.
Mr. POLE. They do not go to the Federal reserve banks.
Mr. SEIBERLING. Not the individuals, but the point I make is
this: When the individuals withdrew their money and sent it to
New York, then the bank had to go to the Federal reserve in order
to get money to run its busine.ss?
Mr. POLE. I think that is true in many cases.
Mr. SEIBERLING. Is it not also true that the banks themselves
borrowed at the low rate from the Federal reserve and sent to New
York and got the high call money rate?
Mr. POLE. I think that also might have been true:
Mr. SEIBERLING. The effect of all that was to take this money out
of the legitimate channels of business and many people who needed
money for their business needs were refused this money by the
banks; because they could not, in.good morals and under the usury
laws of the Stittes, charge them more than a limited amount when
they could take the money and send to New York and get more?
Mr. POLE. There were undoubtedly illustrations of that kind.
Mr. SEIBERLING. You say that even though your the Comptroller of the Currency of the United States, you do not know who
fixes the call money rate?
Mr. POLE. I do not know the technical operation of the fixing of
the call rate.
Mr. SEIBERLING. Do you know how we could find out who fixes
it?
MT. POLE. Yes.
Mr. SEIBERLING. Where?
Mr. POLE. From any banks that make loans on call in New
York.
Mr. SEIBERLING. After it is fixed from day to day that the call
money rate was so much, and so forth, who fixes it?
Mr. POLE. I think that is said to be fixed under supply and demand
by a committee of the stock exchange.
Mr. SEIBERLING. With the Federal reserve system, there is not
any question about the supply of money in this country any more,
is there?
Mr. POLE. There is, for speculative purposes.
Mr. SEIBERLING. Well, but you can not safeguard that where individuals and corporations and banks withdraw their money from hanks
and send it to New York and the banks themselves borrow from the
Federal reserve—you can not question a bank when they come to
the Federal reserve as to whether they want this for speculative
purposes?
Mr. POLE. YOU can not question the individuals.
Mr. SEIBERLING. Or the banks either?
Mr. POLE. Yes.
Mr. SEIBERLING. If they conic to you and give you the proper
kind of paper
Mr. POLE. It is not incumbent upon the Federal reserve bank to
make loans if the bank is, at the same time, sending money on call
to New York. The Federal reserve bank would inquire into it.
Mr. SEIBERLING. If the bank went to the Federal reserve with good
rediscountable paper, they have the right to inquire why they wanted
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Mr. POLE. Yes.
Mr. SEIBERLING. You do not think they did inquire?
Mr. POLE. I think they did inquire.
Mr. SEIBERLING. Then you have agreed with me that the banking
business is much more of a quasi-public nature than the business of
other quasi-public corporations, whose rates are fixed by the public
service commissions—whose rates to the public are fixed by the public
utility commissions and the Interstate Commerce Commission, then
Why should not Congress, by the enactment of a Federal usury law,
fix the limit which could be charged for the use of money?
Mr.POLE. Congress could do that probably and in respect to national
banks certainly.
Mr. SEIBERLING. Can not they also, in respect to member banks,
if they want to be members of the Federal Reserve system?
Mr. POLE. Probably that is correct.
Mr. SEIBERLING. And States that do not have such laws could be
controlled by the Federal usury laws?
Mr. POLE. I presume so.
Mr. WINGO. You gentlemen are both lawyers, I assume?
Mr. SEIBERLING. Somebody said I was a lawyer once, but I do not
know whether I am or not.
Mr. FORT. Mr. Chairman, may I ask a question? Mr. Seiberling
says he has no objection.
The CHAIRMAN; Yes.
Mr. FORT. Mr. Pole, is it not a fact that a large part of the funds
in the call loan market, which along in October exceeded the total
loans of all banks for their own account, was money of so-called outsiders; that is, of corporations and foreign lenders and others, rather
than the money of the banks themselves?
Mr. POLE. I think that is correct.
Mr. FORT. And 9 large part— the very large part of the money—
that went at the high rates of interest was not banking money?
Mr. POLE. I think the stateinents usually show that loans for others
exceeded the loans of which you speak.
Mr. SEIBERLING. And the result of the high rate is that the depositor who has a large balance, instead of letting the bank lend it and
getting the profit, draws out that balance and becomes, himself, a
lender of money?
Mr. POLE. That is correct.
Mr. SEIBERLING. I think this should be made plain, that when the
private party or the corporation that lends through private bankers
in New York, they have to withdraw that money from some bank in
order to send it to a private bank.
Mr. POLE. I think the custom is for the New York banker to
place the money for its customer, charging a small commission.
Mr. SEIBERLING. But they have to furnish the money to do that.
They have to furnish the money from some place.
Mr. POLE. The customer does.
Mr. SEIBERLING. And he has to take it from the local bank.
Be does not carry thousands of dollars around in his stocking.
Mr. POLE. He has to take it from wherever it is deposited. The
local bank might be in New York.
Mr. SEIBERLING. We know, as a matter of fact, that hundreds of
millions of dollars were sent from other parts of the country to New
York for the high-money rate.

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Mr. POLE. I am sure of that.
Mr. SEIBERLING. What effect, do you think, that had on the legitimate business of the country which is in the shape it is in?
Mr. POLE. I think the effect was bad.
Mr. SEIBERLING. Don't you think it would greatly stimulate
business if borrowers could know what the limited interest they would
have to pay under any circumstances would be?
Mr. POLE. I think that might be desirable.
Mr. SEIBERLING. Of course the interest rate would always have to
be as high as the interest rate of the Bank of England, for instance;
in other words, you could not let the foreign banks put the rates so
high as to draw money from this country. There is an element there
that would have to be protected, is there not?
Mr. POLE. Well, I suppose there naturally would have to be some
adjustment between the foreign banks—the central-bank rates and
our own Federal reserve rates.
Mr. SEIBERLING. Now, in speaking of the branches—of extending
branch banking—there is not any objection to-day to the consolidation of vast public utilities because the rates which they can charge
the public are fixed by commissions, are they not?
Mr. POLE. Yes, sir; I understand the rates are so fixed.
Mr. SEIBERLING. And it would not make so very much difference
in reference to the form of the bank if we had a limit on what they
could charge for the use of the money?
Mr. POLE. I think not.
Mr. SEIBERLING. That is, after all, the protection to the people,
and it is vital that those who are entitled to it, either on account of
their moral responsibility or financial responsibility, should have
money as the necessities demand?
Mr. POLE. Are you referring to the usury laws of the States which
fix the maximum amount that it is permissible to charge?
Mr. SEIBERLING. It is very vital, is it not, that those who are
entitled to money should have the right and opportunity of getting
it at a reasonable rate of interest?
Mr. POLE. Yes, sir.
Mr. SEIBERLING. In reference to this question of extension of
branch banking, your proposal would have a tendency, unless there
was some regulation as to what banks could do, to greatly increase
their domination and control, would it not?
Mr. POLE. There would, in my opinion, always be ample banking
competition which would regulate that.
Mr. SEIBERLING. Well, now, the law preventing interlocking
directors does not protect the situation at all?
Mr. POLE. I would-say not.
Mr. SEIBERLING. It is a question of who the stockholders are, is
it not?
Mr. POLE. I do not quite understand the question.
Mr. SEIBERLING. Is it not a fact after all a question of who the
stockholders are?
Mr. POLE. I still do not understand the question. In respect to
what?
Mr. SEIBERLING. In respect to the control of the stock?
Mr. POLE. As far as monopolies are concerned?

BRANCH, CHAIN, AND GROUP BANKING

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Mr. SEIBERLING. Control clear down the line. The stockholder
can put in a dummy director and tell him what to do. The stockholders control the banks?
Mr. POLE. They could in any individual bank; yes.
Mr. SEIBERLING. Assuming that we adopted your suggestion, there
would be nothing to prevent a Cleveland bank—and I am taking a
Cleveland bank because you were an examiner out there—there would
be nothing to prevent a Cleveland bank from making a branch of the
Akron bank?
Mr. POLE. That would depend upon what Congress fixed as the
Cleveland area.
Mr. SEIBERLING. That is in the Federal reserve district. We
are all in that district.
Mr. POLE. I know, but I have not made any suggestion that the
Whole district should be included. I stated that in no event should
it go beyond the district lines.
Mr. SEIBERLING. Here is a city within 35 miles of Cleveland.
It would certainly be within the trade area.
MT. POLE. Yes, sir.
Mr. SEIBERLING. Canton and Massillon would be within the
trade area,of Akron?
Mr. POLE. It might be said that they would be.
Mr. SEIBERLING. And the Akron bank could make branches of
the Canton and Massillon banks?
Mr. POLE. Yes.
Mr. SEIBERLING. If New York banks owned all the stock of the
Cleveland bank, they would have branches, then, in Cleveland,
Canton, Akron, Massillon, and possibly Warren?
Mr. POLE. If the New York banks could keep on reaching and
acquiring the stock, they might obtain control.
Mr. SEIBERLING. And you can not prevent that?
Mr. POLE. I think that Congress might adopt some legislation
Which would prevent it.
Mr. SEIBERLING. There is another thing: You know the banks and
the trust companies have trust departments and vast amounts of
Stock are willed to them in trust and put in living trusts which the
banks vote and control? That is correct, is it not?
Mr. POLE. I think that is correct.
Mr. SEIBERLING. So that, in the course of time, these banks that
belong to the parent bank and its branches, might even control large
industries in their sections, might they not?
MT. POLE. They might.
Mr. SEIBERLING. They might say to an industry that was about
to start, "If you locate up here in my city"—I am talking about
the head bank—"if you locate up in my city, we will lend you the
inoney to start with, but if you do not do that, we do not have
enough confidence in your business. We want to have it here to
oversee you." They could do that, could they not?
Mr. POLE. Under some circumstances, I imagine that might be
Possible.
Mr. SEIBERLING. They could also have great political control,
could they not?
Mr. POLE. If there were a system of banking through stock ownership, such as you suggest, I think it could have this influence.

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1.

Mr. SEIBERLING. Do you know of any more potent influence than
a banker has when he says to his borrower that he would like to
have some one elected to office?
Mr. POLE. I would call that a rather potent influence.
Mr. SEIBERLING. Do you know that there is great danger of banks
and trust companies having so much of their own stock deposited
with them by wills and living trusts, that the trust department
would finally control and own the bank?
Mr. POLE. I could not conceive of a condition of that kind—not to
the point where they would actually control it.
Mr. SEIBERLING. They could easily have a majority of the stock,
could they not?
Mr. POLE. It would be possible.
Mr. SEIBERLING. How many shares of stock does a director have
to have?
Mr. POLE. In a national bank he has to have $1,000 worth at
par value.
Mr. SEIBERLING. A thousand dollars' worth?
Mr. POLE. Yes.
Mr. SEIBERLING. Well, it would be very easy to have 10 or 15 men
own sufficient stock to qualify them as directors and have the rest
of the stock in the trust department of the bank?
Mr. POLE. Of course it would be much easier hi a small bank than
in a larger bank.
Mr. SEIBERLING. I am talking about the course of time. It seems
to me that you have to look a long ways ahead and we are not only
protecting the interests of the people now, but we are protecting them
for years to come. Is not that correct?
Mr. POLE. Yes.
Mr. A WALT. Speaking of voting trusts?
Mr. SEIBERLING. I am speaking of stock actually trusteed in the
banks under trusts and living wills and banks transferring that
stock to them and they vote it. Is not that right?
Mr. POLE. I should think that would be looking some way ahead.
Mr. SEIBERLING. It is the natural thing for a director or a stockholder of a bank to make his own bank his trustee under his will,
is it not?
Mr. POLE. Yes.
Mr. SEIBERLING. Do you think it would be wise to permit an
extension of the branch privileges to banks unless some restrictions
can be formulated, which will obviate these difficulties?
Mr. POLE. I think that question might well be given consideration.
Mr. SEIBERLING. Well, now, I have just one more line that I want
to ask you about and this is maybe a rather foolish suggestion, and I
want to say it is not original with me, because I read a book on banking that gave the cue.
You are very much interested, I take it, in getting banking facilities
to the outlying districts at points where—which would permit the
establishment of an individual or unit bank and where there is not
sufficient business and yet where the people should have some banking
facilities?
Mr. POLE. That is among my suggestions.
Mr. SEIBERLING. You are greatly interested in that?
Mr. POLE. Yes.

BRANCH, CHAIN, AND GROUP BANKING

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Mr. SEIBERLING. There seems to be a great deal of interest around
here in reference to guaranteeing deposits also, which I understand
You are against?
Mr. POLE. Yes.
Mr. SEIBERLING. And on which point I agree with you absolutely.
Now, since we have the Joint Stock Land. Bank and the Federal
Farm Board to loan money on farms, on real estate, and since we
have the Federal Farm Board to which we have appropriated
$500,000,000 to lend on grain and intermediate credit banks, and
since just the other day we appropriated another $7,000,000 for the
Secretary of Agriculture to loan to farmers—a bill that provides
specially for loans to buy fertilizers, and for which he will take a lien
on the crops—since we have all those instrumentalities, these rural
districts would not need a bank for borrowing purposes to any great
extent, would they?
Mr. POLE. Oh, I should say so. Customers of banks do not go
directly to these corporations that you speak of. They have to
form associations, which associations in turn borrow from these corporations except in the case of the Fedral land bank.
Mr. SEIBERLING. The farmer gets the money?
Mr. POLE. Yes; eventually. There are numerous small merchants
and small operators that necessarily have to transact banking business
outside of type of business which might to go these corporations.
I would say that the banking facilities in a small community could
not be eliminated without very great inconvenience to that community.
Mr. SEIBERLING. A small community with two or three hundred
People who had opportunities to borrow, as I have said, from these
various sources, really needs a place to deposit their money and a place
to check out more than anything else?
Mr. POLE. That is very important. They have also to borrow
and to make such loans as would not be eligible with these other
corporations you speak of, for current business.
Mr. SEIBERLING. What plan have you to work that out?
Mr. POLE. I think it might be easily possible that a bank having
branches might go into such community and perhaps operate two
days or three days a week in order that the community might have
banking facilities.
M.SEIBERLING. You do not think that
Mr. POLE. And there is nothing new in that idea.
Mr. SEIBERLING. You do not think that the Postal Savings could
be expanded so as to take care of communities of that kind, where the
Comptroller of the Currency would designate that it was impossible
to establish a unit bank and where there were no banking facilities,
because I am just as much opposed to the Government going into
business as you are.
Mr. POLE. I think, as a savings bank, the Postal Savings might
be of assistance, but I do not think it would take the place of a local
commercial bank.
Mr. SEIBERLING. They draw money orders now, do they not; they
do a great many things of that kind?
Mr. POLE. They deposit money and draw funds, but I think nothing
else,
100136-30—vot 1 PT 2-3

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BRANCH, CHAIN, AND GROUP BANKING

Mr. SEIBERLING. They have to keep books, of course?
Mr. POLE. Yes.
Mr. SEIBERLING. And you do not think it would be possible to
enlarge that so that not only money could be deposited, but also
withdrawn by check?
Mr. POLE. No; I do not think the post office could ever take the
place of the country bank.
Mr. SEIBERLING. I am talking about sections where it is absolutely
impossible to have a bank on account of the business being so small?
Mr. POLE. Of course a community being that small, it might not
be necessary to establish a bank there. It is not my idea that branches
should be established in every small hamlet in the country.
Mr. WINGO. Might I suggest that in my country there is a possibility of those villages losing even their post offices?
Mr. SEIBERLING. It is very desirable to arrange facilities where
money in these rural districts, now in the stockings and other places,
might be placed in circulation.
Mr. POLE. Yes, sir.
Mr. SEIBERLING. I think that is all.
Mr. STEAGALL. Just one suggestion there with reference to one
statement the gentlemen made—and evidently made under misapprehension: He said that we had appropriated $7,000,000 for the
purpose of lending to farmers to purchase seeds and fertilizers. I
do not think that act can be properly categorized along with the
other loaning facilities, such as Federal land banks, the Farm Board,
and intermediate credit banks. This $7,000,000 fund is purely a
temporary and an emergency matter to take care of unprecedented
conditions created by a flood, something that probably will not
happen again, and I do not think anybody had in mind to make
that a permanent system.
Mr. SEIBERLING. It included Ohio, and we did not have any
flood there that I know anything about.
Mr. STEAGALL. It was done probably as a matter of strategy to
get the matter through the other House. I do not advocate that
as a permanent policy. It was purely an emergency measure.
Mr. WINGO. In connection with one question that Mr. Seiberling
asked Mr. Pole, concerning limited credit under the Federal reserve
system, there seems to be a mistaken idea in the country that the
Federal reserve system carries unlimited credit.
Is not this true? The first is that you have to have eligible paper
before you can get credit. Another is the eligibility and acceptability
of the paper itself—that is, the acceptability. First we have eligibility
and second, acceptability and, in the circumstances in which it is
offered, whether the bank will take the eligible paper and grant credit.
Then after you have gotten by those limitations and handicaps,
the question of available gold for the required reserve comes in. So,
it is a mistaken idea to think of the Federal reserve as a source of
unlimited credit.
Mr. POLE. Absolutely.
Mr. WINGO. There is another question in that connection that I
want to ask in reference to branches to take care of small communities.
I believe you said the other day, in response to a suggestion, that if
you had a small town, say, one of these towns under 10,000, that if
you undertook to take care of it by branch banks, they might under-

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BRANCH, CHAIN, AND GROUP BANKING

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take to take care of it by one branch and there would be a monopoly
and there might be two trade areas that would overlap; for instance,
Dallas, Tex., is close to the south end of my district. That is in the
trade area of Dallas as well as that of Little Rock. It is about as
near to Dallas as to Little Rock. In one of those towns there might
be a branch of a bank in Little Rock and also one branch of a bank
in Dallas, and you suggested that would give the necessary competition of service there and insure good service. Is that your idea,
that you would not be limited to the number of branches except as you
are now limited in the discretion of the charter granting authorities
which, in the case of the States, is the State commission, and, in the
case of the national banks, the Comptroller of the Currency?
Mr. POLE. Yes. I spoke of these small conununities being perhaps
in a position to monopolize the banking business provided the banks
were forced to a higher capital structure. In order to earn a fair
return on such capital, it would be necessary that the banks should
have a large enough area to attract sufficient business to do that.
Now, that was in connection with the suggestion which had been
made that banks should have a minimum capital of $100,000. I feel
that in a town like Dallas or a town like Little Rock the chances are
that there would be several important banks which would reach out
for business from every quarter.
Mr. WINGO. I see your idea. In addition to having two cities
that might each one of the have more than one bank—in other words,
in addition to having a bank in Dallas and a bank in Little Rock,
Which might, each one, have a branch in this small city, a town under
10,000, why there might be also two banks in Little Rock and in
Dallas and the question of allowing them to have branches would
Still be one, under your theory, for the supervisory authority to control, as in the issuing of a charter to a national bank?
Mr. POLE. Yes, sir.
Mr. WINGO. In other words, if the banking facilities of that city
Would be sufficient to meet the public needs—
Mr. POLE. That is my idea, as far as possible, to endeavor to give
every community of any size adequate competitive banking service.
Mr. WING°. As a rule now—you spoke awhile ago of the potent
influence of the banker on the borrower—it is my experience that a
banker has considerable influence with the borrower.
Mr. POLE. Yes.
Mr. STEAGALL. Somewhere in Proverbs it is stated that the borrower is the slave of the lender.
Mr. WINGO. But, Mr. Pole, how can you answer this question:
Mr. Goldsborough touched upon this question and Mr. Seiberling
also did. I think we can reasonably assume that even if you did have
branches, say, in a town that we will call A, one for each of the two
central banks that may be in Little Rock, when you came down to the
issues involved in a political campaign, those two banks would have a
community of interest. The probabilities are that they would be
sup?orting the same issues or the same candidates.
, .1\ ow, then, would not this be what could naturally be expected,
'Mowing human nature both by observation as well as experience,
that the merchants and other people in that town where these two
branches are, would find a very subtle political pressure put on them

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BRANCH, CHAIN, AND GROUP BANKING

to support the candidate or the issue that these central banks wished
to have supported? Is not that reasonably to be expected?
.Mr. POLE. They might naturally—that is individuals connected
with such a bank—take an interest in a political issue. Whether they
would exert improper political pressure is another matter.
Mr. WINGO. Now,if the logic of your scheme is sound, the benefits
of that character along financial lines, having a tendency to grow—in
other words, the institutions having a tendency to grow— would
not their mfluence correspondingly grow?
Mr. POLE. As they grow larger, I would say that their influence
would be greater, but it would not necessarily be directed to political
channels or be detrimental to the public welfare if so directed.
Mr. WINGO. Is not this the probable outcome to your plan, that
at first you would have—as a matter of fact, is it not the virtue of
your plan from your standpoint—that probably you would have a
bank with $100,000 capital with one or two branches, and have a
great many of them scattered around the country, but, ultimately,
these banks in turn would be taken over and become nothing but
branches of a large bank? You will start out and maybe, we will
say, there will be 25, 30, or 35 banks over a State, each one having
branches out in the smaller towns in their particular trade areas, but
as time goes on there will be a natural tendency—and the arguments
in favor of it would be the same as the arguments you make to-day—
"Here, we can work out economies, greater security for the depositors
and greater benefit and greater service if, instead of having 25 or 30,
we have only 4 or 5," and where we have a bank to-day of $100,000
capital, with three or four branches, that bank becomes a branch
of a bank, say, located at Little Rock. It not that a natural evolution of your scheme if your theory is correct?
Mr. POLE. I think the size of a branch that would be permitted to
operate or, rather, the size of a bank that would be permitted to
operate a branch, should be regulated, and not permit branches for
the small banks, and my idea is, further, that the banks in the important cities would develop branches around them. They would be
gradually reaching out and, in the course of time, probably even
those parent banks in such cities might themselves under certain
conditions be consolidated and become branches, but I can not conceive of any idea where there would be any banking monopoly there.
I am inclined to think that there should be consideration given, as
I have said, to legislation regulating perhaps the consolidation of
banks after they get a certain number of branches or reach a certain
size.
The CHAIRMAN. Might I suggest here that we proceed in order?
Inasmuch as the comptroller is going to file a brief, he will cover
that in his brief, so that we can proceed with Mrs. Pratt as the next
interrogator.
Mr. NVDTGo. I beg your pardon. I did not know I was interrupting.
Mr. POLE. That is, my brief in connection with trade areas?
The CHAIRMAN. Yes.
Mr. WINGO. The chairman was not following me very closely. I
was going to another phase of the question. However, I will develop
that some other time. I beg your pardon, Mrs. Pratt.

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Mrs. PRATT. Mr. Chairman, most of the questions that have
arisen in my mind have been covered by previous discussions, but
there is just one point I should like to have made clear.
The purpose of your proposed legislation, Mr. Pole, as I understand it, is to provide adequate and more substantially reliable
banking facilities for the smaller communities?
Mr. POLE. That is one of the outstanding phases of my recommendation.
Mrs. PRATT. Broadly speaking, that is the outstanding phase?
Mr. POLE. Well, yes.
Mrs. PRATT. New York is the greatest money market of the world,
is it not?
Mr. POLE. Yes.
Mrs. PRATT. There has been a great deal said here, in the course
of the discussion, about the centralization of credit which exists and
is probably increasing in New York?
Mr. POLE. Yes.
Mrs. PRATT. I do not know whether you view that with apprehension.
Mr. POLE. No; I do not.
Mrs. PRATT. And what I wished to know is if there might not be
two results, with only one purpose, from this proposed legislation;
namely, as you establish these branch banks throughout the country,
having, as I understand it, parent banks.
Mr. POLE. Yes.
Mrs. PRATT. Eventually these different parent banks, which would
be established, I think your purpose is, in trade areas somewhat
along the lines of the Federal reserve areas, but not coterminus
Mr. POLE. Yes.
Mrs. PRATT. Would become more important and greater banking
centers.
Mr. POLE. I think so.
Mrs. PRATT. That would lead, would it not, possibly to drawing
credit away from New York?
Mr. POLE. That is my thought.
Mrs. PRATT. And you will have, as a result of this legislation, more
competitive credit centers throughout the country?
Mr. POLE. More competitive credit and decentralization.
Mrs. PRATT. I assume, because of its size and location, New York
will always be, probably, the greatest center of credit, although it
might not necessarily be so?
.Mr. POLE. In all probability, as far as we would be willing to look
ahead.
Mrs. PRATT. Yes. You feel, do you not, that as the result of this
legislation there would be a decentralization of credit, and that would
be a valuable result?
Mr. POLE. I do indeed.
Mrs. PRATT. To have more decentralization of credit throughout
the country?
Mr. POLE. Yes.
Mrs. PRATT. I did not know whether that was partly the purpose
of the legislation or whether, as has been brought out in the discussions, that would be a direct result.

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BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. It might be said to be the indirect result should branch
banking limited to trade areas be adopted.
Mrs. PRATT. Just one more question, Mr. Pole. It is true wherever there is a great center for any commodity—calling money a
commodity—individuals, and, as has been brought out here even
banks, go to the great center if they have something to purchase or
to sell?
Mr. POLE. Quite often that is the case.
Mrs. PRATT. It is nearly always the case, is it not?
Mr. POLE. Yes.
Mrs. PRATT. Unless these centers that would be created by this
proposed legislation do develop into large credit centers, you would
still have the same conditions as exist to-day, because the large
investor would still rather go to New York, would he not?
Mr. POLE. I foresee that if any branch banking might be extended
in accordance with my suggestions, there would be no doubt,in my
mind, that large banks would grow up all over this country, by
reason of the fact they would embrace the capital and resources of
probably hundreds of smaller banks which would be in their trade
areas.
Mrs. PRATT. And you would have essentially a great many money
markets of very large proportions?
Mr. POLE. I should say that that would be the result.
Mrs. PRATT. I think that is all.
Mr. STEAGALL. I want to ask Mr. Pole about one matter developed
by Mr. Seiberling in his interesting discussion, and that is in reference
to legislation to fix interest rates of national banks and banks of the
Federal reserve system. I do not know how Congress can, in any
way, regulate or determine interest rates to be charged by any banks
outside of the national banking system, except, of course, we could
pass legislation, controlling the Federal Reserve Boaid in the matter
of admitting State banks into the Federal reserve system by requiring
them to observe certain conditions.
Mr. POLE. I think the conditions of membership are within the
discretion of the Federal Reserve Board.
Mr. STEAGALL. I doubt that, in my own mind, except in dealing
with the acceptability of the securities of a bank, and the question
whether or not it is financially sound—to say that the Federal
Reserve Board should arbitrarily deny membership to a State bank
that is in condition to come into the system, I should question.
Certainly Congress can not pass laws to determine the interest rates
charged in the various States?
Mr. POLE. No.
Mr. STEAGALL. If we attempt to fix uniform rates for national
banks, and indirectly we could find a way, through State banks
becoming members of the Federal reserve system, to fix arbitrary
rates throughout the country, of course no national bank, in any
circumstances, could charge in excess of that
MT. POLE. No.
!" Mr. STEAGALL. In the present situation, the law simply requires a
national bank to observe the law of the State in which it operates as
regards the matter of interest rates to be charged?
Mr. POLE. Yes.

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131

Mr. STEAGALL. If we attempted to fix a uniform interest rate
throughout the country for national banks, how would it operate
as between national banks and State banks? For instence, in the
city of New York, if we fixed a uniform rate for national banks, what
would be its effect upon the national banks in the city of New York,
in attempting to compete with State banks unbridled in fixing
interest rates?
Mr. POLE. Do you contemplate fixing the interest rates to be
charged by national banks below the State banks?
Mr. STEAGALL. Yes.
Mr. POLE. That would have the effect of driving the national
banks into the State systems.
Mr. SEIBERLING. I am not advocating the fixing of uniform interest rates. I am advocating fixing a maximum rate. If you undertake to fix a uniform rate, that would control the rate. I want a
maximum fixed beyond which no one can charge.
Mr. STEAGALL. I am in thorough accord with that, if I understand the gentleman. I am only thinking of the difficulties encountered in attempting to do that. It does not make any difference if
you make it uniform or we say a national bank nowhere in this country shall charge to exceed 10 per cent per annum,we will be confronted
with the situation in New York—and it does not matter what would
be the justification for it or lack of justification, these conditions
will come about again as they have in the past where this accentuated
demand for loans will exist, of course, unless the State of New York
steps in and regulates the interest rates—the interest rates will turn
toward the skies again, and if the national banks are not permitted
to charge those rates, they can not compete in that field with the other
banks, and we will be confronted with the proposition that the
national banks will leave the national system and go to the State
Systems. That is the difficulty.
Mr. POLE. That will be the result.
Mr. STEAGALL. I wish we could find a remedy, but I am pointing
out the difficulties.
Mr. STRONG. Could we not pass a usury law and bar from the mails
and from interstate commerce, any banks that violate that law?
Mr. FORT. We would not have to go that far.
Mr. STEAGALL. There is no difficulty about fixing the rates but the
difficulty is the situation we would place our national bails in in
States where there were high rates permitted.
Mr. STRONG. That would put a limitation on them.
Mr. STEAGALL. Congress can not touch the operations of a State
bank.
Mr. STRONG. We could bar them from the United States mails.
Mr. FORT. I doubt that, in view of the decision of the Supreme
Court in the Insurance Companies' case, where it was held that that
was not interstate commerce.
Mr. GOLDSBOROUGH. Mr. Chairman
The CHAIRMAN. I think in the interest of order that we had better
proceed according to our plan.
Mr. GOLDSBOROUGH. Mr. Chairman, I thought we had finished
with the questioning by the members.
Mr. FORT. The chairman has not asked any questions yet.

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The CHAIRMAN. When all members have asked questions, the purpose was to go around again in a general symposium.
Mr. GOLDSBOROUGH. Mr. Chairman, I move we proceed in order
as we have not been doing all morning.
The CHAIRMAN. Have you finished, Mr. Strong?
MT. STRONG. NO; but I will yield to you.
The CHAIRMAN. The chairman is the next on the list. I desired to
ask my questions last.
Mr. STEAGALL. I think the chairman should have all the time he
needs in his discussion with Mr. Pole, and I suggest to the chairman
that it is now close to 1 o'clock and I think he had best begin his
discussion when he has plenty of time.
The CHAIRMAN. Under those circumstances then, suppose we adjourn until to-morrow morning at 10.30 o'clock.
(Whereupon, at 12.50 o'clock, p. m., an adjournment was taken
until Wednesday, March 5, 1930, at 10.30 o'clock a. m.)

BRANCH, CHAIN, AND GROUP BANKING
HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,
Wednesday, March 5, 1980.
committee
room, Capitol Building, at
The committee met in the
10.30 o'clock, a. m., Hon. Louis T. McFadden (chairman), presiding.
The CHAIRMAN. The committee will COM to order.
I desire to call the attention of the committee to a letter from
Gov. R. A. Young, of the Federal Reserve Board, in reply to an
invitation by the chairman of the committee, for the appearance of
the Federal Reserve Board or their designates before this committee.
The letter reads as follows:
Your letter of February 21, inclosing House Resolution 141, with regard to
the study of group, chain, and branch banking which your committee is to undertake, and stating that your committee will be pleased to hear from me or whomever the board may designate to speak for the board, upon the subject, has been
brought to the attention of the board by me.
In reply I am writing to say that while the board has in the past accumulated
information on the subject of group, chain, and branch banking, nevertheless,
the rapid strides made by group banking during the past two years particularly
has made it extremely difficult for the board to secure information promptly
enough to enable it to keep pace with recent developments and the present status
of this whole matter. With this in mind, it recently, at the suggestion of the
Federal Advisory Council and also of the governors of the Federal reserve banks
and the Federal reserve agents, enlarged the membership of its committee prosecuting these investigations, by including representatives of the Federal reserve
banks.
The board feels that group, chain, and branch banking presents one of the most
important and most difficult problems of our changing banking structure before
the country at the present time. It believes that more complete information
regarding the forces which have impelled this new development will be necessary before conclusions of value can be arrived at regarding its effects—financial,
economic, and social. The board has not yet reached such conclusions and is not,
therefore, in a position to designate a representative to appear before your cornrnittee and to speak for the board at this time.
I will, of course, be very glad to appear before your body, furnish all the information we have at the present time, and answer any inquiries that I can, as
Will also any of my colleagues.
In the course of your hearings questioEs may arise whereby our research and
statistical division may be of service to you and to your committee. I hope you
Will feel free to command us at any time. I can assure you in advance of our
Complete cooperation.

STATEMENT OF JOHN W. POLE (resumed)
The CHAIRMAN. Mr. Pole, in answer to a question of Mr. Strong,
you said you examined the Bank of Italy with 40 men. This is a
plan you worked out to meet the situation which has developed in
connection with the examination of these large groups of banks. Is
that strictly in accordance with the law? The law, as I understand
it, provides that the Comptroller of the Currency, through examiners,
shall examine each bank at least two times a year?
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BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. Yes, sir. I think there would be no question about
that.
The CHAIRMAN. You do not think it is necessary to amend the law
to cover such situations?
Mr. POLE. I think not. The method of examination is discretionary with the comptroller.
The CHAIRMAN. The law is quite specific, however, in that respect.
It says there shall be at least two examinations each year.
Mr. POLE. It is specific as to the number of examinations, but not
as to the method.
Mr. FENN. You can make more examinations than that if you care
to? It does not restrict you to two examinations? It compels you
to make two, but does not restrict you from making any more?
Mr. POLE. No, sir. Our experience with regard to the examination of the very large branch banking systems does not cover a long
period of years and we are gradually becoming more and more familiar
with it, and I think we shall be even better able to cope with such
examinations as time goes on. It is quite likely we will have to materially increase our forces as the banks grow.
The CHAIRMAN. There has been much discussion in regard to the
methods of examining these large branch groups?
Mr. POLE. I am preparing, at your suggestion, a brief in that
connection and am going to lay down, for the committee, the details
of our method of examining the branch bank systems.
The CHAIRMAN. In the past, in regard to these large groups, a
serious question was raised as to whether or not there should not be
a simultaneous examination of the parent bank with the branches.
Of course, under this method that you have worked out, you do not
have a man in each one of the branches at the same time the main
offices are examined, do you?
Mr. POLE. We do not.
METHODS EMPLOYED IN THE EXAMINATION OF THE LARGE BRANCH BANKING
SYSTEMS IN THE TWELFTH FEDERAL RESERVE DISTRICT
Until 1927 there was only one national bank in the twelfth Federal reserve
district maintaining branches and that bank and its three branches were examined
simultaneously. When a State bank was converted into a national bank with
287 branches the Comptroller of the Currency was confronted with a new and
somewhat perplexing problem. If the bank and its branches were to be examined
simultaneously, a force of more than 400 men would be required. The State
department had found it necessary in making a simultaneous entry to employ
temporarily a number of certified public accountants and others for this purpose but this practice was unsatisfactory on account of their lack of knowledge of
the State banking laws and the rulings of the banking department; also for the
further reason that improper comments were sometimes made of the bank's
affairs by their temporary employees.
After careful consideration, and consultations by the chief examiner of the
twelfth district with his associates, it was concluded that the best results would
be accomplished by considering each branch as a semiindependent unit, for the
reason that it would be a practical impossibility to assemble a force of 400 men
who had the necessary detailed training and experience to make a simultaneous
entry into each of the branches and to submit reports that could be merged into
one complete and intelligible consolidated report.
The larger branch-banking systems do not make up a consolidated balance
sheet daily, though daily reports are required from the branches so that a balance sheet for the entire system can be made for any given date. Daily computations are made of items necessary to determine required res.:ryes. When
an examination of one of these systems is begun the examiners must close the
books as of that date and obtain a balance sheet for the entire system, regardless

BRANCH, CHAIN, AND GROUP BANKING

135

of the method of examination used. Since branch banking is comparatively
new to the chief examiner and his staff in the twelfth district, the method of
examination of the larger branch-banking systems has heretofore been varied
from time to time. While the method now being employed will be described it
is necessary to refer to our experience with at least one other method used.
In one of the earlier examinations of the large branch-banking systems forms
were prepared (specimens herewith) to be executed by branch managers, giving
a complete inventory of assets of each branch, as of date named, in sufficient
detail that a consolidated report could be made therefrom excepting, of course
(the most important part of any examination) the valuation of assets and their
Classification as "Slow," "Doubtful," or "Loss." In this particular examination simultaneous entry was made into the head office and five of the larger
branches so that the examiners actually covered and verified approximately 60
per cent of the bank's total assets. As fast as the examiner in charge could
release his men from the larger branches they were sent to the remaining branches
With a copy of the previous report of examination of the daily statement of the
branch as of date of current examination and of the branch manager's own inventory of the assets of his branch as of that date. The examinr was under
instructions to examine the branch as of the date he reached it, but to make a
sufficient check of the manager's inventory to satisfy himself of its accuracy.
Inaccuracies discovered were trivial and largely attributable to carelessness or
failure to correctly interpret instructions from the chief examiner. It would be
Possible to make an audit of the accounts by this method, but this course would
be impracticable on account of the time and expense involved. Therefore, the
examiners contented themselves with "spot checkings"; that is, tracing out to
their final conclusion the larger items involved.
The method above referred to has developed the fact that the same borrower
is found in only one branch except in rare instances when a border customer
borrows from a second branch without the branch manager's knowledge. This is
Usually discovered at the head office which arranges for such borrowings to be
concentrated at one branch.
Relative to the exchange of loans or other assets between branches it may be
said that this is positively prohibited without the consent of the head office.
To illustrate, a large branch banking system purchased a bank in a town, which
it merged with its existing branch there. The assets purchased included some
$300,000 of loans on real estate located in a section much nearer the other branches
of the bank and by direction of the head office these loans were sent to other
branches where they would receive the closer per sonal attention from the local
manager. Another point of interest here is that branches do not carry accounts
With each other. No. 20 will send checks upon No. 40 direct to it, but a copy of
the letter of transmittal goes direct to the head office where all interbranch
accounting is done. If No. 40 protests important items, of course No. 20 is
notified by wire, but that has no effect on the accounting. In theory (of course,
not in practice) the branches can be examined from the head office files and records, including all loans for more than $1,000.
An examination of a large branch bank system was begun on December 31,
the date on which it was known the bank would obtain from its branches a daily
statement and compile a balance sheet for the entire system. The head office
only was examined on that date, including, of course, the administration depart'Dent. The consolidated balance sheet contained assets of the head office verified
by the examiners, as well as the assets reported by the branches. Examiners
Who were later sent to examine the branches were requested to carefully consider
important changes between the daily statement of December 31 and the date of
their entry into the particular branch, and to follow to a final conclusion any
item bearing evidence of suspicion or irregularity. This would seem to be as
far as the examiner can go with tilt individual branch. If irregularity exists
It is usually the result of collusion between employees of two or more branches
and this, of course, is possible between men in two or more unit banks. The
tnventory method enables the examiners to audit the period between date of
inventory and date of examination of the branch and, therefore, provides protection against the exchange of assets between branches.
Branch bank systems carry their bond anti securities investments, brokers'
loans, commercial paper, and bankers' acceptances at the head office, so that in
tin examination the examiners have to consider only those securities which have
already been placed under seal and such as may be in transit, the receipt of which
they verify by an inspection of the securities upon arrival at the head office.

•

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BRANCH, CHAIN, AND GROUP BANKING

Interbranch accounts are carried through the head office entirely. For
instance, branch No. 10 will send to No. 30 its cash letters, copies of these letters
and the replies thereto, whether return items or credits, are sent to the head office
where all of the accounting is conducted. The method, of course, reduces the
possibilities for any improper transfer of items or fictitious credits between
branches.
As a matter of information it may be stated that the larger branch banking
systems maintain thorough auditing departments, which report direct to the
executive officers and through them to the executive committee and board of
directors; they also maintain a comptroller's department and an examining
department. The national bank examiners have found these departments
usually to be the most efficient of any of the departments of the bank.
If we had the type of branch banking which has been suggested by me there
should be developed a continuous contact between the examining force and the
executive committee of a branch institution and its board of directors. There
is no doubt that in such an institution the initiation of policies which control
the management are of great importance and the Government should be in a
position to gain immediate first-hand information in order that the public might
be protected.
To examiners and assistants:
In the present examination of the bank please observe carefully the following
instruc dons, suggestions, and comments
Branch examinations will be conducted as if each branch were a unit bank.
A consolidated balance sheet will be prepared as of the date on which the head
office is examined, namely, December 31, 1929. No data will be required from
examiners in branches for this balance sheet.
(1) Transcripts of accounts with head office will not be required.
(2) All assets (except accounts, including transit, with head office) should
be verified, including cash count, listing of loans and discounts, items for collection sent elsewhere than head office, etc., tracers to be sent by examiners returnable to chief examiner. It will not be necessary to verify the liabilities.
(3) Give date of report on head office on page 1.
(4) Consolidated schedules (except bonds, etc.) will be compiled from your
reports of branches. These reports will be compiled on Form 1424—E and
references to schedules in these instructions refer to that form.
(5) Give all information in detail called for in Schedule 1, on page 2, and in
addition show the following in each instance:
Total direct loans to directors, officers, and emUnsecured
Secured
ployees
Total direct loans to advisory board members_
(6) Give in detail all information called for in Schedule 2, page 2, and in addition
show:
Total direct loans in which directors, officers, or emUnsecured
Secured
ployees are interested
Total direct loans in which members of advisory
board are interested
(7) In addition to information called for by Schedule 3, page 2, show par
value of national bank stocks pledged as collateral to bank under examination
and name or names in which stock is issued, that we may determine whether
directors are disqualified.
(8) In schedule of "Overdue paper" please show totals of class A and class
B as follows:
A. Total bad debts as defined by sec. 5204, United States Revised
Statutes (including real estate loans of $
B. Other overdue paper (including real estate loans of $
) $
(9) The schedule "slow and doubtful paper and losses on loans" should represent the examiner's opinion after full discussion with officers of the branch
(and local directors, where necessary), and if there is a material difference of
opinion, that fact should be discussed in detail in the confidential section of
the report, and we should be supplied with full information on all important
loss items that they may be intelligently discussed with officials at head office.
(10) The schedule of real estate loans requires unusually careful attention.
Item 1 thereof (D. P. C.) refers only to those loans acquired since March 1,
1927, date of nationalization, and should include only those loans acquired in

BRANCH, CHAIN, AND GROUP BANKING

137

settlement of debts previously contracted in good faith. Nonconforming loans
held prior to date of nationalization, or March 1, 1927, or any renewals thereof
should be included with other nonconforming loans, total to be shown under
item 4, "Nonconforming loans held at date of conversion."
. Nonconforming loans acquired since March 1, 1927, should be shown under
item 3, as in violation of law.
Detailed schedules must be made ot items 1, 3, and 4, and in addition thereto,
please recapitulate schedule 4 under the following headings, showing totals:
; maturity, $----; unimproved, $----.
Value, $
Totals only need to be shown for item 2.
In classifying nonconforming loans please make careful inquiry of branch
managers relative to each and do not rely wholly upon appraisal certificates, for
we have found that highly improved, income-producing agricultural land has
been reported Unimproved," the examiner following the synopsis of the apprasiers' report, so made because there is no residence on the property. Those
classes nonconforming on account of value should also be carefully considered.
(11) Item 2., page 7, should contain a complete schedule of overdrafts of six
months duration, showing names, and dates of inception, and those considered
uncollectible should be marked
(12) Reference is made to page 6, "Other assets." Your report on suspense
resources should show date of item, brief description and classification. Total to
agree with line 9 of face of report. Please also prepare a separate schedule.of
suspense liabilities or other liabilities, showing dates, brief description and
amounts.
Items carried under city cash collection account and documentary transit
account should be carefully scrutinized and totals shown separately' on page 1.
All transit items are to be verified.
(13) Accounts maintained by other banks with the individual branches should
be verified in the usual manner.
(14) Do not examine trust department. This will be done by an examiner
especially designated for this purpose.
(15) Make up a schedule in confidential section showing loans secured by any
of the following stocks:
Totals only need be shown, e. g., "Loans on stock of affiliates, $10,000, 100
•
shares; $35,000, 200 shares."
(16) Omit items 4 and 5, page 7; items 10, 11, 14, and 15, page 8; schedule 1,
Page A (salaries) and item 5, page B.
(17) Pencil copies of reports of examination of branches in the southern
division should be promptly forwarded to examiners for review with credit
department, or that he may arrange for such conference in important cases, with
the examiner who makes the examination. If.for any good reason you desire
to personally discuss criticisms with the credit department, please so advise
When transmitting your report.
(18) In submitting your monthly budget report, please show expenses as a
separate item. (This will be included in the chief examiner's office with
subdistrict A).
Respectfully,
T. E. HARRIS.
SAN FRANCISCO, CALIF.
To the manager, Branch
•
DEAR SIR: In order to facilitate an effective examination of the
you are requested to prepare
and its branches as of the close of business
In triplicate and forward to T. E. Harris, chief national bank examiner, the
following schedules in duplicate retaining triplicate for your files. It is important
that this data be forwarded at the earliest possible moment and that totals of
schedules agree with daily financial statements.
In order that there may be uniformity, all branch managers must use legal size
Paper in preparing schedules, and place the name of your branch on each sheet
of the report. If you do not have a supply of legal paper, purchase a supply
locally.
Schedule No. 1.—Statement of assets and liabilities as of above date on the form
Used in submitting this information to the head office. This includes all departinents.
Schedule No.2.—All loans to directors,officers and employees,including members
of the board of directors of the head office, and advisory board of any branch,
With detailed list of collateral or security thereto.

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BRANCH, CHAIN, AND GROUP BANKING

Schedule No. 3.—Loans to corporations in which any director, officer, employee
or advisory board member is interested, with detailed description of collateral or
security thereto, together with name of party interested therein.
Schedule No.4.--List of all overdrafts of directors, officers or employees showing
date of inception. Also list of all other accounts showing overdrafts which are of
more than six months' standing. (This schedule will not balance with D. F. S.).
Schedule No. 5.—A detailed list of public funds on deposit, showing name, title
and address of officer who controls the account, amount of deposit and rate of
interest paid thereon (including deposits of all Government, State, county and
municipal authorities.).
Schedule No. 6.—All individual deposits (not including public funds, savings
deposits, or certificates of deposit) on which interest is paid, omitting names,
but showing aggregate amount for each rate paid. (This schedule will not
balance with any account on D. F. S.)
Schedule No. 7.—Schedule of all unsecured loans, showing name of borrower,
amount of loan, and, if past due, date to which interest has been paid.
Schedule No. 8.—Schedule of all secured loans, showing name of borrower,
amount of loan and, if past due, date to which interest has been paid and an
itemized list of collateral or security thereto.
Schedule No. 9.—List in detail all "Suspense resources" showing collateral
or security thereto.
schedule No. 10.—Schedule of all loans secured by real estate mortgage or
deed of trust giving details provided for in pro forma schedule attached. In
column 8 of the schedule indicate whether secured by improved farm land
(I. F.), improved city property (I. C.), or unimproved real estate (unimp.).
If mortgagd was taken to secure a debt previously contracted in good faith
this fact should be indicated by "D. P. C.". Also indicate in column 8 on
past due items whether interest is payable semiannually (S. A.), quarterly
(Q.), or monthly (M.) and date to which interest has been paid. (Property is
within legal boundary if located in Federal reserve district.)
Schedule No. 11.—Schedule all bonds, warrants, and other securities, showing
par value, name, maturity, book value, and interest rate.
See specimen schedules attached for your guidance.
Yours very truly,
Chief National Bank Examiner,
Federal Reserve District.
Branch managers should compile data asked for on legal size paper. The first
page of each schedule must bear the columnar headings indicated below; and
must bear the name of the branch.
Schedule No. 1.—This must be compiled on your regular form of report to head
office (Forms GL, lx, and GL, 2x):
Schedule No. 2.—Loans to directors, officers, employees, and advisory board
members:
Amount

Name

Collateral or security in detail

Schedule No. 3.—Loans to corporations in which directors, officers, employees,
of advisory board members are interested:
Name

Amount

Name of party interested

Collateral or security

BRANCH, CHAIN, AND GROUP BANKING

139

Schedule No. 4.—Overdrafts:
Name

Amount

Date of inception

If a director, officer, or employee, so state

Schedule No. 5.—Public funds on deposit:
Name of official

Title

Address

Amount

Interest
rate

Schedule No. 6.—Interest paid on individual deposits:
Two per cent on deposits aggregating.
Two and five-tenths per cent on deposits aggregating, $
Three per cent on deposits aggregating, $
Three and five-tenths per cent on deposits aggregating, $
Four per cent on deposits aggregating, $
Over 4 per cent on deposits aggregating, $
Total, $
Schedule No. 7.—Unsecured loans. Indicate maturity and date to which
Interest has been paid only on those that have passed date of maturity, and on
demand paper when more than six months' interest is accrued and unpaid. Also
indicate on past-due notes whether interest is payable semiannually (S. A.),
quarterly (Q.), or monthly (M.):

Name of borrower

Amount

Maturity

Date to which interest is
paid and how payable
(S. A.)(Q.)(M.)

Schedule No. 8.—Secured loans.
Name of borrower

Amount

Maturity if past due

Schedule No. 9.—Suspense resources:
— ---Date taken
Name of debtor

Date to which interest is paid (if past
due)

Amount

Collateral or security

Collateral or security

BRANCH, MAIN, AND GROUP BANKING

140

Schedule No. 10.—List of real estate loans (special form inclosed):
Schedule No. 11.—Bonds, warrants, and other securities:
Par value

Description

Maturity and interest rate

Book value

List of real estate loans (number of bank,
1

2

Name of borrower

Amount
of loan

3

1

6

7

4

State
propwhether Iserty
Estiby located
mated Date mort- Maturity secured
• •
value of gage taken of mortgage improve
within
farm or
i property
legal
other
property boundary
0

,

Total

5

p,
i,,
s l;,„,
'— ''''

,

The CHAIRMAN. Now, referring to the affiliated companies, you
have stated that you thought it proper that the comptroller be
permitted to examine the affiliated companies—companies affiliated
with national banks, and, I am supposing, State member banks of the
Federal reserve system?
Mr. POLE. I had no reference to State members banks because
we have no supervisory powers over them.
The CHAIRMAN. You are speaking particularly of the national
banks?
Mr. POLE. Yes, sir.
The CHAIRMAN. In your examination of national banks, where
there are affiliated companies, have you ever had any access to
affiliated companies in your examination?
Mr. POLE. We have not, except occasionally banks will voluntarily
permit or request us to inspect the assets of an affiliate. We have not
legal authority to do so.
The CHAIRMAN. But you have,in certain instances, been permitted
to examine the affiliated companies?
MT. POLE. Yes, sir.
The CHAIRMAN. That is optional, however, with the banks?
MI. POLE. Yes.
The CHAIRMAN. As to whether you do that or not?
Mr. POLE. Yes.
Mr. FENN. May I ask just one question?
The CHAIRMAN. Yes.
Mr. FENN. Were those inspections of the affiliated companies,
so called, at the request of the banks or bank, or were they at your
request that you should be allowed to examine them?
Mr. POLE. At our request or even at the request of the bank.

hk.

BRANCH, CHAIN, AND GROUP BANKING

141

Mr. FENN. Sometimes the bank might think it would be to their
benefit to have a certification from you?
Mr. POLE. They feel that way; a great many of them.
Mr. FENN. They think it a good idea to have you check up on them?
Mr. POLE. Yes, sir.
Mr. LETTS. Will you get a definition of the term "affiliated companies" into the record at this point, Mr. Chairman?
The CHAIRMAN. Yes; we will be glad, Mr. Pole, if you will give us
the definition of an affiliated company?
Mr. POLE. The stock of an affiliated company is usually held in
trust for the benefit of the shareholders of the national bank and is a
State corporation with power to deal in stocks and bonds, make
investments, and do such other things as are permitted under its
State charter.
The CHAIRMAN. In addition to that, would that include the
ownership of the State bank?
Mr. POLE. Among its investments might be found the stock of
State banks.
The CHAIRMAN. In such a case as that, does your thought extend
to the access, for examining purposes, of State banks, where control
of such an institution is vested in an affiliated holding company?
Mr. POLE. My thought would hardly extend that far, Mr. Chairman. My particular reason for examination would be that the close
affiliation of the stock of the affiliated company with that of the
national bank may be such as to affect the national bank should the
affiliated company become in anyway involved.
The CHAIRMAN. Where a securities company owns control of a
State bank, whose solvency would affect the holding company and the
holding company would affect the national bank, should you not
have access to an examination of such a State bank?
Mr. POLE. I hardly think it would be necessary to carry it to the
Point of examining the State bank any more than it would be to
examine any other institution whose stock might be carried as an
asset of the corporation. It would be possible to determine the value
of the assets of the securities company without that.
The CHAIRMAN. Referring to the stock ownership of affiliated companies, I understand some affiliated companies' entire stock is owned
by the stockholders of a national bank and there are other companies
where they are not the same stockholders, but the stock is scattered,
and simply controlled either through control of the officers and
management or control of the stock, and the minority control would
be in the hands of the public. Is that a fact?
Mr. POLE. As far as I know, I think there may be some such
instances.
Mr. LETTS. Do you mean that the stock of the affiliated company
is held by the stockholders of the national bank as individuals or
held in trust for all of the stockholders of the national bank?
The CHAIRMAN. It might be either way. I am seeking information
here. I will be glad to have Mr. Pole answer that.
Mr. POLE. In the ease of national banks the stock is usually held
in trust for the benefit of the shareholders of the national bank.
The CHAIRMAN. It has happened, has it not, in the past where
national banks have declared a dividend and organized an affiliated
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BRANCH, CHAIN, AND GROUP BANKING

company from the dividend, that the entire capital has come as the
result of the declaration of the dividend of the bank?
Mr. POLE. That is the case.
The CHAIRMAN. This is done with the approval of the comptroller
always?
Mr. POLE. No; I would say not. The comptroller would not have
to approve such a thing as that.
The CHAIRMAN. It could proceed without his approval?
Mr. POLE. If a bank declares a dividend, it is entirely a matter for
the shareholder to decide what he does with that dividend, whether
or not he invests in the stock of a securities company or something
else.
The CHAIRMAN. We have these various methods of organization,
and control of affiliated companies. The national bank law, as I
understand it, forbids the purchase by the bank itself of the stock
of the bank. That is correct, is it not?
Mr. POLE. Yes, sir.
The CHAIRMAN. A national bank is not permitted to deal in its
own stock in any manner whatsoever?
Mr. POLE. A bank may acquire its own stock to secure a previous
indebtedness.
The CHAIRMAN. It has come to my attention that some of these
affiliated holding companies, where the entire capital stock is owned
by the same stockholders as the national bank, have been buying
national-bank stock—the stock of the affiliated national bank.
Would you consider that to be legal under the national bank act?
Mr. FORT. Will you state that question over, please?
The CHAIRMAN. I was stating where the stock of a company affiliated with a national bank, is 'buying the national-bank stock, the
purchase of which is forbidden under the law to the bank itself, but
is purchased by the holding company
Mr. FENN. The stock in the parent company?
The CHAIRMAN. In other words, that which is prohibited in the
national bank law to a national bank, is being carried on by the
purchase and sale by an affiliated company. Is that an evasion of
the law, or of the intent of the law, or is it legal?
Mr. POLE. Where a State corporation is permitted to buy stock,
I think it would be legal for it to purchase stock in a national bank
with which it might be affiliated. As to whether or not I would
deem that advisable if carried too far, is of course another question.
The CHAIRMAN. There was one particular case called to my attention—and I do not want to give any arbitrary figures, because I do
not know whether they are exact figures—where one of the affiliated
companies, the stock being owned entirely by the same interests as
owned the national bank, purchased the controlling interest in the
stock of the bank at a price of $350 to $400 a share. The fact that
they were purchasing the stock ran the stock up to between $700
and $800 per chare—just the mere operation of the demand for the
purchase of that stock.
Then I understand other circumstances arose, perhaps through the
crash of last fall, where the stock depreciated in value again, and that
the control of this national bank now rests entirely in the hands of
the affiliated company whose stockholders are exactly the same.

Le

3
3

BRANCH, CHAIN, AND GROUP BANKING

143

Do you think such a condition as that should be permitted; or should
it be denied?
Mr. POLE. I should think any manipulation of national banks
would be objectionable.
The CHAIRMAN. Is not that a manipulation, to avoid the law?
Mr. POLE. Such a case as you speak of might be so termed.
The CHAIRMAN. It might be construed as a dummy company,
might it not?
Mr. POLE. Yes; it might be so construed.
The CHAIRMAN. Now, in regard to the examination of national
banks and trust departments, which are created by national banks,
under section 11.-K of the Federal reserve act, which I think the
national banks are permitted to do—to have trust departments
and carry on fiduciary relations—are your examiners equipped to
handle that increasing amount of trust business?
Mr. POLE. We are preparing for a more comprehensive examination
of the trust departments, Mr. Chairman. That is an extremely
technical and difficult operation. We are training the men and are
endeavoring to cope with that situation.
The CHAIRMAN. That is an increasing responsibility that comes
through the growth of the trust business being conducted by the
national banks?
Mr.POLE. Yes.
The CHAIRMAN. Now, as to the method of examinations: I understand that so far as the examination of State banks is concerned, that
is done by the Federal reserve and your department has nothing
to do with it?
Mr. POLE. Nothing whatever to do with State banks.
The CHAIRMAN. Do the Federal reserve people ever call upon you
to examine a State bank?
•
Mr. POLE. No.
The CHAIRMAN. Now, as to the expense of these examinations.
Before I take that up in detail, what arrangement have you with
these big banks as to the payment for these continuous examinations?
How is that worked out?
Mr. POLE. We assess the bank on the basis of its total resources.
The CHAIRMAN. Well, is the cost of examination under a con.
tinuous plan such as you are now pursuing, more costly to those
banks than it would be by making individual examinations of the
parent banks and the branches?
Mr. POLE. It is not more costly to the banks, because under the
law a bank shall be assessed on its resources.
The CHAIRMAN. So, the same—
Mr. POLE. So, we do not assess each branch separately.
The CHAIRMAN. But the cost of that examination is levied just
the same as it is on other banks?
Mr. POLE. Just the same.
The CHAIRMAN. Does that actually cover the cost of examination
of these special groups?
Mr. POLE. Practically so. In the large banks, it about covers
the cost. However, I have it in mind to recommend an amendment
to the law which will permit an additional charge for each branch
examined. But we have not done that yet.

144

BRANCH, CHAIN, AND GROUP BANKING

The CHAIRMAN. Will you place in the record a statement showing
just how you levy and collect the assessments for the examination of
banks and show the cost over a period of the last five years—the
annual cost. I would also like to have you put in a list of the names
and addresses of your national bank examiners now in your service,
including their assistants; the chief national bank examiners and their
assistants, and the salaries paid?
Mr. STRONG. And the number?
The CHAIRMAN. Including the number. You can do that, Mr.
Pole?
Mr. POLE. Oh yes, and we will be glad to.
At the completion of an examination the examiner prepares a
bill to cover the cost of the examination. The bill is based upon
minimum charge of $50 on assests amounting to $25,000, the remaining assest are assessed 3 cents on each $1,000.
The following is a statement showing the annual cost of examination
of all national banks for the past five years:
1925
1926
1927
1928
1929

$2, 174,428. 74
2, 195, 709.69
2,334, 705. 72
2, 352,009. 95
2, 499,657. 68

National-bank =miners and assistants, by Federal reserve districts, March 5, 1930
DISTRICT NO. 1
Name

Address

F. D. Williams, chief examiner

Federal Reserve Bank IttiMug, Bos. $13,000
1
ton, Mass.
Hartford, Conn.
4,500
Providence, It. I
4,100
Manchester, N. II
4,200
Boston, Mass
5, 100
do
3, 300
Portland, Me
3,300
Boston, Mass
4,100
do
7,000
do
5,300
Hartford, Conn
1,000
Portland, Me
2, 01 0
Boston, Mass
2, 150
2.000
do
do
1,100
1,020
do
do
2,300
2,440
do
2, 100
_do
do
3,000
2,040
Rutland, Vt
Boston, Maas
1.620
1,620
do
Providence, R. I
1,020
1,740
Boston, Mass
_do
2700
Manchester, N. II
2, If 0

Thomas E. Dooley, examiner
Otis, M. Freeman,examiner
Aloysius W. Green, examiner
Michael J. Hurley, examiner
John Isaac, examiner
W. P. McCall,examiner
Daniel F. Murphy,examiner_
Edwsrd F. Parker, examiner
Frank J. Ryan,examiner
George M. Bernier, assistant
Clyde A. Campbell, assistant
Francis Carolan, assistant
Medville L. Clark, assistant
Henry V. Cunningham, Jr., assistant
Ernest G. Flint, assistant
W. C. Fridstrom, assistant
Gerald Griffin, assistant
Russell A. Hersee, assistant
Julian R. Hohenstein, assistant
Griffith Wm.Jones, assistant
Daniel I'. Miller, assistant
Gordon I. Miller, assistant
Harold Wm. Randall, assistant
George A. Smart, assistant
Howell B. Voight, assistant

Allan F. Wright, assistant

DISTRICT
Owen T. Reeves, Jr., chief examiner
Cecil Ashwood,examiner
Otis W. Beaton, examiner
Harold W. Black, examiner
Francis S. Clarke, examiner
Raymond G. Dann, examiner
Carlos B. Dawes, examiner
Andrew MacKenzie Douglas, examiner
C. C. Francis, examiner

Salary

NO. 2
•
$25 Federal Reserve Bank Building, $20,000
New York City, N. Y.
Buffalo, N. Y
3,900
New York, N. Y
4.200
Buffalo, N. Y
$,000
Kingston, N. Y
3,000
Utica, N. Y
4,0(5)
Albany, N. Y
2, 700
New York,N. Y
3,000
do

BRANCH, CHAIN, AND GROUP BANKING

145

National-bank examiners and assistants, by Federal reserve districts, March 5, 1930Continued
DISTRICT NO. 2-Continued
Name
Paul L. Hotchkin, examiner
Peter J. Lorang, examiner
Albert P. Luscombe, examiner
A. B. McCans, examiner
Chas. J. Machleid, examiner......
Robert Neill, examiner
Thos. J. O'Connor, examiner
Harold P. Robinson, examiner
J. Oscar Roots, examiner
Lewis A. Shea, examiner
William F. Sheehan, examiner
Raymond R. Shroyer, examiner
E. Stewart, examiner
Jesse M. Strong, examiner
John L. Watts, examiner
Edward B. Wilson, examiner
Harold C. Adams, assistant
Ferdinand A. Barg, assistant
John W. Beaton, assistant
David S. Birch, assistant
Edwin C. Boa), assistant
Melvin J. floe, assistant
Edward C. Boyce, assistant
John- Charles Brogan, Jr., assistant
Irvin N. Clary, assistant
Arthur H. Coe., assistant
William G. Coo, assistant
Donald S. Day, assistant
Wyman C. Donaldson, assistant
Thorpe G. Drain, assistant
Cauldwdll A. Dunham, assistant
Van Wert Ellis, assistant
Walter V. Ferris, assistant
Gilbert W. Gardner, assistant
Edmund J. Graves, assistant
Gordon R. Graves, assistant....
Harmon Leon Hensley,. assistant
Edw. N. Howland, assistant
John J. Irwin, assistant
Irwin L. Jennings, assistant
Lewellyn A. Jennings, assistant
Walter Larsen, assistant
Felix J. McCarthy, assistant
Francis X. McKeone, assistant
Victor M. Meister, assistant
Harry Messer, assistant
O. S. Nichols assistant
George W. Nielsen, assistant
Knud Ott, assistant
Donald Patterson, assistant
Benjamin Peticolas, assistant
Herman L. Pritchard, assistant
Oliver B. Proctor, jr., assistant_.Donald E. Pugh, assistant
Harold A. Reitz, assistant
John R. Reynolds, assistant
Richard Sailer, assistant
Joseph A. Sales, assistant
Ernest John Scharpf, assistant
Arnold F. W. Schneider, assistant
Harold Jesse Seeley, assistant
Joseph James Silas, assistant
Kendrick J. Smith, assistant
A. Kenneth Spaulding, assistant
Francis R. Steyert, assistant
Charles F. Strenz, assistant
R. B. Stringfellow, assistant
Clarence A. Clary, assistant
Gerald F. Varnum, assistant
Chester I. Wenman, assistant
Franklin Parker West, assistant
Adam Wetzel, assistant
Wm. F. Wilkinson, assistant
Herbert G. Wing, assistant
George W. Wood, assistant

Address
Watertown, N. Y
New York, N. Y
do
do
do
do
Geneva, N. Y
New York, N. Y
do
do
do
do
do
Albany, N. Y
New York, N. Y
Albany, N. Y
New York, N. 1"
do_
do
do.
do
Albany, N.
New York, N. Y
do
do
do
Albany, N. I'
Watertown, N.
New York, N.
do
do
do
do_
do
do
do.
do
do
do_
do_
Buffalo, N.
New York, N. Y
do
do
do
do
Buffalo, N.
New York, N. Y
do
do
do
do
do
Albany, N. Y
New York, N. Y
do
do
do
do
Utica, N. Y
Buffalo, N. Y
New York, N.Y
Buffalo, N. Y
Albany, N. Y
New York, N. I'
do
do
Kingston, N. Y
New York, N. Y
do
do
do
do
do
do

Salary
$4,'2(10
7,000
4, 200
9,800
4,000
6,500
3,300
3,600
7,000
4,000
7.000
3,5(5)
3.000
5,000
4,200
6,000
2,620
1,800
3,500
1,500
2,000
2,100
2.620
2,400
2, 520
1, 520
1,800
2.220
1,800
2,000
2, 400
2,400
1,920
2,160
2.400
2, 280
2, 100
3,800
2,520
2,000
1,64)
4(K)
1,800
3.000
2,400
3, 120
2,000
2,100
2,520
2,400
1,920
1,800
2,000
1,620
3,000
2,220
2,520
3,300
2,100
2,680
2,400
2,700
1,600
2,200
3,000
2,640
2, 720
2,040
2,520
2,520
1,620
2,400
2,240
1,920
2,640

A

146

BRANCH, CHAIN, AND GROUP BANKING

National-bank examiners and assistants, by Federal reserve districts, March 5, 1930Continued
DISTRICT NO. 3
Address

Salary

1500 Walnut Street, Room 1603, Philadelphia, Pa.
Philadelphia, Pa
do
Wilkes-Barre, Pa
Lancaster, Pa
Philadelphia, Pa
lo
Reading, Pa
Philadelphia, Pa
Altoona, Pa
Philadelphia, Pa
Williamsport, Pa
Ilarrisburg, Pa
Sunbury, Pa
Philadelphia, Pa
do
Reading, Pa
Philadelphia, Pa
Altoona, Pa
Philadelphia, Pa
do
do
do
Lancaster, Pa
Reading, Pa
Philadelphia, Pa
do
do
do
do
do
do
do
do
Sunbury, Pa
Philadelphia, Pa
Williamsport, Pa
Ilarrisburg, Pa
Philadelphia, Pa
do
Wilkes-Barre, Pa
Philadelphia, Pa

$15,000

Name
Stephen L. Newnham, chief examiner
Edward A. Allanson, examiner
William B. Baker, examiner
Alfred Boysen,examiner
Henry B. Davenport, examiner
R. Gordon Finney, examiner
Charles 11. Hartman, examiner
John li. Ketner, examiner
Francis .1. McGinnis, examiner
George L. Madill, examiner
Frank T. Ransom, examiner
Joseph H. Siebert, examiner
George F. Smith, examiner
Vernon G. Snyder, examiner
Lloyd W. Stover, examiner
Marshall Abrahamson, assistant_
Norman H. Anderson, assistant
Carl B. BaIdt, assistant
Norman 0. Bloom, assistant
John Calvin 13rachbill, assistant
Albert A. Burford, assistant
Roy F. Cowan, assistant
Howe MacLean Crawford, assistant
Ira L. Hall, assistant
Frank B. Hower, assistant
Samuel N. Jones, assistant
.1. Elmer Kil'mond, assistant
William A. Lank, assistant
J. Wesley Little, assistant
B. J. McGilvery, ass.stant
Joseph A. McLaughlin, assistant
Conrad Melas, assistant
Russell K. Metz, assistantM. J. AI uldowney, assistant
Edward J. O'Rourke, assistant
Troy Rhoads, assistant
Raymond W. Scharfenberg, assistant
Dwight Andrews Segar, assistant
Ray DuPont Smith, ass.stant
Leon A. Stanger, ass,stant
Lenwood M.'VanOrsdale, assistant
Richard F. Walsh, assistant

6,000
7,000
4,200
6,200
3,000
4,800
3,000
3,000
4,200
5,800
3,000
4,200
4,800
3,600
2,500
1,800
1,800
1,620
1,500
1, 740
2,040
2,044)
2,040
1,620
3,300
3,010
1, 5110
1,500
2,160
2, 700
1.920
1,860
1,800
1,500
1, 740
1,800
1,740
1.860
1,680
2,040
2, 160

DISTRICT NO. 4
William Taylor, chief examiner
Jas. W. Austin, examiner
Ben .7. Blaakley,examiner
Addison A. Clarke, examiner
A. Burton Faris, examiner
Ira J. Fulton, examiner
George R. Oaskell, examiner
Lester P. Hauschild, examiner
Floyd P. Hunt,examiner
Harry L. Lanum,examiner
Louis A. Norman, examiner
Richard Rossman, examiner
William J. Schechter, examiner
Michael II. Sims, examiner
George H. Smith, examiner
Loren Swenson, examiner
Frank G. Abbey, assistant
Donald W. Allen, assistant
Joseph V. Denney, Jr., assistant
Chapman C. Fleming, assistant
William B. Frantz, assistant
Herbert L. Gernandt, assistant
Howell H. Harris, assistant
Wilmot Louis Harris, assistant
Clyde Hendrix, Jr, assistant
Preston P. Kellogg, assistant
Walter J. Kunzi, assistant
Marcellus R. Lare, Jr., assistant
Wendell C. Laycock, assistant_
Paul 0. Malone, assistant

715 Federal Reserve Bank Building, $10,000
Cleveland, Ohio.
3,300
Cleveland, Ohio
4,200
Wheeling, W. Va
4,'200
Lima, Ohio
4,200
Richmond, Ky
6,500
Cleveland, Ohio
4.000
Mansfield, Ohio
3,000
New Castle, Pa
2,700
Cleveland, Ohio
3,300
Ohio
Cincinnati,
3.600
do
3,500
Pittsburgh, Pa
7,000
do
5,000
do
5, 100
Greensburg, Pa
4,500
Painesville, Ohio
1,920
Mansfield, Ohio
1,560
Pittsburgh, Pa
do
1, 320
1,620
Cleveland, Ohio
2,040
Pittsburgh, Pa
1,740
do
2, 160
Columbus, Ohio
1,500
Cleveland, Ohio
1,500
Painesville, Ohio
2.000
Richmond, Ky
2, 120
Cincinnati, Ohio
1,680
Pittsburgh, Pa
2, 160
Columbus, Ohio
2, 160
Pittsburgh, Pa

BRANCH, CHAIN, AND GROUP BANKING

147

National-bank examiners and assistants, by Federal reserve districts, March 5, 1930Continued
DISTRICT NO. 4-Continued
Address

Name
Charles J. Miller, assistant
Robert D. O'Grady, assistant
Ira Paine, assistant
John H. Polo, assistant
Sherman C. Shull, assistant
E. Trimble Smith, assistant
Harold N. Smith, assistant
Benjamin D. Staggers, assistant
Gordon E. Starkey, assistant
'
,
eon F. Stroefer, assistant
Curtis D. Thomas, assistant
Chelsea E. Underwood, assistant
11. M. Walker, assistant

New Castle, Pa
Pittsburgh, Pa
do
Cleveland, Ohio
Greensburgh, Pa
Columbus, Ohio
do
Wheeling, W. Va
Lima, Ohio
Pittsburgh, Pa_
do
Painesville, Ohio
Cleveland, Ohio

Salary
$1,900
2, 160
2,400
2.000
1,860
2,000
1,860
1,860
1,860
1,920
1,880
1,920
2,100

DISTRICT NO. 5
Ralph W. Byers, chief examiner
Joeeph A. Amrhein,examiner
Jennings I.. Bailey, examiner
John W. Dalton, examiner
Charles W. Green, examiner
Thos. F. Kane, examiner
John R. McMullan, examiner
Chas. W. Motter, examiner
F. C. Ockershausen, examiner
Paul C. Ramsdell, examiner
Charles A. Stewart, examiner
H. F. Stokes, examiner
D. Robertson Wood, examiner
Maurice I.. Barnett, jr., assistant
James P. Banter,jr., assistant
Wilfred H. Blanz, assistant
Douglas W. Cahill, assistant
Francis J. Clark, assistant
Lewis II. Clark, assistant
Earl B. Crabtree, assistant
James S. Ellington, assistant
Hugh W. Folger, assistant
J. Cooke Grayson, assistant
Frank A. Gunther, Jr., assistant
James C. Hopkins, assistant
William E. Howard, Jr., assistant
Vernon D. Palmer, assistant
Garrett A. Pendleton, assistant
Alton L. Powell, assistant
Robert M. Seabury, assistant
Douglas 0. Starr, assistant
William M. Taylor, assistant
William T. Vandoren, assistant
Win. H. Wheelwright, Jr., assistant

Washington, D. C
Richmond, Va
Washington, I). C
Charlotte, N. C
Cumberland, Md
Washington, D. C
do
Raleigh, N. C
Columbia, S. C
Washington, D. C
do
Huntington, W. Va
Pulaski, Va
Washington, D. C
do
do
Charlotte, N. C
Washington, D. C
do
do
do
do
do
do
Huntington, W. Va
Pulaski, Va
Raleigh, N. C
Washington, D C
Richmond, Va
Cumberland, Md
Washington, D. C
do
do
do

$10,000
4,100
4,500
4,500
4,200
4.200
4,800
3,800
3,900
4,500
4,200
3,300
5,000
2,040
1,860
2,280
1,680
2, 220
2,000
1.320
1,860
1,620
3,6(8)
1,680
1, 740
1,800
1,920
2,000
1,920
2, 160
2, 100
2,160
1,980
2. 180

DISTRICT NO. 6
Ellis 13. Robb,chief examiner
Albert A. Basham,e‘amlner
James J. Byrne,examiner
Field F. Cunningham,examiner
Clyde J. Evans,examiner
Morris Lammond,examiner
W.
w. P. Llfsey, examiner
John B. Luiken, examiner
James W.S. Aylward, assistant
Edward C. Barnes, assistant
_Wm. A. Cottingham, assistant
_need Dolab, assistant
Lori= C. Hendrix, assistant
Donald F. Houser, assistant
....Leonard C. Johnson, assistant
.."1011am H. Lewis, jr., assistant
4efferson S. McClain, assistant.
E. P. Medlock, assistant
Hiram C. Miller, assistant
Turner Rice, Jr., assistant
Wilbur W. Sasser, assistant
Aldine K. Snead, jr., assistant
Gilbert M. Stall, assistant
James M.Stooksbury, assistant

Atlanta, Ga
Knoxville, Tenn
Montgomery, Ala
Lakeland, Fla
Nashville, Tenn
New Orleans, La
Albany, Oa
Birmingham, Ala
Atlanta, Ga
Montgomery, Ala
Atlanta, Ga
do
do
do
do
do
do
do
do
Nashville, Tenn
Atlanta, Oa
do
do
do

$12,000
4, s00
3,( 00
3, I 00
5. 200
4,700
4, 200
4.700
1.500
I, 920
1,500
2,220
1.500
l,S00
1,500
1,1)20
2,000
3, 00
1,500
1, e00
1,500
1. r20
1,740
1,500

148

BRANCH, CHAIN, AND GROUP BANKING

National-bank examiners and assistants, by Federal reserve districts, March 5, 1930Continued
DISTRICT NO. 7
Address

Salary

164 West Jackson Boulevard, room
1209, Chicago, Ill.
Sioux City, Iowa
Decatur, Ill
Des Moines, Iowa
Rock Island, Ill
Chicago, Ill
Peoria, Ill
Chicago, Ill_ _
Indianapolis, Ind
Detroit, Mich
Grand Rapids, Mich
Des Moines, Iowa
Chicago, Ill_ _
Waterloo, Iowa
Chicago, Ill '
Des Moines, Iowa
Indianapolis, Ind
Milwaukee, Wis
Wisconsin Rapids, Wis
Chicago, Ill
Danville, Ill
Fort Wayne, Ind
Peoria, Ill
Chicago, III
Des Moines, Iowa
Grand Rapids, Mich
Decatur, Ill
Chicago, 111
do
do
do
do
Detroit, Mich
Chicago, Ill
Sioux City, Iowa
Milwaukee, Wis
Chicago, Ill
do.
Rock Island, Ill
Chicago, Ill
do
do
Danville, Ill
Indianapolis, Ind
do
Chicago, III
Des Moines, Iowa
Waterloo, Iowa
Chicago, Ill

$12,000

Name
A. P. Leyburn, chief examiner
Glenn W. Baugh, examiner
Robert S. Beatty, examiner
Lysle S. Burk, examiner
Willston A. Cutler, examiner
Leo D. Donovan, examiner
Samuel W. Dye, examiner
Horace S. French, examiner
Barry R. Fuller, examiner
Raby L. II opkins, examiner
E. M. Joseph, examiner
harry A. Laird, examiner
Harold E. Laufer, examiner
William R. Nolan, examiner
Henry F. Quinn, examiner
David II. Reimers, examiner
.J. Lyell Sanders, examiner
Robert K. Stuart, examiner
II. W. Walker, examiner
Maxwell M. Ward, examiner
George Robert Wilson, examiner
Chester A. Ackley, assistant
Edward C. Alderson, assistant
T. F. Barradell, assistant
Felix Brodthagen, assistant
Walter F. Busch, assistant
Orth I. Damns, assistant
Paul E. Enlow, assistant
Francis B. Fanning, assistant
Laurence B. Finn, jr, assistant
George J. Fitzgerald, assistant
Theodore Flasks, assistant
Bernard M. Flynn, assist itit
F.. L. Gustafson, assistant
Guy Richard I Wien, assistant
Edward IS. Johnson, assistant
Roger A. McLean, assistant
Francis J. Madden, assist ant
Warren F. Miller, assistant
Maurice It. Moon, assistant
Marshall NV. Murray, assistant
P. E. Norsen, assistant
William F. O'Meara. assist ant _
J. C. Patterson, assistant
Ivan L. Potts, assistant
J. C. Remington, assistant
Franklin F. Robinson, assistant
James F. Rush, assistant
Thomas it. Sayer, assistant
Joseph W. Sinnott, assistant
Lawrence B. Thurman, assistant
Max 'N'an &my, assistant
Richard J. Wainwright, assistant
Earl J. Walters, assistant ----------

Wisconsin Rapids, Wis
Des Moines, Iowa
Chicago, Ill

3,000
4,000
2,700
3,900
2,709
4,800
2,300
3,900
5, 300
4, 100
4, 200
2, 700
3, 300
3,300
3,600
3,900
6,200
8,700
3, 300
3,000
2,000
1.100
2,700
1,620
1,800
1,980
2160
1,680
1,620
2,000
2,400
2.010
2,280
1.500
2.000
1, 740
2, 160
2, 100
1,440
2. 500
3,800
I. 920
1,620
1, 980
I,620
1,620
2, 100
2,400
1, 920
2,040
1,920
1,680
1,800

DISTRICT NO. 8
John S. Wood, chief examinaer
Lewis It. Elkins, examiner
Henry Glenn Harrison, examiner
Robert K. Hooker, examiner
William IN. Kane, jr., examiner
John F. Lilly, examiner
Stuart H. Mann,examiner
Russell E. Mooney, examiner.
Edward A. Vonarb, examiner
Hal Woodside, examiner
William R. Young, examiner
Joseph D. Cowan, assistant
Robert It. Dickinson, assistant
Albert W. Doepke, assistant
Martin J. Franey, assistant
Hollis Ilaggard, assistant
Sterling Hale, assistant
James Parker Hickok, assistant
Harry II. Holekamp, assistant

1310 Federal Commerce Building, St.
Louis, Mo.
Evansville, Ind
St. Louis, Mo
do
do
Little Rock, Ark
St. Louis, Mo
Louisville, K
(*entralia,
Springfield, Mo
Memphis, Tenu.
do
Louisville, K y
St. Louis, Mo
do
do.
do.
do
..do.

$15,000
1, 20)
3,600
3,300
4,5(X)
4,'200
5,500
3,600
3,900
6,0(8)
6, 000
1.260
1,620
2, 160
2040
1,920
1,800
1,620
I, 200

MEN.1

BRANCH, CHAIN, AND GROUP BANKING

149

National-bank examiners and assistants, by Federal reserve districts, March 5, 1.930Continued
DISTRICT NO. 8-Continued
Address

Name
John D. Spires, assistant
Pope James Walker, assistant
Fred S. Wetzel, assistant
Cliff Wood, assistant

Evansville, Ind
St. Louis, Mo
Springfield, Mo
Little Rock, Ark

Salary
$1,740
1,500
1, 740
1,620

DISTRICT NO. 9
Irwin D. Wright, chief examiner
Ole A. Anderson, examiner
James II. Gentry, examiner
William F. Huck, examiner
Daniel D. McLaren, examiner
Weis Nelson, examiner_
Elmer J. O'Bleness, examiner
Louis H. Sedlacek, examiner
Henry Sevison, examiner
Lyle T. Stevens, examiner
LeRoy J. Van Brunt, examiner
Francis M. von Birgelen, examiner
Harold Lester Wray, examiner
I. Howard Barker, assistant
Lorille J. Boyle, assistant
Marvin B. Chapin, assistant
L. Harold Ickler, assistant
Lester G. Le Fevre, assistant
Robert T. Lincoln, assistant
Reynolds B. North, assistant
Walter W. Olson, assistant
Evan D. Saltzman, assistant
Prank T. Sankovitz, assistant
F. Pinkham Sherman, assistant
K. D. Van Rhea, assistant

1334 First National-Soo Line Building, $11,000
Minneapolis, Minn.
Billings, Mont
4,800
Bismarck, N. Dak
'2, 700
Minneapolis, Minn
4, 200
Fargo, N. Dak
3,300
Minneapolis, Minn
3,900
Sioux Falls, S. Dak
2, 700
do
5,000
Duluth, Minn
4,500
Minneapolis, Minn
4,500
do
3,600
do
3,000
do
3,000
do
1,680
do
1,800
do
1,800
do
1,860
do
1,800
do
2, 100
do
2,400
do
2, 100
do
1,860
do
1,980
do
1,800
do
1,860
DISTRICT NO. 10

Luther K. Roberts, chief examiner
Edgar F. Allen, examiner
Edwin J. Becker, jr., examiner
Rollin 0. Bishop, examiner
William H. Donahue, examiner
Jesse A. Fraser, examiner
Cecil W. Lyon, examiner
Walter N. Male, examiner
Pleasant V. Miller, examiner
Frank S. Nelson, examiner
David V. Penn, examiner
Charles T. Rafter, examiner
Gerhard F. Roetzel, examiner
Murdo A. Ross, examiner
Claude L. Stout, examiner
Otis W. White, examiner
Elbert L. Williams, examiner
Clarence It. Anderson, assistant
Glenn E. Anderson, assistant
Ralph A. Blackburn, assistant
Charles M. Bowles, assistant
James E. Bradshaw, assistant
Ross M. Burt, assistant
Dillard Coggins, assistant
Robert E. Cook, assistant
Merle Cushing, assistant
John C. Faulkner, assistant
Fred Oignilliat, assistant
Richard S. Goodhart, assistant
Howard N. Hardenbrook, assistant
John S. Head, assistant
Paul T. Henninger, assistant
Charles 0. Mut, assistant
William N. Ilurd, assistant
William B. Knight, assistant
Charles D. Lents, assistant
Joseph W. Morrlsey, assistant

800 Federal Reserve Bank Building, $15,000
Kansas City, Mo.
Kansas City, Mo
4,200
Clinton, Okla
8,600
Kansas City, Mo
3,900
Muskogee, Okla
4,500
Ilutchinson, Kans
3,000
Norfolk, Nebr
3,300
Denver, Colo
3,300
,' Kansas City, Mo
4,000
I Grand Island, Nebr
3,600
Oklahoma City, Okla
3,600
Salina, Kans
3,000
Oklahoma City, Okla
3,300
Kansas City, Mo
4,500
Cheyenne, Wyo
3,600
Denver, Colo
4,800
Kansas City, Mo
3,000
Oklahoma City, Okla
1, 740
Kansas City, Mo
1,620
do
1,500
Denver, Colo
1,740
Kansas City, Mo
1,500
do
2.700
do
'
do
do
do
do
do
Clinton Okla
GrandIsland, Nebr
Norfolk, Nebr
Kansas City, Mo
do
do
Oklahoma City, Okla
Muskogee, Okla
,054I

150

BRANCH, CHAIN, AND GROUP BANKING

National-bank examiners and assistants, by Federal reserve districts, March 5, 1930-Continued
D$STRICT NO. 10-Continued
Address

Name
Howard 0. Murray, assistant
Frank A. Rees, assistant
Fred L. Rees, assistant
Cecil 0. Reynolds, assistant
Edmond Tomlin Richmond, assistant
Hubert S. Robinson, assistant
Leonard H. Smith, assistant
Frank J. Tyliski, assistant
Louis F. Ward, assistant
Hilary B. West, assistant

Denver, Colo
Kansas City, Mo
do
Muskogee, Okla
Kansas City, Mo
do
Hutchinson, Kens
Cheyenne, Wyo
Salina, Kane
Kansas City, Mo

Salary
$1,440
3,000
1,200
1,800
1,440
1,820
1,800
1,800
1,620
1,740

DISTRICT NO. 11
Richard H. Collier, chief examiner
Jacob Embry,examiner
Charles W. Foster, examiner
Headley B. Gilbert, examiner
John W. Hawkins, examiner
Gilbar C. Hedrick, examiner
Bryan E. Horton, examiner
William Edgar Hutt, examiner
Ernest Lamb, examiner
F. Raymond Peterson, examiner
William W. Pierce, examiner
Walter A. Sandling, examiner
William L. Sibley, examiner
William N. Whitehurst, examiner
Grady T. Witt, examiner
Thomas M. Glass, assistant..
Lenode Goldston, assistant
Louie L. Harris, assistant
J. W. Hudspeth, assistant
Charles Godfrey Lee, assistant
Ernest O'llearn, Jr., assistant
Thomas C. Patterson, assistant
Virgil P. Patterson, assistant
Edwin B. Patton, assistant
Luther K. Roberts, Jr., assistant
Clyde Shannon, assistant
Carroll B. Spearman, assistant
Hunter L. Wilson, assistant
Leon R. Withers, assistant
Alfred R. Woodson, Jr., assistant

1706 Republic Bank Building; Dallas, $13,000
Tex.
6, 300
Dallas, Tex
4,500
San Antonio, Tex
4,700
Wichita Falls, Tex
3,600
Abilene, Tex
4,100
Dallas, Tex
3,300
Waco, Tex
1,000
Sherman, Tex
6,300
Fort Worth, Tex
4,500
IIouston, Tex
3,000
Corsicana, Tex
4,000
Dallas, Tex
3,COO
Shreveport, La
3,600
San Antonio, Tex
3,300
Amarillo,'Vex
1,800
Dallas, Tex
1,700
Amarillo, Tex
1,620
San Antonio, Tex
2,000
do
1,700
Waco, Tex
5,920
Houston, Tex
700
Corsicana, Tex
1,500
Dallas, Tex
1,700
do
1,980
do
1,700
Shreveport, La
1,800
Wichita Falls, 'l'ox
1,800
Sherman, Tex
1,900
Fort Worth, Tox
1,200
Dallas,'Vex
DISTRICT NO. 12

Thomas E. Harris, chief examiner
William II. Baldridge, examiner
Ira I. Chorpening, examiner
G. S. Collin, examiner
Anthony J. Cooke, examiner
Cornelius A. Donahue,examiner
Charles A. Glazier, examiner
William M. Gray, examiner
Marshall Hooper, examiner
R. Foster Lamm,examiner
Carve! C. Linden, examiner
Leland L. Madland, examiner..
Charles Ilarold McLean,examiner_ _
Clarence E. Morgan, examiner
Robert E. A. Palmer,examiner
Albert E. Price, examiner
John T. Rummel,examiner
Leo Shapirer, examiner
Orville C. Taylor, examiner
Aubrey F. Tolton, examiner
Max C. Wilde, examiner
Thomas B. Williams, examiner
Elmer M. Wright. examiner
Floyd Andrews, assistant
John Kenneth Barnes, assistant
Leland B. Dunham, assistant

1103 Alexander Building, San Fran- $10.000
cisco, Calif.
5, 200
Spokane, Wash
7,500
Los Angeles, Calif
5,200
Sacramento, Calif
3,300
Los Angeles, Calif
3,300
do
3,300
Pocatello, Idaho
2,500
Portland, Oreg
4,300
Seattle, Wash
5,300
Santa Ana, Calif.
3,(5X)
Boise, Idaho
7,000
Seattle, Wash
4,500
Los Angeles, Calif
3.600
San Francisco, Calif..
3,300
Seattle, Wash
3,900
San Francisco, Calif.
3,300
do
3,900
Sacramento, Calif
3,300
Los Angeles, Calif
3,600
Fresno, Calif
5,800
Portland, Om
3,000
Los Angeles, Calif
3,600
Portland, Oreg
2,240
San Francisco, Calif
1,000
Portland, Oreg
1,860
do

to
to

10

to

to

to

to

BRANCH, CHAIN, AND GROUP BANKING

151

N ational-bank examiners and assistants, by Federal reserve districts, March 5, 1950—
Continued

DISTRICT NO, 12—Continued
Name
Charles H. Franklin, assistant
Edmund
H. Galvin, assistant
R. N. Geller,
assistant
A. Earl Harris, assistant
Ray A. Hook assistant
G. W.Jorres, Jr., assistant
Francis H. Ketcham, assistant
H. E. Landis, assistant
Thomas P. McCoy,assistant
Arthur J. O'Meara, assistant
James Congdon Osborn, assistant
E. C. Overton, assistant
W.J. Peters, assistant
Louis I. Rasmussen, assistant
A. W.Scougall, assistant
H. E. Scofield. assistant
Max Spendrup assistant
Merton E. Stewart, assistant

Address
Seattle, Wash
Santa Ana, Calif
Los Angeles, Calif
do
San Francisco Calif
Los Angeles, Calif
Seattle, Wash
Los Angeles, Calif
San Francisco, Calif
Los Angeles, Calif
Portland, Oreg
Los Angeles, Calif
do
do
do
San Francisco, Calif
Los Angeles, Calif
San Francisco, Calif

Salary
$2, 100
1,800
3,240
1,620
2,400
2,300
1,500
2,820
2,340
2,280
1,800
2,340
2,220
2,040
3,480
2,340
2,400
2,280

to

to

to

to

0

to
to

to
to
0
to
to

to
to

0

0
0

0

ASSIGNED TO COMPTROLLER'S OFFICE
William P. Folger, chief examiner
Gail W. Crosser', assistant chief examiner
examiner
Reginald M. Hodgson, assistant chiefexaminer
W. Waller McBryde, assistant chief
examiner
Clarence F. Smith, assistant chiefexaminer
Charles F. Wilson, assistant chief
Adelia M.Stewart, examiner
Sumner E. Kimball, assistant
W.J. Owens, assistant

Washington,p. C
do
do
do
do
do
do
do
do

$11,000
6,500
9.000
9.000
9,000
6,000
5,500
3,600
b. 200

RECAPITULATION IN NUMBERS
Examiners------------------------------------------------------------------------------------------Assistant examiners----------------------------------------------------------------------------------

194
292
Total _ ----------------------------------------------------------------------------------------- 486

The CHAIRMAN. Are you carrying out the system of simultaneous
examination of any parent bank and its branches?
Mr. POLE. Yes.
The CHAIRMAN. They do that in the smaller groups?
Mr. POLE. In the smaller groups.
The CHAIRMAN. Of the branch banks?. .
Mr. POLE. Yes, sir; and as far as possible in the larger groups, by
covering the more important offices.
.
the larger groups
The CHAIRMAN. The reason you do not examine
is because it is physically impossible to do so with your present force?
Mr. POLE. Yes.
The CHAIRMAN. If you had a large enough force, you would rather
make a simultaneous examination of those banks?
Mr. POLE. That would be preferable. .
The CHAIRMAN. Referring to the organization of these affiliated
companies, I am not just clear as to whether or not, in your judgplant, the affiliated companies, whose stocks are owned entirely or
in part by stockholders of the parent bank or national banks—do you
consider those as legal institutions under the law?
Mr. POLE. As far as I know, Mr. Chairman, they are State chartered institutions and I have no reason to question their legality.

152

•

BRANCH, CHAIN, AND GROUP BANKING

The CHIRMAN. Do your records show the ownership of these companies, where the control of the national banks is vested in the
holding companies or these affiliated institutions?
Mr. POLE. Our records shown on July 1 of each year, where the
stock of these companies is distributed. .
The CHAIRMAN. Is it the usual practice of these companies to have
the stock of a national bank owned in the name of a company or do
they have it in dummy names?
Mr. POLE. Are you speaking of the holding corporations?
The CHAIRMAN. "Yes.
Mr. POLE. I really am not informed.
The CHAIRMAN. I am speaking of what is shown in the stock list of
the national banks as to the ownership of their own stocks—who owns
their own stocks. Do the records of the banks show clearly where
'the holdings of a majority or less than a majority or control of them
are in an affiliated company, or do you have to guess at that?
Mr. POLE. If the stock were in the name of another corporation,
of course the records would show that. It would be very difficult for
us to tell if the stock were held in the name of a dummy—the records,
of course, would not show that.
The CHAIRMAN. In some of Mr. Wingo's questions to you the
other day, he referred to State examinations, and I have understood
from you this morning that you do not have anything to do with the
examination of member banks?
Mr. POLE. That is correct as to State member banks.
The CHAIRMAN. Are you furnished with the examination sheets of
any of these examinations of State member banks which are held
entirely by the Federal Reserve Board?
Mr. POLE. They are held entirely by the Federal Reserve Board.
The CHAIRMAN. In connection with these examinations, what part
of the cost of the maintenance of your office or examinations is paid
by the Federal reserve banks?
Mr. POLE. None of it.
The CHAIRMAN. None of it?
Mr. POLE. No, sir.
The CHAIRMAN. Do you furnish the Federal reserve system with
any information as regards your examination of national banks?
Mr. POLE. Copies of reports of our examination are sent to the
Federal reserve banks.
The CHAIRMAN. Each of the 12 banks?
Mr. POLE. Yes.
The CHAIRMAN. Do they pay anything now for that?
Mr. POLE. The actual cost of typing that report.
The CHAIRMAN. What is that specific charge?
Mr. POLE. I think it is $4.50 or $5 now.
The CHAIRMAN. Will you put into the record the total receipts
from the Federal reserve to your department covering payments to
you for any part of the examination which you have rendered?
Mr. POLE. Yes. The total amount received from such source
for the year 1929 was $77,559.75.
The CHAIRMAN. DO you make any use of the examiners of the
Federal reserve?
Mr. POLE. We do, Mr. Chairman.
The CHAIRMAN. In what manner?

BRANCH, CHAIN, AND GROUP BANKING

153

Mr. POLE. We enlist their assistance in the examination of the
branch-banking systems.
C1The CHAIRMAN. They are always responsive to your calls to
assist in these examinations?
Mr. POLE. Quite so.
The CHAIRMAN. HOW many examiners do the Federal reserve
have—do you recall?
Mr. POLE. I really do not.
The CHAIRMAN. How many chief and assistant chief examiners
have you at the present time? My understanding is that you have
a chief examiner for each Federal reserve district.
Mr. POLE. That is correct.
The CHAIRMAN. That is correct, is it?
Mr. POLE. Yes.
The CHAIRMAN. And each one of those chief examiners has an
assistant, does he?
Mr. POLE. There are examiners who usually act in their stead,
When they are away for any purpose. There is not such a title in
the field as assistant chief national-bank examiner.
The CHAIRMAN. One of the regular examiners assigned to that
district acts as chief when the chief examiner is away?
Mr. POLE. Yes, sir; during his absence.
The CHAIRMAN. In your statement of the names and salaries, and
SO forth, of examiners, I wish you would also include such attorneys
as may be regularly employed by your department, their names and
ftddresses and the amount of salaries or compensation paid and also
information pertaining to those attorneys employed in connection
With failed national banks; and we will also like to have you put in a
brief as to how you handle the business in connection with failed
national banks. You have a department,I believe, that handles that?
Mr. POLE. Yes.
The CHAIRMAN. If you will give us a statement as to how that business is handled, we will appreciate it.
Mr. POLE. I shall be glad to do so.
(The statement referred to as being furnished by Mr. Pole is as
follows:)
When a national bank is insolvent, the Comptroller of the Currency, in accordepee with the statute, appoints a receiver for such bank; and if there is no possibility of reopening the bank as a going concern, the receiver thus appointed by
the comptroller proceeds to liquidate the bank and pay its creditors to the limit
Which may be obtained from the realization on its assets. These receivers are
usually appointed from men of experience in this line of work and who may be
errned trained receivers, since they are shifted from receivership to receivership
In accordance with the demands of the work. Such receivers are not paid on a
eonunission basis, as was done in the earlier days of receiverships, but are paid
on a flat salary basis.
.As of December 31, 1929, there were 424 insolvent national banks being adhunistered by 172 receivers, some receivers in the interest of economy having
Charge of more than one bank. The average yearly salary paid these receivers
On the basis of 424 banks was $1,681 per bank; or, on the basis of 172 receivers,
$4,144 per year per receiver. Under the law, the liquidation of national banks by
receivers is made under the supervision of the Comptroller of the Currency. As
an example, all compromises of debts and all sales of assets are approved by the
Comptroller; all stock assessments are levied by the comptroller, and all dividends
are paid by the comptroller through the issuance of checks. To maintain this
sopervision it is necessary for the comptroller to have in his office a division giving
attention entirely to insolvent matters.

154

BRANCH, CHAIN, AND GROUP BANKING

There is attached hereto a chart showing the personnel of this division as of
December 31, 1929, at which date there were 73 employees, 2 field examiners,
and 4 employees in the office of the general receiver, the general receiver being a
receiver who takes over the liquidation of these receiverships which have been
practically closed out, with the exception of certain miscellaneous assets and unfinished litigation which would not justify the expense of the continuance of a
resident receiver.
In this division the supervising receiver, the two assistant supervising receivers,
and the receivers shown on the chart as district receivers are all men of experience
from the field, who have been detailed to the comptroller's office by virtue of
their wide knowledge of conditions, their training, and their experience in liquidation work. These men have been brought from various sections of the country
and give direct attention to the receiverships in the sections, the conditions of
which they are familiar. As of December 31, 1929, the total amount of resources
of the insolvent national banks then in liquidation being supervised by the
comptroller's office through the insolvent division was, as of the date of the
failure of the various banks, in the aggregate sum of $344,486,598.
It can be readily appreciated that in these failed banks almost every question
of law can arise. In view of the complexity of these various questions and the
large amount of litigation, with numerous cases going to the Supreme Court of
the United States, it has been necessary to maintain a legal staff in connection
with this insolvent work. At the present time this staff consists of the general
counsel and two assistants; and in accordance with the chairman's request,
their salaries are as follows:
General counsel
$6
9; 000
One assistant general counsel
One assistant general counsel

The CHAIRMAN. I would like to ask, if in your judgment,
examiners and their assistants are properly compensated?
natiolbk
Mr. POLE. I should say the scale of salaries of examiners is quite
low.
Mr. STEAGALL. Does not the comptroller's office fix those salaries?
Mr. POLE. Yes.
Mr. STEAGALL. That is my recollection of the law.
Mr. POLE. With the approval of the Federal Reserve Board.
The CHAIRMAN. You are speaking now of examiners. How about
the assistant examiners?
Mr. POLE. I think, as a general thing, the assistants are better
paid than the national bank examiners.
The CHAIRMAN. At what salary do you start examiners and assistant
examiners?
Mr. POLE. Assistant examiners are usually started at $1,500 or
$1,600 a year and given the usual per diem in addition to their
expenses while away from headquarters.
The CHAIRMAN. $6 a day?
Mr. POLE. Yes, sir. Examiners quite often start as low as $3,000,
in accordance with their experience and aptitude for the position.
They also receive their regular per diem and expenses when away
from headquarters.
The CHAIRMAN. Sonic examiners are drawing less than $3,000, are
they not?
Mr. POLE. Some of the examiners of the junior grade.
The CHAIRMAN. At what salary do you start them?
Mr. POLE. There is no fixed salary for them, but it is usually
$2,700—$2,500 or $2,700.
The CHAIRMAN. What is your experience as to the turnover among
your examiners?
Mr. POLE. It is quite large.

COUPTECLIER OP THE C(JIHIEN CT

Supervising Receiver

(1)

Steno (1)
AS.Si stant Supervi sing Receivers

COILRESECEDE/ICE
(1)

LEGAL
(6)

Rece iv er

General Counsel

(1)

DI STRICT
..*.I?ERVI SION

(17)

(1)1

nuance Clerk

District Receivers (7) I

(2)1

Clerks

Stenographers

(10)

Steno (1)

E

MISSENGIRS
(2)

(1)

Messenge rs

Stenographer (1)

Clerk

(7)

(1)

..4...istant Auditors (11)

I

Steno (2) 1

MISCELL ANDJJS
(2)

Receiver

I

Chief Auditor (1)

(1)]

Asst. Finance Clerk (1)1

Steno (1-fl

Assi stoat Counsel

Tile Clerk (1)

(1)

Steno

EMPLOYEES
LOANED
(1)

FILES
(6)

AUDITING
(13)

FINANCE AND ACCOUNTS

(17)

(2)

stenographer (1)

Organization and Personnel of
Division of Insolvent Nati °nal
Banks as of December 31, 1929 (FaeW)

GENERAL RECEIVERS
(4)

YIELD TJUNINKEtS
2)

Examiners

—7271

ornez

General Recei ver

(151

Clerks
:10. (Faeo p. 15-I.)

(2) I

BRANCH, CHAIN, AND GROUP BANKING

155

The CHAIRMAN. What is the reason for that?
Mr. POLE. An examiner develops perhaps to the point where he
attracts the attention of a bank and they offer him a position which
is much more remunerative than we can pay.
The CHAIRMAN. Taking into consideration the importance of the
position of national bank examiners, clothed with the authority they
have, as well as their assistants, do you not think that the quality of
men employed could be improved a great deal by paying them
higher salaries? In other words, it seems to me that we should have
a very high type of man to be charged with the responsibility of
examining these important banking institutions. I am not intending
in this statement, to reflect upon your present corps of examiners.
I think they are a splendid lot of men—at least those that I have
come in contact with—but I am under the impression that they are
greatly underpaid for the type of work they are doing.
Mr. POLE. Yes.
The CHAIRMAN. I believe you are losing a great many men in your
department to-day because of the fact they are underpaid, and
I believe that you would greatly improve your service if you would
pay them a higher wage. The type of service they render certainly
entitles them to a better salary than they are now getting.
Mr. POLE. I think you are right, Mr. Chairman.
The CHAIRMAN. I sf37 that because I am deeply impressed with the
importance of improving these examinations because of the rapid
and diversified development of the banking systems.
I believe that you have a problem on your hands and I believe it is
most important that you should have the right type of men and that
they should be better paid because they are coming into contact
with the highest officers and managers of national banks; in other
words, they must sustain a certain standard of living to enable them
to meet men drawing salaries of from $10,000 to $50,000 a year in the
management of banks. For that reason, it seems to me— and I am
glad you agree with me—that the service could probably be improved
by paying these men a higher wage.
Mr. POLE. I think there is no doubt of what you say. I think,
however, it would be extremely difficult for us ever to compete in the
matter of salaries with commercial banks. Men getting $5,000 a year
walk into positions of $15,000 a year and men who are getting $7,500 a
year now and then $15,000 or $20,000 a year. It is extremely difficult
to compete with commercial banks in matters of salary.
Mr. FENN. Is it not a fact that your ablest men are drawn away
from you by the coinmercial banks?
Mr. POLE. Yes.
Mr. FENN The ability shown by them attracts the attention of
the commercial banks and their large salaries take them away from
you?
Mr. POLE. Yes, sir; those are the men we lose.
Mr. FENN. Is it not really a training school?
Mr. POLE. For the examiners; yes. We usually consider it such.
Mr. FENN. They go to work at these low salaries with the expectation of getting higher salaries from commercial banks?
The CHAIRMAN. Mr. Pole, have there been any complaints by the
banks as to the amount of charges levied against them for these
examinations?

156

BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. No complaints, Mr. Chairman. I might qualify that
by saying that some time ago there was a feeling expressed upon
the part of some of the larger banks that they were paying the loss
which was entailed in the examination of the smaller banks in the
country. They felt they were paying a little more than their share.
The CHAIRMAN. Am I correct in saying that a year or two ago, or
during the period of Mr. McIntosh's term, that out of the funds
collected, under the workings of the budget system put in operation
in each Federal reserve district, under a chief national bank examiner,
a surplus accumulated over and above that, which was paid back to
the banks?
Mr. POLE. Yes, ir.
The CHAIRMAN. How was that disposed of?
Mr. POLE. Returned to the banks, Mr. Chairman, by making
a round of examinations—one examination for each bank at a greatly
reduced rate.
The CHAIRMAN. What was the amount of that accumulation so
reimbursed to the banks?
Mr. POLE. May I insert that in the record, as I have not the
figures in mind.
The CHAIRMAN. Put it in at this point, if you will, please.
Mr. POLE. The amount of accumulation of funds that was reimbursed to the banks was $577,118.21, which represented reduction in
fee of 2Y2 cents per thousand of resources.
Mr. WINGO. Mr. Chairman, did you not ascertain—Mr. Pole suggested that some of the larger banks complained about paying for the
smaller banks—I expected you to follow that up by asking if those
banks were the ones mentioned by Mr. Seiberling that were having so
much difficulty in making their expenses.
The CHAIRMAN. Do you put that in the form of a question?
Mr. WINGO. No;I did not, exactly..
The CHAIRMAN. It should be put in the form of a question. Mr.
Wingo, will you restate your question?
Mr. WINGO. Whether or not those who complained were these
larger banks that Mr. Seiberling and you went over their earnings
yesterday—these banks that have such difficulty in meeting expenses,
were they the ones complaining about these examination expenses
Mr. POLE. As I recall it the only complaints that have ever been
recorded in our officers are complaints from the New York banks.
Mr. WINGO. They were only making about 16 per cent a year and
they were probably trying to find some economics to increase their
earnings.
The CHAIRMAN. You appoint all national-bank examiners and
assistant national-bank examiners and chief national-bank examiners?
Mr. POLE. In the case of the national-bank examiners, with the
approval of the Secretary.
The CHAIRMAN. Secretary of the Treasury?
Mr. POLE. Yes, sir.
The CHAIRMAN. Now if branch banking is permitted in the country
as you suggest, limited to trade areas, such laws as are passed here
would only apply to national banks. Is that correct? Also member
banks of the Federal reserve system.

1

BRANCH, CHAIN, AND GROUP BANKING

157

Mr. POLE. I assume that is correct.
The CHAIRMAN. Well, would not such a plan then favor national
banks to the exclusion of State banks?
Mr. POLE. I should hope it would favor the national banks. I
do not know whether it would to the point of exclusion of the State
banks, since the privilege of applying for membership or converting
into national banks would be open to them.
The CHAIRMAN. If a national bank,for instance, operating in a trade
area was permitted to have branches and a State bank operating in
that particular trade area was not permitted to have branches, would
not that tend to nationalize those State banks in that community
in order to enable them to compete?
Mr. POLE. The probability is that the States would pass similar
legislation. However, if their trade area should extend beyond the
State lines, it would be a decided advantage to the national banks
and would probably attract a great number of State banks into the
national system.
The CHAIRMAN. Because the State banks could not go outside of
State lines?
Mr. POLE. Yes.
The CHAIRMAN. Some allegation was made the other day as to
trade areas. Take, for instance, Jersey City, Newark, New York
City, Kansas City, Mo., and so forth. Under your plan of not
permitting branches to cross Federal reserve district lines and State
lines
Mr. POLE. District lines, Mr. Chairman.
The CHAIRMAN. You mean district lines there?
Mr. POLE. Yes, sir.
The CHAIRMAN. Would not there be many troubles in defining
trade areas through the Federal reserve districts; would not some
State banks be discriminated against definitely under that plan? I
wish you would, in the brief covering that, elucidate very clearly as
to how you would restrict chain banking to certain areas.
Mr. POLE. I will try to do that. You mean chain banking or
group banking?
The CHAIRMAN. I have particular reference, in that last question,
to your statement wherein you indicated there should be some restriction as to control through chain banking or holding companies
of those groups developed in certain trade areas.
In other words, it was indicated there that you were of the opinion
that New York should not control eventually these several independent trade areas by controlling the branches or the parent banks which
had branches in these trade areas?
Mr. POLE. Yes.
The CHAIRMAN. It is not clear to me just how control of that situation could be worked out and if, in your statement, you can clarify
that, the committee, I think, would be very glad to have you do so.
In that connection, you rather indicated you thought it desirable
to decentralize New York financially. Did I understand you correctly that you are in favor of building these units throughout the
territory, in these trade areas, and decentralizing the financial situation in New York, by that operation?
100136-30—voL 1,PT 2.-5

158

BRANCH, CHAIN, AND GlIOUP BANKING

Mr. POLE. The building up of larger groups of banks all over the
country generally might result in a greater decentralization away
from New York.
The CHAIRMAN. But it would tend to centralize in these trade
areas, would it not?
Mr. POLE. What might be termed a more local centralization.
It would centralize the funds which properly belonged to that particular trade area or locality.
The CHAIRMAN. Mr. Busby, the other day, in his questions to
you, referred to the flow of money into the stock market. I should
like to ask you a question in connection with that.
Do you not think we might restrict the flow of money into the
stock-market operations by regulating the amount that a bank can
lend on certain stocks?
Mr. POLE. That possibly might be done. It is rather difficult
to answer that question offhand.
Mr. WINGO. IN) the banks not do that now, Mr. Chairman?
Mr. FORT. NO.
The CHAIRMAN. Are there restrictions on the amount now?
Mr. POLE. There is a legal restriction with regard to the amount
which an individual may borrow from a bank. Of course any number
of individuals may borrow whatever the bank's limit might be.
The CHAIRMAN. I was referring to the amount loaned on the par
value or market value of stocks back of the loans.
Mr. POLE. Oh.
The CHAIRMAN. Do you not think that the flow may be checked
by allowing a less amount, a safer am,ount, than the practice has
been heretofore?
Mr. POLE. Possibly something like that could be worked out. I
could not very well answer that offhand.
The CHAIRMAN. Mr. Letts asked you concerning the Bank of Italy
and affiliated companies. I wish you would tell us in detail the
make-up of this group in all its known ramifications over which your
department has jurisdiction. Just describe to us the make-up of
this particular group.
Mr. POLE. Our department has jurisdiction only over the Bank of
Italy, which is a national association, operating in California with
something like 300 branches.
The CHAIRMAN. How about the Bank of America in New York?
Is that a national bank?
Mr. POLE. The Bank of America in New York is a national
association.
The CHAIRMAN. You have jurisdiction over them?
Mr. POLE. We have jurisdiction over them.
The CHAIRMAN. But the Bank of America in Los Angeles is a
State bank?
Mr. POLE. A State bank.
The CHAIRMAN. Your jurisdiction, then, over the trans-American
group is confined entirely to the Bank of Italy in California and the
Bank of America in New York?
Mr. POLE. That is correct.
The CHAIRMAN. You have no access to any other of the affiliated
companies?
Mr. POLE. None at all.

BRANCH, CHAIN, AND GROUP BANKING

159

Mr. LETTS. I wonder if it may be shown how many affiliated
Companies there are?
The CHAIRMAN. I wish that you would put into the record how
Many branches the Bank of Italy has and their location and the
number of branches of the Bank of America. Have you any knowledge as to the other affiliated companies in these particular groups?
Mr. POLE. I have no official knowledge, Mr. Chairman.
The CHAIRMAN. As I understood you to say, national banks were
not permitted to own their own stocks or the stocks of other State or
national banks. Is that correct?
Mr. POLE. Correct.
The CHAIRMAN. Nor are they permitted to own directly stocks of
affiliated companies?
Mr. POLE. That is correct, except such companies as might be
formed for the purpose of holding real estate for the accommodation
of the bank's own business.
The CHAIRMAN. Well, has the Bank of Italy or the Bank of America
Such a ,company?
Mr. POLE. If it has the stock of such a company is not owned by
the Bank of Italy.
The CHAIRMAN. Well, it would be owned by one of the affiliated
companies?
Mr. POLE. It might be owned by the Trans-America Corporation
or one of its affiliates.
The CHAIRMAN. Are the bank buildings and equipment and main
offices and branches owned by the Bank of Italy or the Bank of
America, or owned by the affiliated companies?
Mr. POLE. My recollection is that they are owned by the affiliated
company.
The CHAIRMAN. These various groups of banks are either owned
by the Bank of Italy, the Bank of America, the Bancitaly, Transor the Trans-American-Blair Co.—in other words,
American
control of the management, is there not?
Co.,
there is a centralized
Mr. POLE. I am not able to answer that. I know that those comPanies are affiliated with one another, except possibly the Bancitaly
CO.! which I understand has been absorbed by the Bank of AmericaBlair Corporation. But as to how the corporations are controlled,
I am not able to answer.
The CHAIRMAN. The make-up of officers and directors of these
various companies does not indicate anything so far as control is concerned, of these big groups; in other words, there is a management
group outside of the officers and directors of these various individual
institutions that has the real control, is there not?
Mr. POLE. I could not definitely answer that, Mr. Chairman.
I have no official knowledge of the workings of these various corporations except those which are of national charter. I am quite sure,
however, that any officer of any of those companies would be very
glad to furnish you all the information. I presume you may call
them to testify before your committee.
The CHAIRMAN. In that connection, it is the function of your
Office, is it not, in small national banks, in communities, to know who
controls the institutions or who its stockholders and officers are?
Mr. POLE. We usually do.

160

BRANCH, CHAIN, AND GROUP BANKING

The CHAIRMAN. Whether they are dummies or some one man or
group controls and dominates the situation.
Mr. POLE. That is true.
The CHAIRMAN. Should any different rule apply as to large groups
than as to smaller ones?
Mr. POLE. It would be very difficult for us to trace out the ramifications of a corporation like the Trans-America Corporation and
as to whether or not the stock of the bank may be held by it or one
of its affiliates. It is a matter that we would hardly be posted on,
inasmuch as we have no jurisdiction.
The CHAIRMAN. This is one added reason you should have authority to examine these affiliated companies?
Mr. POLE. I think it is important that we should have an insight
into to the affairs of corporations which own considerable amounts of
national-bank stocks.
The CHAIRMAN. In other words you find, in the conduct of your
examinations, it is rather difficult to examine and know the full
facts as to the companies, because you are prohibited from examining
the affiliated institutons?
Mr. POLE. Yes.
The CHAIRMAN. Now, Mr. Fort asked you concerning the ownership of bank stocks by banks and affiliated companies. I think you
pretty well covered that this morning.
Mr. POLE. Yes.
The CHAIRMAN. Were you here this morning, Mr. Fort, to hear
the answers which Mr. Pole made?
Mr. FORT. I was here most of the time.
The CHAIRMAN. Have you covered all the questions you wanted
to ask in regard to that particular phase?
Mr. FORT. Not quite; no, sir. I have had some others that have
come to my mind during the examination of the comptroller by yourself and others.
The CHAIRMAN. I wish you would make note of them.
Mr. FORT. I am doing that. We are to go ahead, are we not, Mr.
Chairman, after you, with a sort of recapitulation examination of the
witness?
The CHAIRMAN. Yes. Mr. Pole, you said in answer to Mr. Fort
the other day that two holding companies in one Federal reserve district do not now hold enough stock of member banks to give them
control of the election of the directors of the Federal reserve bank of
that district. Would you not say that those influences would determine an election because of the preponderance of control of banks
in that district; that it might control the election of directors in the
Federal reserve district?
Mr. POLE. I said that I was not sure that that was the case. I
might insert in the record, if you will permit me, a memorandum on
that question, Mr. Chairman.
The CHAIRMAN. Well it is perfectly clear that this question pertains to the district in which the Minneapolis Federal Reserve Bank
is located.
Mr. POLE. Yes.
The CHAIRMAN. And I hope that you have in that brief you are
submitting there a list of just how many banks are controlled by
these two groups in St. Paul and Minneapolis, and I would like to

BRANCH, CHAIN, AND GROUP BANKING

161

ask you, in that connection, whether or not your office was consulted
by either one of these holding companies as to the organization and
control of these several banks.
Mr. POLE. They have consulted us with respect to organizations
of new national banks and with the taking over of certain national
banks, and we have been very much delighted, in some instances,
When they have gone into a community and have assisted us in
correcting a bad situation. As to the number of banks which they
have in their groups, I could probably furnish that.
Mr. WINGO. Mr. Chairman, may I suggest that I intended, at the
Proper time, to suggest that we get a list of the names and locations
of these different groups and chains where more than 10 banks were
involved, and the names of the banks in the chain and where located,
and the names of individuals that dominated them or the holding
Company or central bank that dominated them. We had a great
many conflicting statements as to the extent of this and where it is
located and I had intended suggesting to the committee that we call
for that, and if you are going to go into that question, why not prepare that and get it into the record? It may take a couple of weeks
to get it.
The CHAIRMAN. Is that available and can it be furnished to the
Committee?
Mr. POLE. The information was compiled up to December 31 by
the Federal Reserve Board, and possibly by the American Bankers
Association. It has not been compiled by our office. I feel quite
sure the records of the Federal Reserve Board would be available.
Mr. WINGO. It doe not make any difference what source it comes
from. It is public information.
Mr. FORT. If you are going to get that information and have it in
the record, is there any special necessity for restricting it to, say,
10 banks? There may be groups of 5 banks that would far exceed in
importance a group of 10 or even 100 banks.
Mr. WiNco. I see the force of your suggestion as to putting a limit
on the number.
Mr. FORT. Why not get all?
Mr. WINGO. The trouble is that possibly there would be some
where only one or two extra hands are involved. I think we should
have the outstanding ones. Of course if it is thought necessary to
have all of them, let us have them.
The CHAIRMAN. While this is not under the jurisdiction of the
comptroller, the comptroller is ex officio a member of the Federal
Reserve Board, and I am going to suggest to you, if that is available
through the Federal Reserve Board, that you present it to the committee and it will be inserted in the record here.
Mr. POLE. I shall be glad to obtain that for the record if it is
available.
Mr. WINGO. He would not only have to have the cooperation of
the Federal Reserve Board, but the State banking commissions.
However, I think they can give you this.
Mr. POLE. It has been compiled in connection with information
received from the State banking commissions.
Mr. Wirroo. If it is available in the States, I have an idea you can
easily get it.
Mr. POLE. It is a very difficult thing to get.

VOW

162

BRANCH, CHAIN, AND GROUP BANKING

The CHAIRMAN. Governor Young stated in his letter this morning
the willingness of his research department to cooperate with the
committee. If Mr. Pole has not got that information, I think he
can get it.
Mr. POLE. I think so.
The CHAIRMAN. We would like to have it in the record at this
point.
CHAIN OR GROUP BANKING AT THE END OF DECEMBER AND JUNE, 1929
The attached list of bank groups or chains is based on information collected
for the Federal Reserve Board by the Federal reserve agents and includes those
systems in which any person, group of persons, partnership, association, or
corporation has actual or potential control over the operations or policies of
three or more banking units, each working on its own capital and under its own
personnel. The sources of the information include State banking departments,
national bank examiners, the management or controlling interest of some of the
groups, press reports, etc. While the information obtained is believed to be
reasonably correct it may omit a few small chains for which no information is
available and may not include all the banks in some of the groups or chains
listed. It is also possible that the controlling interests do not regard some of
the banks included in the attached statement as constituting group or chain
systems.

Number and loans and investments of banks in each chain or group
IAll banks are located in the same State as the management or controlling interest in the chain or group, unless otherwise noted. Figures of loans and investments for both December and June are based largely on June, 1929, Bankers' Directory, and are in thousands of dollars]
Number of banks
Stattem
r em-

National

Nonmember

Debceerm- June 1)ebeeer-m- June :
De eerm. June :
De eerm-1 June

Alabama (December, 4 groups;
June, 3 groups)

26

23

First National Bank (Grimsley, A. M.), Clanton

10

10

First National Bank, Dothan
Alabama
Florida
Dothan National Bank, Dothan
Alabama
Florida
American-Traders Security Co.,
Birmingham
Arizona, Brophy, F. C., and associates, Phoenix
Arkansas, December, 3 groups;
June, 4 groups
Banks, A. B.,et al.. Little Rock.
Hudspeth, A. T., Harrison
Nakdimen,1.11., Fort Smith_
Arkansas
Oklahoma

15

12

11

11

Total

National

raDebeeer

June

Decern- 11
ber

$39,188

$14,368

837,490

State member

June

December

June

$12,670

Nonmember

December

June

$1,698

$1,698

2

2

8

8

2,086

2,1816

1,263

1,263

823

823

8

8 ,

5

5

3

3

8,686

8,686

7,811 '

7,811

875

875

5
3

5
3

4
1

4
1

1
2

1
2 •

3, 267
5, 419

3,267
5,419

3, 194
4,617

3, 194
4,617

73
802

73
802

11,813

11,813

5

5

5

5

3,596

3,598

3, 596

3,596

4
1

4 ,
1 :

4
1

4
I

2,118
1,478

2,118
1,478

2,118
1,478

2,118
1,478

3

1
24,820F'

3

6

6

1 .
9

1

24

62

(9
11

38
11

12

1

3•
1

8

8

6

6

5
3

5
3

5
1

5 i
1 1

I Taken over by Rogers Caldwell Group, Nashville, Tenn.

2

3

1

1
1

24,820

5

5

17,646

17,646 .

5,833

5,833

13

47

16, 768

41,624 .

14,085

15,637

9

34
9

2,626

424

I, 752
424

2

2

4,585

4,585 ,

4, 287

2

4, 154
431

4,154
431

4, 154
133

2

24,856
2,626

$234

$11,374

2,449

14,413

158

11, 140
158

2,044

11,964
2,044

4, 287

298

298

4, 154
133

298

298

BRANCH, CHAIN, AND GROUP BANKING

Name and address of management
Total
or controlling interest
'

Loans and investments

Number and loans and investments of banks in each chain or
Number of banks

Name and address of management
or controlling interest

Total

Nonmember

5 1

5

2

2

Arkansas
Oklahoma

1
4

1
4

1
1

1
1

California (December, 5 groups;
June, 4 groups)

36

31

24

-Ainglo-National Corporation,
San Francisco

17

15

16
1

14
1

California
Washington
Calitalo Investment Corporation, San Francisco
California
Oregon
Washington_
Howard, Mr. & Mrs. W. B.,
Pasadena
McCook, R. D., and Nelson,
• San Bernardino
California
Iowa
Pacific National Co., Los Angeles
Sebastopol National Securities
Co., Sebastopol
Colorado (December, 3 groups;
June, 3 groups)

1

1

2

Total

December

National

June

December

June

State member

December

June

Nonmember

Decem- 1
ber

2

$9,557

$9,557

$9, 374

$9,374

$76

$76

$107

$107

2

2

9,083
474

9,083
474

9,083
291

9,083
291

76

76

107

107

n

12

9

170,252

173,875

156,640

162,153

13,612

11,722

14

12

3

3

146, 138

144,040

137, 121

13.5,023

9,017

9,017

13
1

11
1

3

3

145,066
1,072

142,968
1,072

138,049
1,072

135,951
1,072

9,017

9,017

1

1

6

3

3

7, 776

6,435

1,341

3
1
2

1
1
1

2

2147
2,293
3,336

1,711
2,293
2,431

905

1

436

6

6

2

2

4

4

4

4

9,914

9,914

9.914

9,914

3
1

3
1

3
1

3
1

8,984
930

8,984
930

8,984
930

8,984
930

6

(1)
3
15

..._

4

10

4

2
10

4,403

2

4
1

15

June

5

4,403

15,518
2,021

5

2,247

29,505

2,247

14,969
923

29,505

2,156

22,405

2, 156

549
1,098

22,405

7,100

7,100

BRANCH, CHAIN, AND GROUP BANKING

Decem- June DecemDecem-.
DecemJune
ber
ber
June
ber
June
ber
Arkansas-Continued.
Sims, Neil, Fort Smith

Loans and investments

I

State member

National

group-Continued

Thatcher, M. D.,et al„ Pueblo_
Parks, C. C., et al., Denver.

5(

5

0

0i

4

4(

2

2

Holland, M. B., Denver

3

3I

2

2

,
I

2
1

2

2

Colorado
Wyoming
Connecticut, Hartford
Trust Co., Hartford

621

621

521

521

521
100

521

521 '

1

521
100

"s8/
112

I

I

3

37, 186 I

4, 261

4i871

100 1

100

100,

100

32,925

3

3

1, 141

1, 141

19 2
7 1 127, 282

3

3

1,141 I

1, 141

1
36

39

17

12

122,034

114,402

87,469 1

12,880

34,565

7
8

7
8

4
2

4
2

3
6

3
6

31, 153
21,682

31,153
21,682

29,933
17,186

29,933
17, 188

1,720
4,494

1, 220
4,494

7
6

4
8

1
3

1
3

6
3I

3
3

13,735
25,7943

13,027
25,796

9,505
23,367

9,505
23,367

4,230
2,429

3,522
2,429

4

4
14

(3)
4

Georgia(December,5 groups;June,
6 groups)

24

The First National Bank of
Atlanta, Atlanta

7

15,771
2

12

3
22

10

1
9

4

5

4

I
9 I1
1

15,771
30,376

19,145
9

3

174,033

7,476

22900

18,638
165, 219

101,951

146,971

507
146,063

20,763

13,827

6,299

5,329

20,452

84,502

Citizens & Southern Holding
Co., Savannah

7

4

4

2

3

2

67,683 1

62,658

61,913

57,964

5,770

4,694

Georgia
South Carolina

5
2

2
2

3
1

1
1

2
1

1 1
1

59,951 1
7,732

51,926
7,732

58,458
3,455

54,509
3,455

• 1,493
4,277

417
4,277

5

1

2

i

709

200

152

258

Ethridge, F. S., Atlanta
Fourth National Bank, Atlanta.
Atlanta le Lowry National
Bank, Atlanta
Benton, L. 0., Monticello
Holden, Jonathan F., Crawfordville

44

I

(1)

4

(I)
3

3
3

3I

3

1

1

1

103

39,869

4
1

1
1

1

Constituent banks taken over by Transamerica Corporation group.
10 banks suspended during July, 1929, and group dissolved.

2
1

1

1

467

3

3

326 1

61,190
467
326

200

2.51

251

60

13,516
60

39,869
356

47,674
356

51

51

326

326

bank suspended Dec. 31, 1929.
I Atlanta 6: Lowry National and Fourth National merged to form the First National.

'One

BRANCH, CHAIN, AND GROUP BANKING

Atlanta Trust Co.,Jacksonville _
First National Bank, Tampa
Exchange National Bank,
Tampa
First National Bank, Miami._
Barnett National Bank, Jacksonville
Citizens Bank & Trust Co.,
Tampa
Florida National Bank, Jacksonville_

1

i

Delaware, Vinton, Benj., and Associates, St. George
Florida(December,6 groups; June,
5 groups)

, 17
r
4 I
19,

1
1

4

11
:
f
8
1.7

I1

1

(Conn.)
7

21/
:555 I

,555
2•3
,

'1 1

)-f•
CrJ
CJ1

Number and loans and investments of banks in each chain or group-Continued
Number of banks
State mem-

National

1 Nonmember t

1
DecemJune D ebceerm-'1 June Decem- June 'Debceerm- J une
ber
1
1
Idaho k December, 3 groups; June,
3 groups)
First National Investment Co.
(Crawford-Moore chain),
Boise
Idaho
Oregon

22

Hemingway, H. E., Burley_ _
Idaho
Nevada
Utah
Illinois(December, 12 groups; June,
11 groups)
John Bain dt Lewis Co., Chicago
Foreman Family, Chicago
Ballou, Ralph N., et al., Chicago
Craig, C. C., Galesburg
Baets, A. W., East St. Louis_ _
First National Bank, Chicago_
Schmidt, W. B., Chicago
Clay, John, Chicago

23

6

National

State member

7

16

18

Nonmember

Dmer

June

December

June

$20,589

$21,431

$11,814

$12,656

$8,775

December

December

Jue
June

$8,775

I
10

10

3

8
2

8
2

1
2

Vollmer Clearwater Co., Lewis1
town
Idaho
Washington

Total

1

J

3

7

7

11,820

11,820

7,351

7,351

4,469

4,489

1
2

7

7 1

11,090
730

11,090
730 •

6,621
730

6,621
730 .

4,469

4,469

9

2

2

7

7

5,145

5,149

3.756

3,756

1,389

1,389

7
2

7
2

2

2

5
2

5
2

4,508
637

4,508
637

3,756

3,756

752
637

752
637

*3

4

1

2

2

2

3,624

4,466

707

1,589

2,917

2.917

2

2
1
1

1

1 i
1

1

1

1, 132

707

425

1

2,492

707
842

425

1

1, 132
842
2.492

2,492

2,492

1

,

87 1

62

16
14

14
14

3

3

8
8
7
7
6

8
8
7
7
6

2
1
3
1
1

2
1
3
1
1

5

5

2

2

21

20

10

9

56

53 1, 205, 290

989,238

724,331

6.58.671

$191,272

$81,747

289,687

268,620

2

2

16
9

14
it

28,059
270,719

25,380
189.475

176,961

III,501

24, 262

24, 262

28,059
69,496

25,580
53,712

1

1

23,366
6,275
11,478
512,669
17, 293

6, 193
1,222
10,055
342,066
5,381

6, 193
1,222
10,055
342,066
5, 381

1,522

3

5 ' 23,366
6,275
7
4
11,478
512,669
3
5
17,283

1, 522

3

5
7
4
3
5

25,811

25,811

15,681
5,053
1,423
144,792
11,902

15,651
5,053
1,423
144,792
11, 902

1

1

2

2 I

5,857

4.132

950

950

775

775

5,357

4,132 ,

6/CYR3 ‘1101sIVall

Total

oximmvs anoao amv

Name and address of management
or controlling interest

Loans and investments

1

3

Carroll, John A., Chicago
Central Trust Co., Chicago. _ _
McLeod Murray, Chicago
National Bank of the Republic,
Chicago

4
3
4

4

Indiana (December, 3
June, 2 groups

4

1

3

1

1

2I

2

2

2'
1
1 ,

2

1

11,977

10,738

10,738

1

171,453

171,453

155,961

155,961

9020

1
13 ,

7

40,576

29,620

4,323

3,931

22, 291

6 I
1 j

1

10,956
5,694

5,694

392
3, 931 .

3,931

2

17

10

3!

2

1

1

1
2

2

7

7

Iowa: December, 12 groups; June,
12 groups

88

87

32

32

17

10
6
3
1

10
6
3
1

950
950 '
------ - - - .

1

2

3

000!

3, 452
11,622

2!

129,525 :

1

1

6

6

23,926

23,926

1

1

55

54

60,999

60,999

7
7

6
6

13,056
11,579
1,044
433

13,056
11,579
1,044
433

37,059

37,059

9,302 .
.
22. 291

775

775

2,203
2,804
1,239

2,203
1239

6,290

6,290

13,962

3, 398

10,564
1,763

1, 763

22,291

22,291

1,635

1.635

910

910

23,030

23,030

3,893
3,893

3,893
3,893

Toy, James F., Sioux City
Iowa
Nebraska
South Dakota

13
3
1

16
12
3
1

Bradley Bros., Centerville

13

13

3

3

10

10

4,990

4,996

1,878

1,878

3,118

3,118

Rich, E. H., Fort Dodge

12

2

2

10

10

3, 165

3, 165

5, 486

11
1

2

2

9
1

9
1

8,651
7,726
925

8,651

Iowa
Minnesota
Weiser, C. J., and Algier, R.,
Decorah

12
11
1

7,726
925

3,165

3,165

4,561
925

5,486
4,561
925

11

11

1

1

10

10

5.733 i

5,733

660

660

7
3

1

1

7
2
1

7'
2
1

3,882
1,404
447

3,882
1,404
447

660

660

5,073
3,882
744
447

5,073

7
3
1

2
2
2
2
2

7
2
2
2
2

18,102
1,336
1,637
1,076
1,161

18,102
1,336
1,637
1,076
1,161

15,168
8.55
1,2311
652
959

15,168
855
1,236
652
959

2,934
481
401
424
202

2,934
481
401
424
202

2
3
1

1

7
2'
2
2 .
2
.
1'

H

I

oau i
3,452
11,622

5

3

0001
9.50
4, 227
13,825

5

First and Tri-State Corporation, Fort Wayne
Riley, Walter J., East Chicago
Fletcher, Sayings & Trust Co.,
Indianapolis

950
4, 227
13,82.5
132.329
11,977

I
211

groups;

1

1

2

894
881
1,148

894
881
1,548

910

1

1

1

1

1 .
1

1,548

1,548

910

Benton Bros.. Des Moines
Flaugen, (I. N., Northwood _
Chamberlain, Park, Anamcoa_
Shade, Charles, Rock Rapids
Taylor, Henry C., Bloomfield
Foster, John W., Guthrie Center
Differ, E. T., Diagonal
Johnson, Brush .Si Annis, Osage_

,

Iowa
North Dakota
Disposed:of stock in one:bank.

9
4
4
4
4
3
3
4
3
1

ca

Iowa
Minnesota
Washington

t._

.
1 1
!
2;
1 I
31

3I
1!

2 :

991
881
3,379

,
991 '
881
3,379 ,

1 I
I J

3,056
323

3,056 :
323 :

9, 163 j
7,650
1,044
433

9, 163
7,686
1,044
433

910
910

3,882
744
447

97

97

921

921
598
323

598
323

'xivHD ‘RoNvua

1

3

19 (INV

.

AIN XVII a.

Nebraska
South Dakota
Wyoming

Number and loans and investments of banks in each chain or group-Continued
00
Loans and investments

Number of bunks

Name and address of management
or controlling interest

State member

National

Total

n1110111ber
N,

Decem- June Decem- ,„„„ Decem- June Decem- June
ber
ber '
ber
ber

Total

Debee
erm

National

June

;

1 Decem-June
ber

State member

Decem-June
ber

Nonmember

December

June

t11
).•

Kansas(December, 19 groups; June,
groups)
Benton, G. D.and H.0., Oberlin
Burrow, J. R., and family, Topeka
Atwood, F. J., Concordia
Burks, W. H., Wellington
Kansas
Oklahoma

89

86

23

21

7

7

2

2

5

5

1,769

1,769

1,030

1,030

739

739

7
6

7
6

2
1

2
1

5
5

5
5

8,309
I, 135

8,309
1,135

5,575
479

5,575
479

2, 734
656

2,734
656

6

6

1

1

5

5

3,341

3, 341

1,259

1,259

2,082

2,082

4
2

4
2

1

I

4
1

4
1

1,939
1,402

1,939
1,402

1,259

1,259

1,939
143

1,939
143

1
3
1

1
3
1

4
3
4

4
3
4

3, 199
2, 569
3,243

3, 199
2. 569
3, 243

906
2,145
1,385

908
2, 145
1,385

846
424
1,8.58

846
424
1,858

1

1

4,339
1,322
1,962
2, 212
871
2,770

4, 339
1, 322
1,962
2, 212
871
2, 770

935

1
1
1

5
4
4
3
3
3

935

1
1
1

5
4
4
3
3
3

980
426
1,975

980
426
1,975

4,339
387
1,962
1, 232
445
795

4,339
387
1,962
1,232
445
795

1

1

3

3

945

945

353

353

592

592

1

I

2
1

2
1

424
521

424
521

3.53

353

424
168

424
168

3

3

2,448
233
733
523
4,368

2, 448
233
733
523

2, 267

1
1

1
3
2
2

2, 267

1
1
2

1
3
2
2
1

237
225
4,297

237
225

181
233
496
298
71

181
233
496
298

CoRingwood,I. H.,and family,
Topeka
Lemon, G. W., Pratt
Gardiner, J. 0., Wichita
Gray, George M., et al., Kansas City
Moffett, A. H., Lamed
Docking, Wm.,Topeka
Jellison, A. D., Junction City__
Mermis, J. A., Hays
Sponable, F. W., Paola__

6
6
5

6
6
5

5
5
4
4
4
4

5
5
4
4
4
4

Stewart Estate, Wellington_ _

4

4

Kansas
Oklahoma
Womer, W. D., and family,
Manhattan
Benjamin, J. J., Cambridge_ _ _ _
Flack, B. A., Enterprise
Frazier, Linn, Fouber
Limbocker, M. A., Emporia_ __

2
2

2
2

4
3
3
3
3

4
3
3
3

1

1

1

1

65

64

$46,291

$41,923

$24,476

$20, 179

1

$1,445

1,445

$1,445

1, 445

$20,370

$30,299

C)
01

••••

C)
C)

trl

A
CI

Kentucky, December, 3 groups;
June, 1 group
First National
Louisville

18

4

r

I
10 ,

4

4 i_ .

149,372

8, 12D

77, 710

8,120

68,115

I

6, 547

Corporation,

Banco Kentucky, Louisville
Ohio
Kentucky
Ashland National Bank, Ashland
Louisiana, December, 2 groups;
June, 2 groups
•
Calcasieu National Bank of
southwest Louisiana, Lake
Charles
Commercial National Bank
Shreveport
Maine, December, 2 groups; June
1 group
Financial institutions
Augusta
Eastern Trust dz Banking Co,
Bangor
Massachusetts (December, 5
groups; June, 4 groups)
First National-Old Colony
Corporation, Boston
Federal National Bank
(through Federal National
Investment Trust), Boston_
National Shawmut Bank
(through Shawmut Association), Boston
Worcester County National
Worcester
Makepeace, J. C., and family,
Wareham

9

5

1

3 1

43,823

21,656

17,642

4, 525

5

1

3

1

97,429

47,934

47,473

2,022

1

2
1

1

25,088
72341

47,934

25,088 1
22 385

2.022

2
3
4

4

4

4

10

10

6'

6

6
4

6

5

5

4

1

1

12

5

5

2

9

5

5

2

8,120

8,120

8,120

8,120

4

33,078

33,078

29,842

29,842

1

1

14,644

14,644

14,294

14,294

350

3

3

18,434

18,434

15,548

15,548

2,886

7

3

69,635

53,267

14,583

10,033

55,052

43, 234

4

3

59,576

53,267

14,583

10,033

44,993

43, 234

4

1

3

350

j

2,886

10,059

10,059

3

3, 236

3, 233

45

33

27

19

7

6

11

8

870,871

530,104

761,556

280,558

73,461

224,929

35,854

24,617

20

17

12

9

5

5

3

3

568,312

275,980

492,815

45,229

65,134

220,388

10,363

10,363

8

6

4

4

1

3

2

55,785

45,787

42,601

42,601

3,786

9, 398

3, 186

6

6

4

4

2

2

194,642

194,642

190,388

190,388

4,254

4,254

.
6
5

5
4

2

1
2

1

1

2

1

14,845

3,875

33,412

37,287
13,695

2,340

2,340

4,541

4,541

7,964

6,814

Number and loans and investments of banks in each chain or group-Continued
Number of banks
1,e “nd address of management
or controlling interest

Total

I

State member

National

Nonmember

126

Guardian
Detroit
Union
Group (Inc.), Detroit
35
First National-Peoples, Wayne
group, Detroit
21
Sleeper, A. E., Bad Axe
16
American State Bank group,
Detroit
13
McPhail, C. W., Central Lake_
12
Wolf, Frank, Detroit
7
Gerber, Cornelius, Fremont__ _ _
5
Merrick, Frank W.,Saginaw_ _ _
5
Smith, Wm.A., Grand Rapids_
5
Hicks, John C.. St. Johns
4
73
Hudson, John R.. Middleton _ _
McGill, H. J., Mount Clemens_ (1)
Orr, Andrew W., Blanchard _ _ (1)
Minnesota (December, 37 groups;
June, 37 groups)
Northwest Bancorporation.
Minneapolis
Minnesota
Montana
North Dakota
South Dakota
Nebraska
Iowa
Wisconsin
Washington
First Bank Stock Corporation,
Minneapolis

472

20

24

1

11

82

Decemher

65 81,243,488

June

10

7

5
1

8
1

1
1

8
14

5
14

705,032
5,612

284.071
5.612

8

2

12
7
5

5

2

1

6
12
6
4
4
4
3
3

6
12
6
4
4
4
3
4

61,701
2,954
32,686
2,975
2,522
23,531
1,881
598

53,186
2954
32686
2,975
2,522
23,531
1,881
992
7,370
848

1
1
1
1

5

5
4
4
4
4

1

223

92

20

59

46
7
9.
10
8
1

10

27
2
7
10
4
3
6

2
6
1

1
1
1

1
1

146
17 1
7 I

3
1
7

2

3
242

214

63

•
Deeemher

June

Decemher

June

$12 153

$707, 123

$347, 145

$188, 203

$59,330

167,360

154,218

167,482
465

465

479, 253
419

273, 176
419

58,297
4,728

10,895
4,728

51,104

44,897

1,290
626
20,213

1,290
626
20,213

8,289
2954
22,546
1,685
1,896
3,318
1,474
598

8,289
2,954
22,546
1,685
1.896
3,318
1,474
992

2,308
10,140

407

407
1,141

38,749
17,664

339,754

147,674

288, 356

128,204 1

109,758

2

208,180
15,116
14,875
22,213
35,358
24,338
8,973
10,701

182,039
5,610
14708
22,213
31,445
24,338
8.005

90,288

339,267

21,550

2

13

1

7,871
5,768

282,646

6,963
8,099
16, 178

1,805

137,795

88,911

33,734

19,470

26,141
2,543 '
169

19,470

3,913

7,871
5, 768

20,838

553
1

265,999

3

4
1
1

6,229
295

660,155

3

8,099
16,178

82,418

10, 140

30

1
1

11

356,715

Nonmember

June

Deeemher

19
3
2

1
12

836,699

State member

3

2
6

1

403,996

18

National

$418,623 $348, 162

6
16

362

78

4

Total

10,701

968

19,280

37,341 \

714

BRANCH, CHAIN, AND GROUP BANKING

DecemDeeemJune DecemJune Decem- June
ber '""` ber
ber
ber
Michigan (December, 11 groups'
June, 12 groups)

C.)

Loans and investments

Minnesota
Montana
North Dakota
South Dakota
Michigan
Bremer, Otto, et al., St. Paul__
Minnesota
Montana
North Dakota
Wisconsin
Union Investment Co. (J. F.
•
Millard) Minneapolis
Minnesota
Wisconsin
North Dakota

T1 1
15
11
3:

5
4
3

26
10
15
9
3

4
2

71 1

71

12

30
1
32
8

30
1
32
8

(10)

31

•

11 azlett, Isaac, et al., Minneaplis
Minnesota
Montana

5

10
1

2

2

1

252,785 l
53,496 :
14,378 1
9,727
8,881 1

10,379
,
5,731 !
5,440

217,291
33,802
14,378
8,288
8,881

10,379

:
19, 280

35,488
414

5,731
4,726

1,439

714

12

1

1

58

58

52,932 I

52,932

27,434

27,434

1, 315

I, 315 .

24, 183

24, 183

6 :

6

1

1

32,919 ,
1,893
15, 233 I
2,887 :

32,919
1,893
15,233
2,887

17,685

1,315

1,315 ,
'

5
1

23
1
27
7

17,885

5
1

23
1
27
7

9,349
400

9,349
441

13,919
1,893
5,884
2,487

13,919
1,893
5,884
2,487

(10)

16

(Hi)

9,658

(16)

23
6
2

(10)

,

15,143

12 I
1
2

:

11,769
3,265
169

1

,
,
5, 361 I

09

15

11
5
':

5,485
4,348
968
169

7,421
2,237

19 ,

19

13

13

6

6

5, 361

4,434

4,434

927

927

18 1
1 '

18
1

12
1 ,

12
1

6

6

5, 224 !
137 ,

5, 224
137

4,297
137

4, 297
137

927

927

13

13

7

7

6

6

7,139

7,139

3,742

3,742

3,397

3,397

8
2
3

4
2
1

4
2
1

4

4
2

4,513
1,482
I, 164

1, 727
1,462
553

1.727
1,462
553

2,786

2

4, 513
1,462
1, 164

2,786

_

8
2!
3

611

611

Lewison,Samuel,Swenson,Car I
C., and Fries, J. F., Canby_ _

12 ,

12

7

7

5

5

5,440

5,440

2,600

2,600

2,840

2,840

9
3

9
3

4
3

4'
3,

5

5

4,427
1,013

4,427
1,013

1,587
1,013

1,587
1,013

2,840

2,840

11
9

11
9

5
I

5
1 ,

6
8

6
8

3,728
4, 110

3,728
4,110

2,950
2,023

2,950
2,023

778
2,087

778
2.087

8

8

8

8

2,503

2,505

2,503

2.503

2
5
1

2
5
1

2
5
1

2
5
1

1,659
636.
208

1,659
636
208

1,659
636
208

1,650
636
208

Black, J. IV., Co., Minneapolis
Minnesota
Michigan
Wisconsin

Minnesota
South Dakota
Sheldon, F. P., Sheldon Bros.,
Minneapolis
Mealey, S. J.,et al., Monticello.
Johnson, A. J., Granite Falls
Minnesota
North Dakota
Montana

1

7 1 bank sold to Guardian Detroit Union group, Detroit.
• Taken over by American State Bank group, Detroit.

II aken over by Guardian Detroit Union group, Detrol.
30 Now a part of the Northwest Bancorporation group.
0.4

Number and loans and investments of banks in each chain or group-Continued
Number of banks
Name and address of management
or controlling interest

Total

Loans and investments

Stat:em
r em-

National

Nonmember ,

Minnesota-Continued.
J. Lampert Co., St. Paul

December

National

June

December

State member

June

December

June

Nonmember

December

June

8

8

3

3

5

5

$2,431

$2,431

$1,451

$1,451

$980

$980

7
1

7
1

3

3

4
1

4
1 ,

2,096
335

2,096
335

1,451

1,451

645
335

645
335

8

8

2

616

616

1,780

1,780

3
5

3
5

Brickson, Edwin, Adrian
Carlson, John C., Rush City_

1,062
718

7
7

Lofgren, C. J., Ada

1,116
2,486

Minnesota
Wisconsin
St. Olaf College and Holland.
P. 0., Northfield
Minnesota
North Dakota

Minnesota
North Dakota
Montana
March, C. H., Litchfield
Tillemans, H. J., Minnesota_ _ _
Christopherson, Alfred, Albert
Lea
Minnesota
Iowa
Gunn,D. M., King, F. E., King,
Alexander, Grand Rapids__
Lee, Harry, Long Prairie
Mills, C. B., General Securities
Co., Minneapolis
Minnesota
North Dakota

2

6

6

2,396

2,396

2

2

3
3

3
3

1,062
1,334

I,062
1,334

616

616

1,062
718

7
7

2
1

2
I

5
6

5 I
6 1

1,375
3,104

1,375
3,104

259
618

259
618

1,116
2.486

7

7

3

3

4

4 •

1,635

1,635

898

898

737

737

4
2
1

4
2
1

2
1

2
1

9
1
1

9
1
1

1,146
294
195

1,146
294
195

805
93

805
93

341
201
195

341
201
195

7
7

7
7

2
2

2
2

5
5

5 •
5

4, 151
2,661

4, 151
2,661

2,716
1, 745

2, 716
1,745

1, 43.5
916

1, 435
916

116
5
1

7
6
1

1
1

2
2

5
4
1

5
4
1

980
802
178

3,167
2,989
178

267
267

2,454
2,454

713
535
178

713
535
178

6
6

6
6

4
3

4
3

2
3

9
3 .

I, CO2
2, 223

1, C.02
2, 223

1, 345
969

1,345
969

257
1, 254

257
1, 254.

II 6
2
1

7
3
1

4
1
1

5
2
1

2
1

2
1 ,

8,530
384
215

27,933
19,789
215

8,021
193
225

27,426
19,598
215

509
191

509
191

1
I

,

BRANCH, CHAIN, AND GROUP BANKING

Decem- June Decem Thy., DecemJune Deem- June
ber
ber '
- ber
ber

Total

Iowa
Ponsford,J. J., Watertown
Simons, L. C., St. Paul
Towle, Geo. E., at al., Minnaspoils
North Dakota
Montana

Minnesota
South Dakota
Wisconsin
Andrisen, H. P., Clarksfield
Minnesota
South Dakota
Davies, E. W., Pipestone
Minnesota
South Dakota
McClure, T. F., Litchfield
Atlas Realty Co., Minneapolis_
Castle, L. G., Duluth
Mississippi (December, 3 groups;
June, 3 groups)
High, S. J., and associates,
Tupelo
Holland, Mr. and Mrs. W. P.
et al., Clarksdale
First National Bank, Hattiesburg

7, 931

7, 931

2

1,313
4,302

I, 313
4,302

3.417

4

2

2

1,392

1, 392

1,06,5

3
3

2
2

2
2

1
1

1
1

576
816

576
816

415
650

6

6

5

5

1

1

2,826

2,826

2,647

2,647

6

6

6

6

971

971

2

6

4

3
3

6

'5

2

1

4

1

2

2

1

1

318

3,417

I, 313
885

1,063

327

327

415
650

161
166

161
166

179

179

971

971

3,478
1,979
680
632
1,410
584

1,979
680
632
1, 410
584

1,215

1,213

1, 215

649
187
379

649
187
379

649
187
379

649
187
379

4

805

805

805

805

2
2

576
229

576
229

576
229

576
229

2,582
1,789
3,202
1,410
1,994

2,582
1,789
3,202
1,410
1,994

5

5

5

1,215

3
1
1

3
1
1

3
1
1

3
1
1

4

4

4

2
2

2
2

2
2

5

1
2
3

318 ,
I, 313
88.5

3,444

3
3
2
5
3

5
5
5
5
5

1
2
3

6,922

3
3
2
5
3

5
5
5
5
5

7,613

113
1,109
2,570

113
1,109
2,570

1,410

1,410

490

490

4

4

4

4

1,666

1,666

1,666

1,666

2
2

2
2

2
2

2
2

1,165
501

1, 165
501

1,165
501

1, 165
501

4
3
4

4
3
4

2
3

2
3

4
1
1

4
1
1

2,431
2,714
7,843

2,431
2,714
7,843

1,825
7,799

1,825
7,799

2,431
889
44

2, 431
889
44

21

21

2

2

19

19

15,119

15, 119

7,584

7,584

7,535

7,535

. 10

10

10

10

4, 547

4,547

4,547

4,547

7

7

1

1

6

6

4,953

4,953

2,794

2,794

2,159

2,159

4

1

1

3

3

5,619

5,619

4, 790

4, 790

829

829

4

111 bank taken over by Northwest Bancorporation.

BRANCH, CHAIN, AND GROUP BANKING

Ward, A. L., Fairmont
Paulson, C. E., et al., Albert
Lea
Bank
Corporation,
Shares
Minneapolis
Du Toit,D.W.,and Lundsten,
0. W., Chaska and Excelsior.
Glemmestad, M., Tyler
Klein, C. H., Chaska
Sampson, H. Elbow Lake
Schmidt, J. G., Northfield
Warner, H. A., White Bear
Lake

1'
6
4

3
6
6

'

7,613 I

1
6
4

2

3
6
6

Number7and:loans and investments of banks in each chain or group---Continued

Total

Decem- ,,,,„. Decem
ber ."."'
ber
Missouri (December, 7 groups;
June, 7 groups)
Ford, F. L. and associates St.
Joseph
Missouri
Nebraska
Kemper, J. M. et al. Kansas
City
Missouri
Oklahoma
Kansas

i
1
Decem- June !Decem-I, ,„..„
ber
. ber I '"""°

Jun.

41

40

11

12

5

5

Total

State member

National

Nonmember

December

June

December

June

December

June

December

$26,406

$29,531

$111, 188

$111,188

$20,780

$20,168

25

23

$158,374

$160,887

June

9

9

1

1

8

8

10,018

10,018

5, 188

5, 188

4,830

4,830

8
1

8
1

1

1

7
1

7
1

9,799
219

9,799
219

5,188

5,188

1,611
219

4.611
219

it 8

9

3

4

5

5

10,810

13,935

1,358

4,483

14,452

9. 452

4
3
1

4
3
2

1
1
1

1
1
2

3
2

3
2

10, 160
363
287

10, 160
363
3,412

938
133
287

938
133
3.112

9,222
230

9,222
MO

1 ,
3
1
1
1

1
3
1
1
1

1
4

3 i

3

82,025
47,204
1,817
4,959 I
839

3,022
11,212
546
4,401
646

3,052
I 1, 212
546
4,401
646

3,867

3,867

2
3
2

82,025
47,294
2,429
4,959
839

75, 106
36,082

4 '
3
2I

1,883
555
193

1, 271
555
193

4

1

12, 136

2412

The Keystone Corp. (affiliate
of Commerce Trust Co.)
Kansas City
Meyers, A. C. F., St. Louis_ _ _
Harty, A. L., Cape Girard
Speer, A. A., Jefferson City. _
Marshall, N. B., Union ville__ _ _
Montana (December, 2 groups;
June, 3 groups)

5
7
5
4
3

5
7
3
4
3

14

21

Woehner, Fred A., Great Falls.
Johnson, A. C., Helena
Marlow, T. A., Helena

8
II 6
(19

8
7
6

Nebraska (December, 10 groups;
June;10 groups)

State mein-1
Nonmember

National

1
3
15

I
!
I

1

1
4

3
1
2

13

14

7,370

40,537

8
5

8
5
1

3,527
3,843

3,527
7,796
29,214

3,953
8, 183

2,412

75,106
36,082

23, 189
2,412
20, 777

4,958

5,212

3,527
1,431

3,527
1,431
254

62

65

15

47

50

25,044

25,544

12, 740

12,740

12, 304

12,804

McCloud, C. A., et al., York..

10

10

3'

3

7

7

3, 375

3,375

1,944

1,944

1, 431

1,431

Well, M.,and family, Lincoln.

10

10

1

1

9

9

6,708

6,708

4,335

4,335

2,373

.

2,372
.

afloat) axv 'toys° 'lloistvag

Name and address of management
or controlling interest

Loans and investments

ONDINVEI

Number of banks

Kirchman, F. J., et al., Wahoo.
Nebraska
South Dakota

7
1
7
6
5
4
4
"4
1
3

Colorado
Nebraska

Wingfield, Geo., Reno
Scheeline, H. S., Reno
New Jersey (December, 15 groups;
June, 14 groups)

1

1

6
1

7
1

2,071
333

7

1

1

6

CL

1,779

6
5
4
4
6
1
5

1

4
1
1

5

5

1

4
1

5
4

3

5

3, 275
321
2,761
588

5

120
468

3

12

14

2

2

11
3

2

2

55

25

24

WO

31405!eas I
333
I
--i
240
1,779
1
i
834 1
1,824
1
3,275
321
2, 761
2,761
120
754
120
634

120

01.10

1
,

1,1int ,

4 4..

606

I

1,466
333

1,800
333
i

240

_

1,539

,_ _

1434
.
2, 761
120
122

1,1.19

990

990

3,275
321

3,275
321

468

634

468

634

108

108

1,901

20,799

6,811

6,811

12,100

13.988

18,911
1,888

6,811

6,811

12,100

12,100
1,888

391,089

353, 198

92, 274

92,479

109,210

76,228

189,605

184, 491

7 -------------25,427

25,427

570

570

24,857

24,857

7,377

7,377

169

169

1,046

1,046

14,380

14, 380

9,156
18,554)

9, 156
10.556

9,869

9,869

7, 03,5

7,031

2,009

12

18,911

10 1

9
3

18,911

20 I

17

10

Peoples Trust & Guaranty Co.,
7
2
2
9
9
Hackensack
Bankers Securities (Inc.),
1
5
5
7
7
Hackensack
Montclair Trust Co., Mont1
2
2
5
5
clair
3
3
4
4
Kean family, Elizabeth
Peoples Bank & Trust Co.,
1
1
2
3
4
Passaic
Doremus, Cornelius, Ridge2
3
wood
(19
Everett, J. D., and Holmes,
2
2
3
3
H. L., Orange
First-Mechanics National
I
1
3
3
Bank, Trenton
Heppenheimer, Wm. C., Jer3
3
sey City
1, Disposed of stock in one bank.
1, 1 bank taken over by First Bank Stock Corporation.
14 Group taken over by First Bank Stock Corporation.
"Sold interest in 1 bank.

2, TM

1,901

1

1 1

14

1,824

5
4

1
3

59

2,404!

1

3

12

8

8
1

4

(I7)

7

1

4

Titus, G. H., Holdrege
Nevada, December, 1 group; June,
2 groups

9

14

1

1

1

8,592

2,009 1

8,592

1

.-1
-1

2
1

25,862
34,636

25,862
34,636

2,326
24,086

2,326
24,066

1

1

1

20, 276

18,013

3,372

I. 109

1

11,583

1

I
I
I 1

8,086

11, 159
11,583

2 I

2

35, 374

3.5, 374

3 1

3

94,382

94,382

9,920
32,880

1

I

3,073
1,663

I, 601

1

2, 494

2, 494

1

94,382 .

94,38:

9,920
32,880

11 2 banks suspended.
interest in 1 bank sold; no longer constitutes a chain.
112 banks merged; no longer considered a chain.

"Controlling

BRANCH, CHAIN, AND GROUP BANKING

Ound, C. F., and family, Blue
Hill
Southwick, L. E., H. J., and
P. 0.,friend
Folds, E. F., and family,
Schuyler
Barber, R. H., Kearney
Coffee, C. F., Sr., chadron
Hansen,T.J.and C. C., Omaha

Is9

Number and loans and investments of banks in each chain or group-Continued
C:75
Loans and investments

Name .nd address of management
ir controlling interest

Total

State member

National

Nonmember

Decem- June Decem- June Decem June Deem- June
ber
ber
ber
ber
New Jersey-Continued.
Me ahanics Trust Co., Bayonne_
Ne v Jersey Title Guaranty
rust Co., Jersey City
Pla infield Trust Co., Plainfield_
Sut ton, Frank W.,et al., Tom's
iver
tin on County Trust Co.,
lizabeth
tin ted States Trust Co.,
aterson
West Side Trust Co., Newark__

3
3
3

3
3

3

2
I

1

2
1

1
2

1

3

3
3

3
3

2

June

$10,745

$10,745

38,440
22,984

1

8,347

22,984

1 ,

16,450

16,450

2

3
1

3
1

24,758
13,383

24, 758
13, 233

1

1

December

$1,725

June

December

June

December

June

$9,020

2,385

495

$36,055
22,489

$22, 489

1,078

1,078

1,391

1,391

495

Nonmember

$9,020

$1,725

2, 729

5,618

1

1

State member

National

December

2
2

2

3

1

Total

13,981

13,981

2,827

I
2,827 1

24,758
10,406

24, 758
10,406

olio)(December, 2 groups;

New
June, 2 groups)

8

8

4

4

4

4 i

2,902 I

2,902

2,071

2,071 '

831

831

Jon es, H. B., Roy

5

5

3

3

2

2 '1

1,475

1, 475

1, 218

1, 218

257

257

Fi ;t National Investment Cor>ration, Gallup

3

3

I

1

2

2

1.427

1,427

853

1
1

1
1

452
975

452
975

Colorado
New Mexico
New Y ork, December, 20
June, 17 groups

California
New York

1
2

1

1

126

107

64

57

20

20

42

19

15

5

5

6

5

8

853

574

574

853

452
122

452
122

490,379

527,614

237,781

111,705

97,052

1,218

337,431

390,204

1, 218

337,431

390, 204

groups;

Marine-Midland Corporation,
uffalo
Traus-America
ew York

1
2

853 '

30 3,434, 166 2,931,994 1,441,508 1, 277,595 ,1, 502, 279 1, 126, 785
5

425,436

372,496

57,071

37,663 1

2

8

9 1,418,361 1,357,342 1,080,930

i
965,920 I

2

8

9 1, 139,879 1,078,860
278,482
278,482

802,448
278,482

687,438
278,482 1

Corporation,
ig 18

22

17
1

21
1

10
9
1

11
10
1

256,660

oxiiisiva anon° amv 'xivrio ‘Roxvng

Number of banks

First Securities Corporation,
Syracuse

14

American .fg Foreign Shares
Corporation, Albany
New York
Vermont

6

1

1

7

3

77,618

6,999

10,949
10,949

18, 102
16,992
1,110

10,949

8,844

8,844
149,995
149,995

665,689
490,916
225,072
39,701

9

5

9

5

18, 102

8
1

5

8
1

5

16,992
1,110

8

7

4

4

5
3
1
1

5
3
1
1

1

1

1

4

1

4 I
2
1
1

4
2
1
1

7

2

3

2

2

5

6

4

4

1

2

5
4

4

2
2

-

2

2

4
4
5

4
4
3

4
4
3

06

4
4
04

I

2

f

115,559

3

12,427

10,557

815,684

815,684

149,995

550,911
225,072
39, 701

550,911
225,072
39, 701

149,995

4,137

100,025 1

67,4891

8,535 1

5.982

3,583

1,713

776

776

10, 949

665,689
400,916
225,072
39, 701

21,083

21,392

7,841

7,950

12,666

12,666

21,871

22,009

10,615

10,615

11,256

11,394

9,013
8, 116

8, 116

5,473
4,291

4, 291

3,825

3,825

5,082
4,431
31,070

5,082
4,431
32,704

5,082
4,431
27,606

5,082
4,431
16,976

1

6,043

9, 246
4, 222
5,024

5,902
878
5,024

5,902
878
5,024

1

4,252

2,150

1,362

181
2,890

2,890

2

3

1

2

3,540

3,464

15,728

_

21

3

3

2

2

1

1
1
1

2
1

1
1

1
1

1

3

3

1

1

2

2

878
5,024
181
5,040

3

4

2

3

1

1

17,234

15,697

16,672

15, 135

562

562

3

3
1
2

2
1
1

2
1
1

1

1

28,343
19,609
8,734

3.599

1

31.942
19,609
12,333

3,599

1

31,942
19,609
12,333

28, 343

1
2
3

3

2

2

132,477

132,477

3
3

1
1

1

2
3

6,366

19. 609
8,734

181

3,344

123,369

123,369

1,381

328,789

1, Seven banks converted into or merged with existing branches and 3 banks added to the group.

3,344

3,599

3,599

9, 108

9, 108

5,005
328,789

20 2 banks consolidated.

12

Two banks merged

BRANCH/ CHAIN/ AND GROUP BANKING

Humphrey, W. J. & F: J.,
Warsaw
Goldman Sachs Trading Corporation, New York City_ _ _ _
New York
California
Pennsylvania
Northern New York Trust Co.,
Watertown
Globe Financial Corporation,
Brooklyn
Interbank Investors Co., Buffalo
Crandall Family, Westfield
Hulbert, C. E., and associates,
Downsville
Murray family, Goshen
Palmer, Leslie R., Irvington_ _
Bank Shares Corporation of
United States, New York
City_
New York
New Jersey
Connecticut
Buchner, P. C., et al., Geneseo_
First National Bank dr Trust
Co., Elmira
trans, S. W., & Co., New
York City _
New York
Illinois
Western New York Investors,
Buffalo
American Shares (Inc.), New
York City
Manhattan Co., New York
City

7

Number and loans and investments of banks in each chain or group—Continued
Loans and investments

Total

State memher

National

Nonmember

National

Total

State member

Nonmember

1
DeemDeceniDeher
her
June Degernher
June DeemJune Deher

North Dakota(December,6groups;
June, 6 groups)
Hanson, 0. S., et al., Grand
Forks
North Dakota
Minnesota
Sishek, J. H., Ashby
North Dakota
Montana
South Dakota
Peterson, Akin, estate, et al.,
Harvey
Robinson, Harve, Medora
North Dakota
Montana

48

50

14

16

34

June

Deeemher

June

34

412,673

$13,901

Deeerm-

June

$4,921

$6, 149

Deem.June

Deeemher

$7,752

June

47,752

14

14

5

5

9

9

3, 303

3, 303

1,640

1,640

1,663

1,663

12
2

12
2

3
2

3
2

9

9

2,687
616

2,687
616

1,024 ,
616

1,024
616

1,663

1,663

11

11

11

11

2,639

2,639

2,639

2,639

9
1
1

9
1
1

9
1
1

9
1
1

2,134
131
374

2, 134
131
374

2, 134
131 I
374

2, 134
131
374

"9

11

8

3

3

1, 390

2,618

1, 152 ;

2, 380

238

238

5

2,136

2,136

413

413

1.723

1,723

572
1, 564

572
1, 564

413

413

572
1, 151

572
1, 151

6

6

6

1

1

5

3
3

3
3 I

1

1

3
2

3
2

Bisehot, John, Zeland
Graves, H. T., et al., Jamestown

5

5

1

1

4

4

1,677

1,677

376

376

I, 301

1, 301

3

3

1

1

2

2

1, 528

1, 528

1. 340

1, 340

188

188

Ohio (December, 2 groups; June,
1 group)

8

4

5

3

2

1

69. 230

7,928

38,231

7.538

Banc Ohio Corporation, Columbus
Mather, W. G., Cleveland—
Michigan

1

61,302

4

4

3

3

1

4

2

1

1

1--------------7.W.68

30,693
7,928

7,538

$29, 152

$390

28,762
7,538

3110

1,847
1,847

390

4113NVIDI

Name and address of management
or omtrolling interest

ONINNVil al101I0 (INV •NIV

Number of banks

Oklahoma (December, 8 groups;
June, 9 groups)

1
.-,..

Southwest Corporation," Tulsa

21 1
'
19 1
i 1
1 1

Oklahoma
Kansas
Texas

5
5

16

0, 1 0. 1 ,.„.. 1

,

Al

5

11
I
1

5

5

77, 753

5

76, 181
915
657

!

„. 1 .. TjIII 1 QA QOV 1
i

1243

,

1,243

66,638

76,510

66,638 1

74,938
915
657

66,638
66,638

3,568

3,568

1,098

4, 149

4, 149

1,084

1,096
2,738
1,084

!

_
15 1
(") 1
9 1
1.
9 !
6 1

15
12
9

9

9

6

6

3

6
12
3

4,664

6

5,233

9
6

4
6

4
6

5

5

4,407
3, 139

4,407
3,139

3,553
3,139

3,553
3, 139

854

8.54

5

5

4

4

1

I

3, 158

3,158

3,082

3,082

76

76

5

5

4

4 1

1

1

1,909

1,909

1,878

1,878

31

31

1
4

1
4

1
3

1 1
3'

1

239
1,670

239
I,670

239
1,639

239
1,639

31

31

3

3

3

31

889 1

889

889

889

Oregon (December,7 groups;June, !
!
6 groups)

3.5

32

16

14

Pacific Bancorporation, PortI
land

10

10 '

5

1

Myers, W. D., Alva
Kansas
Oklahoma

!
!

Vose, R. A., Oklahoma City

West Coast Bancorporation, !
Portland
Oregon
Washington
Oregon Investors Corporation,
Hillsboro
First National Corporation,
Portland
Linn Securities Co., Albany_
McCoy, E. 0., The Dalles
Wright, Will T., Oregon City_
Oregon
Washington

1
1

9 1

9

7

7

8
1

8
1 1

6
1

6
1

4

4

I

1

3
3
•3

3

1 i
1!
1 1

1

3

1

5

5

1 72-!
,
!

1

1
,

14

13

80, 126 .
1

80, 170

68,424

66,632

3,353

2,936

8,349

10,602

4

4

9,074

9,074

6, 777

6,023

214

968

2,083

2,083

2

2

18,853

18,8.53

16,724

16,724

2,129

2,129

2

2

18, 226 '
627 !

18, 226
627

16,097
627

16,097
627

2, 129

2, 129

3

3

1, 449 !

I, 449

945

945

504

504

2

45, 308

40, 101
1,038
2.839

40, 101

1,979
975
377

5, 207

1

42,080
3, 184
3,414 1

1

2,072 1

2,072

1, 770

302

302

1.770
302

1,770

I

1,770 ,1
302,

302

302

I
I

1

2
1
1

2

1

2

3

3

1

2

2
1

2
1

1

2

,

1

3,414

2,839

I, 171
198

198
1,770
_
1,770

I
12

Two banks sold to First Bank Stock Corporation.

11 Formerly Exchange National Co.

All banks suspended November, 1929,

377

BRANCH, CHAIN, AND GROUP BANKING

Thurmond Bros., Oklahoma
City
McCauley, H. A., Sapulpa _ _ _
Douglas, H.T.,et al., Shawnee_
Johnson
Bros.,
Shawnee
Mound
Wooten, H. K., Chickesha
Mullendore, E. C., and family,
Cleveland

1
4,664 1
2,738
5,233

Number and loans and investments of banks in each chain or group-Continued
Number of banks

Total

Loans and investments

Stattem
r em-

National

Nonmember

DecemDecemDecemJune DecemJune
ber '""
•,.,,,„`
ber
ber
J„"„„"-""
ber
Pennsylvania
(December,
groups: June, 12 groups)

Total

National

State member

Nonmember

December

June

December

June

December

June

December

June

12

Peoples Pittsburgh Trust Co.,
Pittsburgh
Union Trust Co., Pittsburgh _
Commonwealth Trust Co.,
Pittsburgh
First National Bank, Johnstown
United States Finance Co.,
Carlisle
Bosak, Michael & Associates,
Scranton
Butler County National Bank,
Butler
Berwind-White Coal Mining
Co., Philadelphia
Colonial Trust Co., Pittsburgh_
Oswald, V. A., Altoona
Prindible, Geo. E., Patton
United States National Bank,
Johnstown

47

47

15

15

9

9

23

23

$763,305

$742,052

$343,683

$343,883

$333,911

$312,658

$83,711

$85,711

7
6

7
6

1
2

1
2

2
2

2
2

4
2

4
2

167, 180
458,901

145,927
458,901

73,470
217,529

73,470
217,529

74,444
206.465

53,191
206,465

19, 266
34,907

19, 266
34,907

1

1

3

3

20, 317

20,317

1, 713

1, 713

15, 754

15, 754

3

3

19,329

19, 329

15,639

15,639

2

2

5,888

5,888

1,122

1,122

2

2

14,000

14,000

1

1

9, 784

9,784

9,784

9,784

1
1
2

1
1
2

5,062
32,200
7,592
4,541

5,062
32,200
7,592
4,S41

214
2,220
5, 142
3, 182

244
2,220
5, 142
3, 182

2

2

18,511

18,511

13,638

13,638

1

1

153,331

153, 331

7,340

7,340

24

25

11,057

13,528

3,200

5,606

7

7

2, 229

2,229

5

5

8

6,

5

5

1

1

4

4

1

1

4

4

2

2

3

3

3

3

2

2

3
3
3
3

3
3
3
3

1
1
2
1

1
1
2
1

3

3

1

1

3

1

1

30

35

6

10

7

7

6

6

6

6

Rhode Island:
Industrial Trust Co., Providence
South Dakota(December,5 groups;
June,6 groups)
Beebe, M. P. Ipswich
Schirber, F. W ., Bents, J. J.,
and Kindred, H. J., Mobridge
Schneider, G. F., et al., Rapid
City

1

1

1

1

2
1

2
1

1

1

788

788

3,701

3,701

4,333

249

249

4,818
28,097

142,069

4,333 1

4,818
28,097

142,069 1

2, 8.50

2,850

3,690

3,690

4,766

4,766

9,667

9,667

I,883
2, 450
1, 359

1,883
2,450
1, 359

4,873

4.873

3,922

3,922

7,857

7,920

2,229

2,229

539

539

3,701

3,701

oxixxva anouo axv 4NIVEID 4EIDNV/IEE

Name and address of management
or controlling interest

00

6f
Stiles, Fred B., Watertown. _ _ _
Greene, F. D., Cahalan, A. B., I
and Swanson, C. P., Miller.. (2') 1
5
Waste, H. G., Spearfish, Wyo..
Tennessee (December, 4 groups;
June,5 groups)
Caldwell, Rogers, Nashville...

National Bank,
American
Nashville
Group,
Commerce-Union
Nashville.
First National Bank, Pittsburgh
Fourth and First National
Bank, Nashville
Nashville Trust Co., Nashville
Texas(December, 16 groups; June,
15 groups)
Wilkinson, J. G. de H. H.,
Fort Worth
Parrish, M. C., and associates,
Austin
Crews, J. M., and associates,
Childress
Thornton, R. L., and Mercantile Banking 6c Trust Co.,
Dallas
Fuqua, W. H., Amarillo
New Mexico
Texas
Feagin, L. M., and Kirby, J.
H., Houston
Couch, R. C. and D. R., Haskell
Staley, J. I., Wichita Falls
New Mexico
Oklahoma
Texas

5

1i

3,096 i

3,096

5

1
5

1,243

2,469
1,243

1 1

67

15

183, 139

91, 727

131,306

78,642

97,028
34, 280

70,346
8.296

4

5
5

,

23

19

8

68

12

1

53

11
55

4
8

1

7
46

15

11

4

3

11

8

31,470

34,012

1

15, 198

15, 198

2

1, 163

3

3

2

2

1

3

3

1

1

2

(21)

3

(21)

3

1

86

80

25

22

12

12

3

3

9

9

8

8

1
5

6
1
5

5

5

5
4
1
1
2

3

5

58

55

104,384

88,712

9

9

9,517

9,517

9
2

2

4

4

1
3

1
3

2

2

2

2

1

2

2

15 Taken over by First Bank Stock Corporation.

1

S

1,059

1,243

63
1,243

11, 140 .1

59,080

29,576

11, 140

41,526

11, 140

26,682
14,844

7

1,928

1,928

6

6

14, 176

14, 176

2

2

5,996

965

2

2

5,996
151
5,845

5

5

965

2

5,989 I
900

1,277

2

4,462

1
1

397
420
3,645

26,279

8,082

7,733

5,989

9, 209

9,209

900

263

I
77, 263
8,223 1

11,352

1,518
62, 508

151
5,845

1,277

429

13,971

13,971

8,223

429
13,869

5, 452 ,
151
5, 301

582

13,869

5,452
151
5,301

582

263
1, 019

27,465

959

7

2

62, 151

27,388

13,870

2
3

1, 163

112,919

28,484

2

1

8

9

6

/46

2,406

,

,
87

145

2,951 I

2,951

1i

5

102

102

3,645

13,150

12,233

1,294

1,294

1, 059

959

1,499

1,499

307

307

544

544

544

544

965

965

593

593

817
397
420

3,645
_

ta Now included in Rogers Caldwell Group,shown above.

BRANCH, CHAIN, AND GROUP BANKING

Tennessee
Arkansas

6

Number and loans and investments of banks in each chain or group-Continued

State member

National

Total

Nonmember

DecemDecem- June DecemDecemJune
June
ber
June
ber
ber
ber
Texas-Continued.
Welhausen & Driscoll, Yoakum
Republic National Co., Dallas _
Stewart, Carter, and Associates, Houston
A tmws, L. P., Groveton
Thompson, H. H., Houston_
Weldon & Sweeney, Milwaukee
Moody, W. L., jr., and associates, Galveston
Paul, F. A.,& Associates, Panhandle

Total

December

State member

National

June

I D berm-

June

Decem-June
ber

Nonmember

December

June

4
4

4
3

1
2

1
1

3
2

3
2

$j,354
45,835

$1, 354
34,721

$736
43,460

8736
32,350

$618
2, 375

$618
2, 375

4
4
3

4
4
3

3
1

3
1

1
3
3

1
3
3

6,830
1, 423
268

6,830
1,423
268

6,031
901

6,031
901

799
522
268

799
522
268

3

3

2

2

1

1

494

494

434

434

so

60

3

3

2

2

1

1

7,087

7,087

7,087

7,087

3

3

1

1

2

2

1,713

1,713

283

283

1, 430

1,430

.50

51

131

13

2.5

2.5

9
14
2

9
14
2

Cosgriff, J. E, Salt Lake City_ _1

9

9

1
,

2
4
3

2
4
3

Utah (December,5 groups; June, 5
groups)
First Security
Ogden
Utah
Idaho
Wyoming

Utah
Idaho
, Wyoming

1

Armstrong - Whitmore, Salt 1
Lake City...........7
Utah
Idaho.
Nevada

8

8

29

30

70, 160

70,262

3.5, 632

3,5, 632

$11,888

$11,888

22,640

22.742

21

6

6

17

17

34,723

34,723

12,038

12,038

11, 129

11,129

11,556

11,556

21

2
4

2
4

5
10
2

5
10
2

19, 302
13,860
1,561

19, 302
13,860
1,561

12,038 1

12,038

2,091
9,038

2,091
9,038

5, 173
4,822
1.381

5,173
4,822
1,561

3

15,747

15,747

15, 146

15,146

601

601

10,694
2,574
2, 479

10,694
2,574
2, 479

10,528
2,312
2,303

10, 528 ,
2,312 1
2,306

166
262
173

166
262
173

1

4.487

4,487

3,534

3,534

759

759

194

194

1

2,722
307
1.4.58

2,722
307
1,458

1,769
307
1,458

1,769
307 '
1,458

759

759

194

194

Corporation.

5
1

_
\

1

5
1
1

6

3

1
3
2

1
3
2

1
1
1

4

4

2

2

2

2

2

2

0
1

1

4NIVIID 41EONVIE1

Name and address of management
or controlling interest

Loans and investments

oxixtuct anotm axv

Number of banks

Desert National Bank group,
Salt Lake City

xr6

6

1

4

1

5

13, 247 i

13, 349

4

1,9511

1,9543

34

174,851

4,914 I

4,914 1

.
Chipman family et al., Ameri(an Forks
Washington (December, 12 groups:
June, 11 groups)
Old National
Spokane.

4
71

59

28

24

2

1

41

Corporation,29

Marine Bancorporation. Seattle
First Seattle Dexter Horton SeI
curities Co.29, Seattle
American Securities Co., Spokane
Butler, Wm.C.,and associates,
Everett
Hall Investment Co., Carnation
Waddell, Hugh,et al., Colville
Bankers Holding Corporation,
Seattle
Bingham, C. E.,Sedro Woolley
Coffman Dobson Investment
Co., Chehalis
Fechter, 0. A., Yakima
Hannay, N. B., et al., Mount
Vernon
Pacific Brotherhood
ment Co., Seattle

81,418

152,536

66,800

3.342

877

8,4311

1,956 ,

1.956

17,973

13, 741

22 •' 20

12

10

10

10

i
32,981 ,

8,566

30,928

6,508

2,058

2,058

5t 5
17
15

3
9

3
7

2
8

2
8

3,325 I
29,656

3,32.5
5,241

3026
27,897

3.026
3,482

299
1,759

299
1,759

10

6

5

4

5

2

35,484

32,186

31,014

29,714

4,470

2,472

7

6

3

3

4

3

78, 298

23,539

76,437

22, 363

I, 861

1, 176

5

5

5

5

4,895

4,895

4,895

4,895

I

4
4
4

3
4

3
3

3
3

3
3

12,484

2

2

1

1

4
3

3
3

703
1,194

516
1, 194

1

1

2
3

2
3

849
1,334

849
1,334

1
1

2

11,057

2,439
3,121

2

1,427

887

887

428

428

703
307

516
307

421
1,334

421
1,334

2,158
2,184

937

281

I
2

1

.

1,675

1,329

346

Invest-

Washington
Oregon
Roberts, F. M. and F. W.,
Seattle

(")

I

3
I

I

1 I
2

2

1

5,n5

4,718

877

1
1

1

3,250
2,345

2,373
2.345

877

2

One bank merged with a bank outside the gro ip.
29 Formerly Union Securities Co.
First National Corporation.

1

1

21

Si

1,069

1,069

8.53

853

216

216

BRANCH, CHAIN, AND GROUP BANKING

Idaho
Washington

.._

8,333 i
.

Groups dissolved.
Now part of Calitalo Investment Corporation group, San Francisco.

"Formerly

00
CAD

Number and loans and investments of banks in each chain or group-Continued
Loans and investments

Number of banks

Name and address of management
or controlling interest

State member

National

Total

Nonmember

Wisconsin (December, 6 banks;
June, 5 banks)
National
Wisconsin
First
Bank, Milwaukee
Coe, C. C., and Coe, A. E.,
Almena
Baker, Harry D., St. Croix
Falls
Dunegan, J. W., Stevens Point.
Rosebush, Judson, Milwaukee_
Brown, C. C., Kenosha
Wyoming (December, 5 groups;
June,5 groups)
Hay, J. W., Cheyenne
Marble, A. H., Cheyenne
Wyoming
South Dakota
Williams, C. J., Hinman, (1.
A., and Paerson, W. E.,
Powell
Taliaferro, T. S., Jr., Rock
Springs
P. J. Quealy, Kemmerer

December

June

December

June

December

June

Nonmember

December

June

38

33

13

11

25

22 $198,212 I $191,277

$172,261

$166,390

$25,951

$24,887

18

17

7

6

11

11

168,466

165,460

147,480

144, 474

20,986

20,986

5

1,660

1,660

1,660

1,660

4

879
3,929
9,709
13, 369

879

879

9,709
13,569

2,865
8,801
13, 115

8,801
13, 115

879
1,064
908
454

12,994

12,994

9,369

9.369

2,685

2,685

5,764

5,764

5

5

4
4
4
3

4
4
3

1
3
2

4
3
3
2

21

21

6

6

2

2

5

5

5

1

3

4

4

2

1
3

1
3

2

4

4

2

3
5

3
5

1'
1

2

3

2

1

12

12

3

3

6,3811

6,381

2

2

I, 167

1, 167

1
1

1
1

197
970

197
970

1

1

908

908

745

745

2
4

2
4

912
3,626

912
3.626

463
2,397

463
2,397

$940

805 1

135

$940

908
454

617

617

362

362

197
165

197
165

135 I28

28

449I
449
1,229,1,229

BRANCH, CHAIN, AND GROUP BANKING

Decem- June Decem- June Decem- June Decem- June
ber
ber
ber
ber

State member

National

Total

BRANCH, CHAIN, AND GROUP BANKING

185

Mr. LETTS. I understand the statement with respect to the Minneapolis and St. Paul situation is ready to go in at this point.
The CHAIRMAN. Yes. Do you want to submit that now, Mr.
Pole?
Mr. POLE. This statement did not refer specifically to any particular banks. You asked that that be included, and so I shall
have to revise it.
The CHAIRMAN. If you will revise that and insert it, we will be
obli!ged.
Mr. POLE. I will be glad to do so.
(The statement referred to is as follows:)
POSSIBLE CONTROL OF ELECTIONS OF FEDERAL RESERVE BANK DIRECTORS BY
GROUP BANKS IN NINTH FEDERAL RESERVE DISTRICT

For purposes of election of class A and class B directors of Federal reserve
banks, member banks in each Federal reserve district are divided into three
groups, each electoral group consisting as nearly as possible of banks of similar
capitalization. Each group of banks is permitted to elect one class A and one
class B director. Each member bank certifies its first, second, and other choices
for a director of class A and class B, respectively. Only one choice for any one
9/ndidate may be voted. A candidate having a majority of first choice votes
la declared elected. In case no candidate has a majority of first choice votes,
the first and second choice votes are added together and if any candidate then
have a majority of electors voting he is declared elected; if not, the first, second,
and other choice votes are added and the candidate then having the highest
number is declared elected.
In the ninth Federal reserve district the electoral groups of member banks
are as follows: Group 1 consists of banks having a capital and surplus of
$400,000 and over, Group 2 of banks having a capital and surplus of from
860,000 to $399,999, and Group 3 of banks having a capital and surplus of less
than $60,000. At the end of 1929, there were 683 member banks in the
Minneapolis district, of which 30 were in Group 1, 299 in Group 2, and 354 in
Group 3.
The number of member banks in the ninth district belonging to the Northwest Bancorporation group and in the First Bank Stock Corporation group,
together with the percentage of the number of banks in each of these groups to
the total number of banks in each electoral group are shown below:
Member banks in the ninth Federal reserve district, by electoral groups, December 31,
1929
Number of banks in—
All
member
banks Group Group Group
1
2
3
All member banks
1'11'4 Bank Stock Corporation:
Number
Per cent of total in group
Northwest Bancorporation:
Number
Per cent of total in group
First Bank Stock Corporation and Northwest Bancorporation combined:
Number.
Per cent of------ in group

683

30

299

354

66
9.5

7
23.3

47
15.7

11
3.1

56
&1

'13
48.3

30
10.0

12
3.4

120
17.6

20
66.7

77
258

23
6.5

'Includes 1 bank which joined the group in January, 1930.

It will be noted that the First Bank Stock Corporation and the Northwest
Bancorporation together control 66.7 per cent of the member banks in Group
1, the group of largest banks, in the Minneapolis Federal reserve district; and
it is manifest that acting together these two corporations could easily control
the elections of class A and class B directors in this group by having the mem-

186

BRANCH, CHAIN, AND GROUP BANKING

ber banks which they own vote for a particular candidate. On the basis of their
present holdings, therefore, these two corporations by their combined action would
be able to place upon the board of directors of the Federal Reserve Bank of
Minneapolis a class A director and a class B director from Group 1. Moreover,
the First Bank Stock Corporation and the Northwest Bancorporation together
control approximately 25 per cent of the banks in Group 2 in the Minneapolis
district. While this number is, of course, not sufficient to control absolutely
the elections of class A and class B directors in the district, it is obvious that
by acting jointly, they could give to any specified candidate a large number of
votes and with some additional votes from independent banks might bring
about the election of the desired candidate. This would be more easily accomplished in an election where there were several candidates in the field, in which
case control of a plurality of the votes might be sufficient to elect. Under some
circumstances, therefore, on the basis of present stockholdings, the two corporations acting together might conceviably succeed in electing a class A and a
class B director from both Group 1 and Group 2 in the Minneapolis district, a
total of four directors.
Acting separately, the Northwest Bancorporation, owning as it does, approximately 43 per cent of the member banks in Group 1, could probably control
the election of class A and class B directors in that group in many cases, unless
the opposition were united on one other candidate. The First Bank Stock
Corporation, however, owning about 23 per cent of the member banks in Group
1, would probably find it difficult to compel the election of any candidate in the
group unless it were able to obtain the support of at least some of the banks
owned by the Northwest Bancorporation. It is doubtful whether either the
First Bank Stock Corporation or the Northwest Bancorporation could, acting •
separately, control the elections of class A or class B directors in Group 2, as
their separate holdings in this group are only about 16 per cent and 10 per cent,
respectively.
As shown in the above table, the holdings of these two corporations in member
banks in Group 3, the group of smallest banks, are relatively small and it is very
doubtful, on the basis of the present holdings, that much influence could be
exerted by these two corporations on elections of class A and class B directors
in this group, unless it be by moral suasion or some method other than direct
control of votes.
While the above shows the possibility of the control of elections of Federal
reserve bank directors by group banking systems, I wish to point out that there
would be no likelihood of similar control of such elections in the case of branch
banking. A parent bank and all its branches constitute but one corporate
entity and, accordingly, a member bank with any number of branches would be
entitled under the law to only one vote in elections of class A and class B directors.
For example, if the Northwest Bancorporation were a member bank with a large
number of branches instead of a holding corporation owning stock in a large
number of individual banks, it would have only one vote in elections of class A
and class B directors, whereas it now controls a large number of votes as indicated
above.
•

The CHAIRMAN. What is the attitude of your departwent when you
are approached by the heads of these chain groups for the organization of banks in any particular territory? Do you lend them assistance and cooperate with them to the end that these groups may be
developed?
Mr. POLE. I would not go so far as to say that, Mr. Chairman,
because when a group undertakes to purchase a bank, it does not
consult us unless it is a question of reorganization under a national
charter which is sometimes the case—frequently the case—and in
those circumstances we have always been very glad indeed to do what
we can to promote a better state of affairs in any particular locality.
The CHAIRMAN. You have no notice, then, when a national bank
is taken over by one of these groups until you examine the stockholders' list?
Mr. POLE. Not necessarily.
The CHAIRMAN. And you do not take any cognizance of it?

BRANCH, CHAIN, AND GROUP BANKING

187

Mr. POLE. No; we can not take any more cognizance of that than
we can the transfer of the stock into other hands than the group.
The CHAIRMAN. Have you ever suggested to the organizers of these
groups the merging or taking over of a national bank in any of these
groups?
Mr.POLE. I have not. There may have been some such suggestions
Upon the part of our chief examiners or examiners in the field.
The CHAIRMAN. Is your department or are your chief examiners
consulted in regard to the organization of these various holding
companies affiliated with the banks?
Mr. POLE. What is that, Mr. Chairman?
The CHAIRMAN. Is your department or the chief national bank
examiners consulted in connection with the organization of these
affiliated companies with national banks?
Mr. POLE. Usually our organization department is consulted, in
order that a method may be adopted which has been approved, of
declaring a dividend and using the proceeds of such a dividend for
the capitalization of the affiliated company.
The CHAIRMAN. Does that extend to the point of approving or
disapproving the organization of these companies?
Mr. POLE. No; we do not have to approve or disapprove.
. The CHAIRMAN. I understood you to say the other day that we
did not need any larger banks in the central reserve cities. Was I
correct in this? To which cities did you refer?
Mr. POLE. Chicago and New York are the central reserve cities.
The CHAIRMAN. Suppose two or more of the big banks in one of
these cities wanted to merge or consolidate; is it the practice of your
department to protest or approve, or could you stop, if you wanted
to, such consolidation or merger?
Mr. POLE. Consolidations of banks has to be made with the approval of the comptroller.
The CHAIRMAN. None of these mergers could be brought about
Without the approval of the comptroller?
Mr. POLE. Consolidation can not be brought about otherwise.
The CHAIRMAN. The other day you said, in answer to a question,
that you were largely responsible for much of the branch banking
discussion going on at the present time. How did you mean that?
Mr. POLE. I mean that through my report to Congress, and through
addresses which I have made, interest over the country has been
aroused in the banking situation, particularly with respect to the
banking situation in the rural communities, where the failures have
been very large.
The CHAIRMAN. Are you carrying on any propaganda in favor of
branch banking or chain banking or group banking?
Mr. POLE. None whatever.
The CHAIRMAN. I have here a report of the Comptroller of the
Currency, sent out by the National Shawmut Bank of Boston, it
apparently having been sent to banks generally. It is dated December 2, 1929, and pertains to legislation recommended, and it is printed
at the United States Government Printing Office.
Was that sent out as a circular to the banks for distribution?
Mr. POLE. May I look at it? [After examining document.] I
know nothing about this. Mr. Await says that he does.
The CHAIRMAN. Can Mr. Await tell us about it?

lbw

188

BRANCH, CHAIN, AND GROUP BANKING

Mr. AWALT. As I remember it, Mr. Chairman, an officer of the
Shawmut Bank came into the office in Mr. Pole's absence from the
city one day and asked if we could furnish them with some of the
copies of our annual report, and I said we could not. He wanted
quite a large number. I called up the statistical division of our office,
and they told me that some banks had desired copies of the comptroller's report and an arrangement had been made that they could
get them from the Government Printing Office by getting in touch
with the Public Printer and having them printed and paid for, and I
assume that that was done in this case. I do not know why they
wanted it.
The CHAIRMAN. The reason I mentioned it is that it seems that
these are being sent out to the banks of the country as part of a movement apparently to encourage certain forms of development.
Mr. AWALT. I might suggest that if the committee desires to find
out the exact reason they call the officers of the Shawmut Bank.
I do not know what their reason is, and we did not approve anything
of the sort.
Mr. LucE. It might be useful in the record to have it appear at
this point that any citizen may secure from the Government Printing
Office, at cost plus 10 per cent, any public documents that he may
desire.
The CHAIRMAN. I was not raising that question, but raising it in
connection with the dissemination of information that Mr. Pole
referred to the other day, as to whether the discussion was being
brought about from the comptroller's office, or whether it was proceeding independently of that, or just what there was to that.
Mr. LUCE. I have an ulterior motive in making the statement that
I did, because I desire to take every opportunity to correct the wrong
impression on the part of the public that members of Congress are
working the Public Treasury in the wide distribution of literature
at public expense.
Mr. WINGO. I think it might be well, for reasons not necessary to
elucidate here—and the public seems to have developed a suspicion
along these lines—to make it appear affirmatively in the record that
what has been done, that what the Shawmut Bank has done is not
reprehensible at all but what they had a right to do. You and I have
seen some things go out in the last few weeks that are perfectly innocent, and yet the newspapers seem to think something terrible is suggested. So I do not think a reputable person or a reputable institution like a bank should be suspected in a case like this of having done
something terrible where they have acted properly. They have
done what any citizen has the right to do, go to the Public Printing
Office and get copies of documents and pay for them. The Government does not lose any money. In other words, the right of legitimate
propaganda is really a part of the right of free speech and freedom of
press.
The CHAIRMAN. Now, Mr. Pole, reverting to that question I asked
some few moments ago which was referred to by Mr. Fort the other
day; take, for instance, St. Louis, as a trade area. You avoided answering Mr. Fort fully in his question the other day about how many
banks you think, that city should have under your plan. For
instance, do you think it should have 1, 2, 3, or more banks, and just
how would you parcel out the business in the city? Would you, in

BRANCH, CHAIN, AND GROUP BANKING

189

ease there were four big banks with branches, permit each of the four
to have a branch on each of the four corners of a location, or just how
'would you do it? Would you divide the city into four districts, one
bank to serve each district, and where national-bank stocks are owned
by group, chain, or holding companies, how are the stocks registered
on the books of the bank, correctly or in the names of dummies—I
think you have answered on this last feature.
When you answer this question I wish you would specifically set
forth just how you would deal with
'a specific trade area like St. Louis,
for instance, so that the committee may understand just how this
plan of branch banking would work out. If you will add that to the
brief you are preparing—
Mr. POLE. You wish me to add that to the brief on trade areas?
The CHAIRMAN. Yes.
Mr. POLE. I thought you wanted me to answer it now.
The CHAIRMAN. Do you regard the national banking system as a
unit banking system?
Mr. POLE. A unit and a branch banking system.
The CHAIRMAN. Your branches being confined to the cities?
Mr. POLE. There are also branches of national banks outside of
the cities which have resulted from the conversion of State branch
banking systems.
The CHAIRMAN. As I understand your testimony, you believe that
We have arrived at the point where we should look the situation
squarely in the eye as to these banks and recommend an enlargement
Of the functions of the national bank business as now conducted?
Mr. POLE. Yes, as being the only remedy which occurs to me, as
the only one which will carry to the rural communities a safe and
Sound banking service.
Mr. STEAGALL. Right there, let Mr. Pole insert the figures showing
the development of branch banking in point of capital and the
bumber of branches since the passage of the McFadden Act.
The CHAIRMAN. February 25, 1927.
Mr. WINGO. Let that show not only the branches established by
direct authorization, but those that have come into the national
sYstem by reason of mergers or by reason of taking over State banks.
I think that is in your annual report.
MT. POLE. It is.
Mr. WING°. But it might be wise to get it into the record at this
Point.
The CHAIRMAN. Without objection, when Mr. Pole supplies that
it will be put in the record at this point.
(The information requested is reproduced below.)
•
BRANCHES

In the comptroller's report for the year ended October 31, 1927, the statement
was made that under the provisions of the act of February 25, 1927, the Comptroller of the Currency had approved the establishment of new city
to
the number of 127. In the year following 103 new city branches werebranches
authorized
and during the year ended October 31, 1929, the number authorized was 89.
Of the 319 local branches authorized by the comptroller 75 have been discontinued
leaving the total of city branches now in operation authorized by the comptroller
under the provisions of the McFadden Act as 244.
During the past year 2 branches were added to the system through the conversion of a State bank and 82 branches were added through the consolidation of
100130-30—voi.I,PT 2-7

190

BRANCH, CHAIN, AND GROUP BANKING

State banks with national banks. These additions, together with those branches
in the system under date of October 31, 1927, less 104 branches dropped through
action of directors and shareholders or liquidation of national banks make a
total of 1,061 branches in existence in the national banking system as of October
31, 1929, summarized as follows:

Classes

Statutory{g
Additional offices, c branches
Millspaw Act
C branches
Total

Closed
Authorized
during
year
Feb.
Oct. ended Share25, 1927 31, 1928 Oct. holders
31, 1929

In
In
opera- existtion
ence

during the year ended
Oct. 31, 1929

Total
in
exist-

Volun- ence
Oct.
Direc- Lapsed tary
tors
liqui- 31, 1929
dation

427

469
162
168
6
187

2
82

202
5

89

5

10

17

244

372

992

173

6

11

86

1,061

165

44
25

243
142
5

The CHAIRMAN. I would suggest to the committee that our committee has charge on the floor this morning of two bills, and probably
we had better recess.
Mr. GOLDSBOROUGH. Mr. Chairman, it seems to me that the rule
under which this hearing is being conducted has worked out so far
very satisfactorily, and I am going to suggest that when we further
hear Mr. Pole, the same procedure be carried out. In other words,
there are certain of the members, I am sure, who, because of the discussion, have other questions that they would like to ask, and if the
chairman would just begin and go around the committee as we did
before, I believe it would be better than to have a round table discussion.
The CHAIRMAN. The Chair will be very glad to comply with that.
There are some members of the committee who have not had their
opportunity to question the witness.
Without objection, we will stand adjourned until 10.30 o'clock
to-morrow morning.
(Thereupon, at 11.57 o'clock p. m., an adjournment was taken
until Thursday morning, March 6, 1930, at 10.30 o'clock.)

BRANCH, CHAIN, AND GROUP BANKING
HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,
Thursday, March 6, 1980.
The committee met in the committee room, Capitol Building, at
10.30 o'clock a. m., Hon. Louis T. McFadden (chairman) presiding.
The CHAIRMAN. The committee will come to order.
Mr. Dunbar, would you like to proceed now?
STATEMENT OF HON. JOHN W. POLE—Resumed
Mr. DUNBAR. Mr. Pole, you stated that the great number of
failures in banks have occurred since 1921—I think it was 5,000—i•-•
that correct?
Mr. POLE. Five thousand six hundred and forty.
Mr. DUNBAR. To what extent do you think that the failures of
these banks were due to conditions existing since 1921? The reason
I ask that question is this, that I was a member of the Committee on
on Banking and Currency nine years ago and we at that time had
confidentiali
information that if the banks n Iowa were required to
liquidate and to do so within two years' time, 95 per cent of them
Would prove to be insolvent.
Now, then, to what extent have these bank failures in small com'nullities been due to conditions existing since that time?
Mr. POLE. I think it has been due in considerable part to the
economic conditions.
Mr. DUNBAR. Those banks at that time were practically insolvent
but we were told that if they were given a chance, probably they
could recuperate and that they might become solvent, and we were
also informed that the condition of many small banks throughout the
United States was the same. Has not the failure of these banks in
rural communities largely been due to the fact that they have been
unable to recover from the effects of frozen paper that they had in
their possession at that time?
Mr. POLE. Undoubtedly that has had its effect.
Mr. DUNBAR. Do you believe that if the banks at that time had
been solvent in a fair proportion, that we would have had the bank
failures in recent years that we have had?
Mr. POLE. The banks were not insolvent as far as the national
banks were concerned. Just as soon as we would discover a condition of insolvency, the law requires us to take charge of that bank or
to put into effect such remedial measures as are available.
Mr. DUNBAR. Does this figure of 5,640 that you have given us
relate to national banks alone, or to national and State banks?
Mr. POLE. National and State banks.
Mr. DUNBAR. Can you tell us how many of them were national
banks?
Mr. POLE. There were 763 national banks, and 4,877 State banks.
191

192

BRANCH, CHAIN, AND GROUP BANKING

Mr. DUNBAR. Which shows that the national banks are better
supervised and better conducted than the State banks.
Mr. POLE. We must take into consideration the fact that there
were almost three times as many State banks as national banks.
Mr. DUNBAR. But the proportion of failures is 3 to 1—is that
correct?
Mr. POLE. Approximately, in ratio to the number of banks.
Mr. DUNBAR. Of course, you have no supervision over any State
banks except in so far as they are members of the Federal reserve
system.
Mr. POLE. We have no supervisory powers over those banks.
Mr. DUNBAR. A large number of the banks that have failed have
been banks as to which you had no power or authority to regulate
their affairs—is that correct?
Mr. POLE. Very largely.
Mr. DUNBAR. You said that if a $100,000 capitalization were required of all banks, that it would close a great many banks in that
area and that there would be a tendency to monopoly.
Mr. POLE. In the smaller communities, because there were in the
United States on June 30, 1929, 5,468 banks with capital of less than
$25,000; 5,357 banks of $25,000 capital; 6,031 banks with capital
above $25,000, but not exceeding $50,000; and 1,073 banks with capital above $50,000, up to, but not including, $100,000. So that out
of 24,912 banks, there were 18,000 which had caiptal under $100,000.
Mr. DUNBAR. In a community in which there is a large number of
State banks, how would the requirement that a.national bank have
a capitalization of $100,000 produce a monopoly?
Mr. POLE. Because a bank has necessarily to have a sufficient
territory from which to draw business, which will enable it to earn a
reasonable profit on its capital investment, and, in addition to that,
it must have an area which will permit of reasonable diversification.
Mr. DUNBAR. If it were a monopoly, it would have all those advantages, would it not?
Mr. POLE. It would have those advantages, but it would also
deprive many communities of banking facilities which they are entitled to.
Mr. DUNBAR. Then you are in favor of communities having banking service in addition to the service to be rendered by national banks
with $100,000 capitalization?
Mr. POLE. I am in favor of that.
Mr. DUNBAR. If you established branch banking systems in those
communities, will that not drive away all of the State banks that are
now serving those communities?
Mr. POLE. If national banks were given the right to extend their
branches, that probably would have the effect of getting a great many
State banks into the national system.
Mr. DUNBAR. Do you think it would get a great many of these small
banks into the national system?
Mr. POLE. I think a great many of those small banks would become
branches of a bank which would be a member of the rational system,
provided the advantages which were given to the national bank were
such as to make the national system more attraetiee than the State
system.

BRANCH,. CHAIN, AND GROUP BANKING

193

Mr. DUNBAR. What would you suggest in the way of advantages
that we could give the national banking system that would make it
More attractive than State banks?
Mr. POLE. If the national system were permitted to extend its
branches across State lines, it would be such an advantage.
Mr. Du/kmArt. You take Indiana and Ohio, for instance; we have
the cities of Cleveland and Cincinnati, and their banks would come
Over into Indiana and compete with Indianapolis, Evansville, and
every one of the other large cities. What would be the object of
that? Why should they compete with one another in the different
cities? Those cities are large capital centers.
Mr. POLE. As far as Cleveland and Cincinnati are concerned, my
suggestion, in order that the development of the branch system might
be orderly, is that a bank should not be permitted to branch out into
a city in which there was a Federal reserve bank or a branch of the
Federal reserve bank.
Mr. DUNBAR. You so stated the other day.
Mr. POLE. Yes.
Mr. DUNBAR. But now we have communities in which the banks
M. existence are earning 10 and 12 per cent. They are prosperous,
but they can not furnish all of the credit required by local manufacturers. Now, then, might not the plea be made that because they
can not extend that credit, a branch bank would be justifiable in
the opinion of the Comptroller of the Currency?
Mr. POLE. It might be so.
Mr. DUNBAR. Then, if it were so, it would interfere with prosPerous municipal banks that have filled the requirements made of
them, with such assistance as they were able to give these manufacturers in obtaining credits in large cities?
Mr. POLE. That is the case now. Where banks are not able to
accommodate the larger borrowings of their communities they now
have to go to these larger cities.
Mr. DUNBAR. That is true.
Mr. POLE. My idea is that the business that has developed in that
Particular community would remain there, but it would be transacted
through a branch, furthermore it does not mean because banks would
be permitted to establish branches, that they would be compelled to
do so.
In Indianapolis there is not a branch of the Federal reserve bank,
is there?
Mr. DUNBAR. I do not know.
Mr. POLE. Indianapolis might be the center of a very large and
Important trade area of Indiana.
Mr. DUNBAR. It is now.
Mr. POLE. Yes. It might be found that it would not be necessary
for them to take full advantage of what opportunities were offered
them under such an amendment.
Mr. DUNBAR. That is true, but I can imagine a situation where some
manufacturer might feel aggrieved in his dealings with the local
bank and he would go to the Comptroller of the Currency and make
his presentation to the effect that he could not be accommodated,
and a branch bank would then be established in that community,
Which would interfere with and ruin the business of the banks which are
there now. Do you not think that there is a high probability of

194

BRANCH, CHAIN, AND GROUP BANKING

interference with the banking business by the granting of a charter to
a branch bank in that kind of a community?
Mr. POLE. Under the suggestion which I have made, that there
would not be much necessity for establishing de novo branches.
There would be nothing to prevent, as far as I know, some Cleveland
people coming down and buying a bank in Indianapolis, but, if they
did buy it, I can not imagine that it would be such keen competition
for the banks of Indianapolis.
Mr. DUNBAR. Theoretically it has been stated that a branch banking system would have been of great benefit in the South, the Southwest, and the Northwest.
Mr. POLE. Undoubtedly.
Mr. DUNBAR. But I fail to see wherein it would be of any advantage in Indiana. In the district I represent, we have 53 banks, and
in 12 years there have been only 3 failures, 1 a national bank and
2 State banks. One State bank paid its depositors in full, the national
bank paid about 90 per cent. The other is in process of liquidation.
Most of the banks there pay large dividends, State and national,
10 and 12 per cent, and the only injury that has befallen them occurred in the debacle of last year's speculation when people began to
use all their resources, borrowed from the banks, and lost their money
in Wall Street. Now they are in the financial condition that they
do not have money to deposit in banks and they do not have surpluses
of necessary funds to engage in their enterprises, so that the country
banks down there are somewhat embarrassed, because they do net
have money to supply speculative losses. Now, the remedy, instead
of establishing branches in those kinds of communities, is some law
that would regulate speculation, because speculators borrowed money
in those banks and invested it in New York. I know one bank in
my own district that loaned $200,000. Banks sent large sums of
money to New York for speculation because of high rate of interest.
Those banks have been injured, but it has been due only to speculation.
Mr. POLE. Mr. Congressman, that era of speculation is of quite
recent date and covered a comparatively brief period, whereas banks
have been failing in rapidly increasing numbers since 1920.
Mr. DUNBAR. National or State?
Mr. POLE. Both national and State; and there have been 115
banks fail in Indiana—more than 10 per cent of all the banks which
were in existence in 1920. Under the branch banking plan, if it were
not found to fit the particular State or the particular community to
which you refer, it would not be compulsory for them to go into the
branch-banking business. It would be easily possible for the important banks of Indianapolis to continue as an independent bank,
perhaps taking advantage of the law to the extent of operating
branches within a short distance of Indianapolis, but if banks of
$100,000 minimum capital are to be established, it would deprive a
great many communities in Indiana of banking service to which they
are entitled, and my chief interest, as has been already expressed, is
particularly with the rural banking situation.
Mr. DUNBAR. A branch bank would have available to be loaned
not only $100,000, but a great many times $100,000, and it would
then interfere with the banks in the communities.
Mr. POLE. It would offer to any community in which it operates
a branch its entire and complete facilities.

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195

Mr. DUNBAR. I do not see any objection to a national bank
having a capitalization of $100,000 being authorized for the simple
reason that it would tend to promote a monopoly of banking insti!
,utions in the country, when the branch banks would certainly do
it, with the great increased availability they have of loaning money
to the community.
Mr. POLE. The point was raised that branch banking would tend
to create a monopoly in banking, and as a remedy for the situation
Which exists in the rural communities, it has been suggested that
banks of not less than $100,000 capital be established, and it was
there that I presented the argument that, such capital limitation
would be more apt to create a monopoly among the small communities, which might be just as dangerous as a monopoly among the
large communities, inasmuch as perhaps two banks could not succeed if their capital had to be $100,000 or more unless they had
territory sufficient to attract an amount of business necessary to
make such a capital profitable.
Mr. DUNBAR. I do not see where the objection would be to a
national bank having a capital stock of $100,000 on the theory of
Producing a monopoly, because if it did.shut out some of these
small banks, so would branch banks. I believe it would be beneficial
to the entire community with the supervison given by the bank
examining system which you have.
Mr. POLE. It is not a question of supervison entirely. It is a
question of ability to earn a fair return on invested capital.
Mr. DUNBAR. I think a $100,000 national bank in my section of the
country would be able to earn a fair investment on its return, because,
with few exceptions, every bank in 12 years has been able to do so.
And I am of the opinion that branch banking, except as it may be
developed from now on on account of speculation indulged in a year
ago, would have no beneficial result in that district. However, I
believe that there are a great many States where it would have beneficial results. At the same time,I recognize that theoretically it is the
right idea of banking. One of my objections to branch banking is
that it is going to run out all community banks eventually, and it is
going to supersede every banking system in the United States outside
of the large banking centers, and in doing that there will be a tendency
to develop toward paternalism, and then, following paternalism,
socialism.
We see that illustrated in our holding
..companies; we see it illustrated in our chain stores, and we see it illustrated in our great cori
porations, which are taking away the individuality
of the people of all
the communities, and making them of no avail.
I used to be secretary of the American Gas Association. I remember 25 years ago when we would attend .the convention of that association, every man had the courage of his convictions and would get
up and express his opinion. I attended
. a meeting last October at
Atlantic City, and there were 5,000 in attendance. I looked over
that crowd and I was.glad that I was not one of them, because but
few of them had an opinion of his own; a man had to look to the fellow
higher up if he wanted to talk, and he had to talk so as to get the
approval of the man higher up. They were all college graduates, but
all of them were impotent so far as having any personality or individuality or sovereignty because they were desirous of having the

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approval of the superior, and I was glad that I was no longer connected with an organization that had to be servile to somebody, just
because they had the money and knew how to manipulate politics.
Now, if we have branch banking, that is only adding to that copdition of man, and I hate to see the individuality that used to exist
on the decline.
Do you not think that that would be one tendency of branch
banking, to promote paternalism, and, following that, socialism?
Mr. POLE. I have expressed myself as deploring the passing of the
unit bank. I do, however, recognize that there is a banking condition
in this country which must be remedied, with the tremendous number
of failures with which we have been faced during the last nine or ten
years, and with the earning position of the thousands of banks III
this country to-day I feel sure that something must be offered as a
remedy for it.
Mr. DUNBAR. Do you not think
Mr. POLE. May I go on?
Mr. DUNBAR. Surely; pardon me.
Mr. POLE. After giving the matter considerable thought, the idea
which has appealed to me as being the most effective is the branch
banking system, and that particularly because I believe it is far better
than the chain system or the group system. Now,inasmuch as there
must be in my opinion some remedy for the situation, I recognize
that it is very difficult to suggest anything which would be equally
effective in every part of this great country. The conditions in
Indiana are so different from the conditions in the Dakotas, that it is
difficult to prescribe any remedy which will be equally fitting. That
there is a necessity for remedy is well recognized and because of legal
restrictions against branch banking there has sprung up in this
country already a large number of chains and groups. National
banks reported as members of banking chains or groups numbered
791 at the end of December, as compared with 646 in June
Mr. DUNBAR. Pardon me, but are not those chains or groups
confined to the corporate limits in which the banks operate?
Mr. POLE. By no means.
Mr. DUNBAR. Do you mean to say that a bank in Cincinnati that
has a chain will go into Indiana, into Kentucky, and into adjoining
communities?
Mr. POLE. I am not specifically referring to Indiana, but in certain
sections of the country State lines and Federal reserve district lines
have been entirely disregarded.
Mr. DUNBAR. By what authority?
Mr. POLE. Through the organization of holding companies under
State charters.
Mr. DUNBAR. We have no jurisdiction whatever of holding companies under State charters, have we?
Mr. POLE. As far as I know, we have not.
May I continue this?
MT. DUNBAR. Yes.
Mr. POLE. State banks, members of groups in December numbered
134, compared with 111 in June, and nonmembers 1,144, compared
1,049 in June. Loans and investments of national banks belonging
to banking groups were $5,600,000,000, or about one-fourth of the
total of all national banks, where loans and investments of State

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197

member banks belonging to the groups aggregated $3,000,000,000 and
of nonmember banks $1,800,000,000.
I was trying to show there that the 2,069 banks reported as belonging to banking groups or chains at the end of the year constituted onetwelfth of all the banks in the country, while the loans and investments of groups and chain banks were about 10,500,000,000 or nearly
one-sixth of the aggregate loans and investment of all banks in the
'United States.
So, as I say, we are faced with that condition now
Mr. DUNBAR. Due to State charters?
Mr. POLE (continuing). And the question is, Would it be preferable
to regulate it by law, or would it be better to let it develop as it is
doing without regulation?
Mr. DUNBAR. But if the Legislature of Indiana would be averse to
such a system of banking, we would be secured against these branch
banks and group banks going far.
Mr. POLE. I do not know how far the laws could be amended to
cover such a situation.
Mr. DUNBAR. We would have a right to control our own affairs
Within our own State, except in so far as it did not interfere with
Federal law.
Mr. POLE. It might be possible to keep a group formed outside of
the State of Indiana from owning the stock of banks within the State
of Indiana.
Mr. STRONG. I am not so sure that it would be possible by a State
law to keep another State from bringing a bank into that State.
1\1r. AWALT. Of owning the stock in a bank in that State, which
would be possibly controlled, and therefore part of the chain.
Mr. STRONG. They could prevent the majority of the stock being
owned outside, could they not?
Mr. POLE. That is a legal question I am not prepared to answer.
Mr. STRONG. I think they could.
Mr. DUNBAR. I am not a lawyer, but I do not understand how any
banking law of Indiana could not exclude branch banks from adjoining
States being legalized unless they were Federal.
Now, Mr. Pole, I recognize the theory of branch banking as being
economical as applied to the Southwest, the Southeast and the Northwest, but do you not believe that it would be more conducive to the
development of man, his courage, his ingenuity, his resourcefulness,
not to have it, and that after the people in these various communities
had suffered, they would find a way to overcome their difficulties?
Mr. POLE. I am trying to assist them along that line.
Mr. DUNBAR. By branch banking?
Mr. POLE. Yes.
Mr. DUNBAR. I do not think it would do it, although I do recognize
it would help those communities at this time.
Mr. STRONG. Do not admit it for our community.
Mr. DUNBAR. What is your community?
Mr. STRONG. Kansas. Do not admit that branch banking would
help us. It would not.
Mr. DUNBAR. It would not help us in Indiana, and I do not think
it would help any of the States on the Mississippi River. I think
it would help some of the States west of the Mississippi River, but
I believe if they were put upon their own resources and made to

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BRANCH, CHAIN, AND GROUP BANKING

realize that they had to devise their means and plans to make the
banking system successful, they would do so.
I want to ask about the Bank of Italy. That is a branch bank
system, is it not?
Mr. POLE. Yes.
Mr. DUNBAR. How did they acquire all their banks? Did they
purchase existing banks?
Mr. POLE. In a good many instances.
Mr. DUNBAR. In a great many instances they purchased banks?
Mr. POLE. Yes.
Mr. DUNBAR. To what extent were the existing banks coerced
into selling?
Mr. POLE. I am not able to answer that.
Mr. DUNBAR. Can you tell us how those that were not purchased
succeeded after the Bank of Italy expanded?
Mr. POLE. I am hardly able to answer that.
Mr. DUNBAR. Would not the natural presumption be that after
the Bank of Italy began to obtain such a strong fortress, all the other
banks of the community had to surrender on best terms?
Mr. POLE. That is a good many years ago.
Mr. DUNBAR. Do you not believe that if branch banking were
made effective in Indiana, the banks there would have to surrender
and sell out on best terms?
Mr. POLE. Not necessarily so. I can visualize a strong bank in
an Indiana town that is well managed and a profitable institution
competing quite successfully with any branch which might be operated
from Indianapolis?
Mr. DUNBAR. I do not mean Indianapolis. I am down on the
Ohio River, in the "sticks."
Mr. POLE. Did you not say Indianapolis?
Mr. DUNBAR. No, sir. I did a while ago.
Mr. POLE. I thought you referred to Indianapolis.
Mr. DUNBAR. Let us take a bank at Mitchell., Ind., which has a
capitalization of $100,000 and a surplus of $100,000. We have
institutions there that borrow $500,000, and the bank can not lend
that money, but it can advise where the money can be borrowed.
Suppose some one says,"We want a branch bank here that can
lend us all their money." What chance would that $100,000 bank
with a $100,000 surplus have after a branch bank came in. Because
it would lose one of its best customers, and it would lose other customers, because it is easier to go right to a bank in your home town
and get all your money.
Mr. WINGO. Mr. Chairman, if the gentleman will permit me, it is
evident that he has not read the hearings of this committee some
years ago where the methods of the Bank of Italy in extending its
branches and destroying independent banks in other communities
were fully pictured, and both sides were presented here.
MT. DUNBAR. I never read it.
Mr. WINGO. I suggest that you can get there a concrete illustration
of what happens.
Mr. DUNBAR. What happens?
Mr. WING°. They drive them out of business.
Mr. DUNBAR. The independent banks?
MT. WINGO. Yes.

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199

Mr. DUNBAR. And that would be the case if we had branch banks
in Indiana.
Mr. WING°. May I suggest that there would be no virtue in the
proposal if you did not, because you say the present situation is a
bad one, and to get rid of what you call these weak banks is one of
the alleged virtues of the branch-banking scheme, to give service to
the community of stronger and better institutions. I did not know
anybody was insisting that there should be branch banking and still
at the same time expect that what they regard as unprofitable and
economically unsound institutions continue. I thought they were
going to supplant the present system with what they claim will be a
Stronger and better one.
Mr. DUNBAR. Would you regard the present system at Mitchell,
Ind. as one which should be supplanted?
Mi.. WINGO. I do not know anything about that system.
Mr. DUNBAR. Take any bank in any town that has a capitalization
of $100,000 and had to loan $500,000 perhaps to one institution.
Would you regard that system as being ideal because they had to go
out and borrow money in different cities, or would you consider it a
system that was worthy or that should be supplanted?
Mr. WINGO. No; I am a great believer in the independent, unit
bank. I have always opposed branch banking, chain banking and
group banking. If you can show me that changed conditions make
branch banking necessary I shall be glad to hear you.
Mr. DUNBAR. I think branch banking might have been the salvation of some of the communities of this country, but I believe that,
having lost their all, they should begin over again and begin on a
sounder basis.
Mr. STRONG. The evident purpose of branch banking is to build
up a monopoly in banking; that has been the result of every branch
bank group that has started, and consequently they have had to
drive out competing banks to establish the monopoly. Otherwise
there would be no use of starting it.
Mr. DUNBAR. That is what I am afraid of.
MT. STRONG. It is the purpose of it.
Mr. DUNBAR. I wanted information from Mr. Pole on that subject.
Mr. POLE. I should differ with Mr. Strong when he says that it is
the evident purpose of such a system of banking to drive out competition. I think there will be ample competition in branch banking,
and where branch banking has been developed in this country there
la no lack of competition, and the banking situation in California,
Where branch banking has been developed beyond that of any other
State, shows over a period of 10 years an infinitely more satisfactory
condition with regard to bank failures than most of the other States.
Mr. DUNBAR. That is undoubtedly true.
Mr. BUSBY. Will the gentleman yield?
Mr. DUNBAR. Yes.
Mr. BUSBY. Would you call the absorption of the Bank of Italy,
the Bancitaly and the other associated corporations by the TransAmerica Corporation, issuing stock that was worth on the market
less than one-fourth of the value originally of the Bank of Italy, a
failure, or what would be your designation of the changed conditions
of the Bank of Italy under the circumstances we find it to-day from
What it was in June, 1928? It is not an independent entity any more

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in the sense that the stock is owned as bank stock is usually owned.,
but the stock is owned by the Trans-America Corporation and 10
worth now less than one-fourth of what the Bank of Italy stock was
in June, 1928.
What was that but a failure in the sense that the stock depreciated
three-fourths of its value?
Mr. POLE. That was the stock, Mr. Busby, of the Trans-America
Corporation of which you are speaking.
Mr. BUSBY. No, I am speaking of the Bank of Italy. The Bank
of Italy is not an independent stock proposition, for the Bank of
Italy stock is not listed any more, but the Trans-America stock IS
listed, and the Trans-America stock was traded on the basis of 1%
shares for 1 share of Bank of Italy, and that stock is listed to-daY
at 45, whereas the Bank of Italy stock on June 5, 1928, was listed at
293. That is a drop from 293 to 66% at the present time. As to the
Bancitaly Co., which was more or less of a trust corporation—Bancitaly Corporation, as it was called—the stock on June 5, 1929, was
listed at 211, and that stock was exchanged for Trans-America Corporation stock, share per share, and the Trans-America Corporation
stock is listed to-day at 45.
Was not that practically a failure of the whole Bank of Italy system?
Mr. POLE. I think that stock may have been split. I am not sure
of that.
Mr. BUSBY. No; I have photographic copies of the history of it,
taken from one of the reputable sources of information. It was
handled in this way; it was exchanged share for share for TransAmerica Corporation, and it is worth 45 cents now.
Mr. FORT. He has used the date of June 5. On the following day,
or two days later, was not that stock worth on the market something more than $200 less?
Mr. BUSBY. I will give you the history of it, if you will permit me,
Mr. Dunbar.
Mr. DUNBAR. Yes.
Mr. BUSBY. On Saturday, June 9, the Bank of Italy closed at 280.
On Monday it opened—Monday, June 11, 1928—at 257. It experienced a low of 125, and it closed at 212. On Tuesday its high was
250, and its low was 150%; it closed at 210, and it wiggled down the
line until the 23d, when we find it standing about 180.
Now, as to its companion corporation, the Bancitaly Corporation,
on Saturday, June 9, 1928—and this is after the slump had slightly
started—it closed at 195. On Monday, June 11, 1928, its high was
177, and its low 109, and it closed at 153. On Tuesday it opened at
140; its low was 120, and it closed at 135.
So the Bank of Italy, as an original institution, has dropped from
its high pinnacle of 293 to,for exchanged stock in the Trans-America
Corporation of New York and San Francisco, 66314 cents per share of
what was formerly the Bank of Italy stock, or 45 cents for Trans
America Corporation.
Mr. PRALL. Was there a corresponding decrease in the value of
all bank stocks at that time?
Mr. BUSBY. There was not a corresponding decrease, although
there was a slight and synpathetic decrease in other bank stocks,
but they soon regained their position. However, the Bank of
Italy stock, I find from following the San Francisco Chronicle quota-

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201

tions through those periods, never did get back to its former footing,
and finally was taken over by the holding company that I mentioned,
Which took over practically all of the six or seven interests that were
represented by the Bank of Italy. I say "interests" because they
were independent corporations doing different types of business in
line and in sympathy with the Bank of Italy; and that is the biggest
branch banking institution in the country.
Mr. POLE. You are speaking largely
Mr. BUSBY. Will you please answer my question first? I was
stating the condition, and asked you if that was not a virtual failure
of this tremendous branch banking institution?
Mr. POLE. You are speaking here of the movements of stock
largely of the Trans-America Corporation.
Mr. BUSBY. It was not organized at that time; it was organized on
the 11th of October, 1928, after the considerable slump in the Bank
of Italy stock, and was organized as a holding company for the purpose of taking over the Bank of Italy interest in its several forms.
Mr. POLE. There might have been considerable fluctuation—and
I think there was—in the Bank of Italy stock, whatever causes it
might have been due to.
Mr. BUSBY. I can explain the causes, which I think will interest
Mr. Dunbar who is asking the questions of the comptroller. Do you
understand the causes, Mr. Dunbar?
Mr. DUNBAR. Yes, but ask the question.
Mr. BUSBY. I will await another time.
Mr. DUNBAR. Do it right now.
Mr. POLE. I was going to add, in answer to your question, Mr.
Busby, that regardless of the stock fluctuations of the corporation to
which you referred, the truth is that the history of the Bank of Italy
is that it has increased from very small beginnings steadily upward
until to-day it is a bank with more than billion dollars of deposits.
Mr. DUNBAR. What is its capitalization?
Mr. POLE. May I incorporate that in the record?
Mr. DUNBAR. Yes. What dividends does it pay?
Mr. POLE. I will furnish that for the record.
Mr. FORT. Here is the figure on the Bank of Italy—invested
capital, $106,253,731.
Mr. POLE. What is the capital stock?
Mr. FORT. I do not know that it is here.
Mr. LETTS. That is as of November.
Mr. DUNBAR. Can you tell us how much they have paid in dividends, Mr. Fort?
Mr. FORT. No.
(The information requested is as follows:)
The capital of the Bank of Italy National Association is $50,000,000_
Dividend rate is 12 per cent.

Mr. DUNBAR. How many independent banks in California in the
last 10 years have liquidated or been merged either with the Bank of
Italy or with other institutions? Can you tell us anything about
that?
Mr. WiNolo. You mean either merged or sold out to the Bank of
Italy, or acquired in some other way?
Mr. DUNBAR. Yes.

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BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. The Bank of Italy has to-day in the neighborhood .of
300 branches. I think I could safely say that the majority of its
branches outside the large cities were formerly independent banks.
As to exactly how many were independent banks and how manY
were de novo branches, I have not the figures.
Mr. DUNBAR. Can you tell us how many independent unit banks
there are now in California, and the amount of their capitalization?
Mr. POLE. I will be glad to furnish those figures for the record.
Mr. DUNBAR. Will you please inform us how many of them are
national banks and how many are State banks?
Mr. POLE. Yes.
Mr. DUNBAR. Will you please put in the record their capitalization?
Mr. POLE. I will be glad to.
(The information requested is as follows:)
Three hundred and eighty-four unit banks in the State of California as of
December 31, 1929. Of this number, 193 were national and 191 were state
banks.

Mr. DUNBAR. Most of the bank failures have been State banks—I
believe that was your assertion a while ago?
Mr. POLE. That is true.
Mr. DUNBAR. Most of these banks would never have been ill
existence if we had had the branch-bank system, would they?
Mr. POLE. A great many of them undoubtedly would not have
been in existence.
Mr. DUNBAR. Have you any idea of the number of State banks
that have failed in Indiana to date?
Mr. POLE. Indiana has been one of the States in which there have
been fewer bank failures than in a good many other States. There
have been 115 suspensions since 1921, up to December 31, 1929,
which is 10.9 per cent of the 1,057 banks which were in existence on
June 30, 1920.
Mr. DUNBAR. That is a good record?
Mr. POLE. In comparison with some other States, it is quite
good, but 10 per cent of the number of banks in a State like Indiana
is no record to be particularly proud of.
Mr. DUNBAR. Yet branch banking would not have assisted this
very much?
Mr. POLE. I think it would have assisted it very much, because
those banks generally are small banks in rural communities.
Mr. DUNBAR. If it would have assisted to a considerable extent, it
would only have done so by knocking out the country banks, the good
as well as the bad.
Mr. POLE. Which knocked themselves out by failing.
Mr. DUNBAR. But the good ones are still there and will be there,
provided they can liquidate the financial losses due to stock exchange
transactions.
Mr. POLE. May I just add one remark, and that is that because
banks would be permitted to establish branches does not mean that
it would be incumbent upon them to do so.
Mr. DUNBAR. I know it would not be incumbent, but it would be
almost putting them in the position where they would have to surrender and give up like you would have to surrender and give up to
bandits that accosted you.

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203

Mr. POLE. That has not proved to be the case to any great extent.
Mr. DUNBAR. It would be almost that case, because I do not see
how the banks in my district would exist if you had a branch bank
there for the reasons that I have given you heretofore.
Now,I admit that branch banking in some sections of the country
would be a wonderful panacea, and I also contend that if these banks
that have suffered as a result of their own lack of adequate knowledge
and conduct of business affairs can be made to recover and stand on
their feet in the future, they will be better off, and I believe that most
of these bank failures have been due to conditions existing prior to
1922; they have never been able to dispose of their frozen paper due
to the depreciation in the value of farms of 50 per cent, all of which
has rendered it impossible for those banks to recover their prestige,
and conditions existing since that time have been such as to have
forced many of them into liquidation.
Mr. POLE. Regardless of what the reasons may be, they have failed.
Mr. DUNBAR. They have failed, but the point I am making is that
they failed because of conditions existing prior to 1922.
Mr. POLE. Might not those conditions prevail in the future?
Mr. DUNBAR. Yes.
Mr. POLE. Do we not want to guard against them? I do not
mean to be questioning you.
Mr. DUNBAR. Do you want to guard against the banks getting
into that condition as the result of their own fault?
Mr. POLE. It would be very desirable.
Mrs. PRATT. Mr. Dunbar, may I ask the comptroller a question?
MT. DUNBAR. Certainly.
Mrs. PRATT. Mr. Pole, is it your idea to force a uniform system
throughout the entire country, or to permit the present system to
exist where unit banks have a sound position?
Mr. POLE. It is not my thought, Mrs. Pratt, that a bank should
be forced to go into a branch banking system.
Mrs. PRATT. But my point is this: There would be perhaps a
branch system formed in one section of the country, and if in another
district present conditions were sound under the unit banking system, would you still feel it incumbent to go on with a uniform system,
in spite of the fact that present conditions in connection with unit
banks were sound?
Mr. POLE. It is not my idea that we could permit branch banking
in one part of the country and not permit it in another. I do think,
however, that it would be more effective in some parts of the country
than in others.
Mrs. PRATT. It could be flexible?
Mr. POLE. It would automatically be flexible, because where unit
banks are operating successfully and profitably there might be no
inducement for them to sell out to any branch system of banking,
and they might wish, as they have done in very many cases over
the country, to continue as successful and profitable independent
units. There are many instances where bankers will tell you that
they want no better competition than that of branch banks.
Mr. DUNBAR. I think that is true, or would be true in many
localities, but if you could have a branch banking system in some
parts of the country, for the present at least it might be a good
thing; but it would work hardship in other parts of the country.

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We have talked a great deal about losses sustained by banks, about
bank failures, which have been mostly State banks.
Mr. DUNBAR. We talked a great deal about bank failures, which
were mainly State banks. It would be a good thing to have all
banks, if possible, in the national banks system? Do you think that
would be a good thing for the country? I might say that I do.
Mr. POLE. I think the national system, inasmuch as it is the only
system through which the Government can enforce its policies,
should be the predominating system. I am not prepared to say that
it should be the only system.
Mr. DUNBAR. These financial losses that have been sustained are
not as great as people think they are, usually.
Mr. POLE. I do not know what people usually think they are.
They are a very impressive set of figures.
Mr. DUNBAR. How much has been lost by the stockholders of
banks by failures in the last 10 years?
Mr. POLE. By stockholders?
Mr. DUNBAR. No; by depositors.
Mr. POLE. I am not able to say that, because out of 5,640 failures,
4,800 of them have been State banks and I hove no idea as to what the
loss to depositors in State banks has been. I do know that it has
been very heavy and I think the loss which has been entailed has
been nothing short of a calamity in the communities in which the
failures have occurred.
Mr. DUNBAR. It is a calamity; it is true.
The CHAIRMAN. Will you yield for a minute? I want to suspend
this inquiry just for a minute in order to call up two resolutions.
(Discussion off the record.)
Mr. DUNBAR. Now, I am not going to detain you much longer,
but I wish, Mr. Pole, that you would give us the amount of losses to
depositors caused by failures of national banks during the last 10
years. Can you do that?
Mr. POLE. Yes, sir.
The CHAIRMAN. I think that material has already gone in.
Mr. POLE. It hits.
Mr. DUNBAR. Then, you need not put it in again.
Mr. SEIBERLING. If you have legislation here which would permit
branches in trade areas, you could then have a main bank out in
sections where you have no banking facilities, merely rent a room
and put in a few employees and give banking facilities, and also protect the State banks by providing that no branch bank could be put
in where they have banking facilities, without the consent of the State
bank or the other bank, which would give them an opportunity to
take over the bank, if it is desirable to be done.
I wish you would explain what you have in mind about that.
Mr. POLE. I could not imagine that the opinion of a State bank
would be anything but a prejudiced opinion as to whether or not
another bank should be established in that community, but, on
the other hand, I, as comptroller, certainly would not permit the
establishment of a branch in any community where the banking
facilities were ample. As I have already stated, I think it would be,
in practice, that very, very few de novo branches would be established. If a branch system wanted to establish branches in a community which was already adequately served, it probably would not
get permission from the comptroller to do so.

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On the other hand, if it wishes to negotiate with a bank already in
existence, and they were willing to buy that bank and the bank was
Willing to sell, there would be nothing to prevent it doing so, in which
ease no doubt they would be permitted to establish that bank as a
branch, which would not, of course, increase or decrease the number
of banking offices in that community.
Mr. SEIBERLING. On the other hand, if they do not have facilities
and needed them, that could be established by the way I have stated?
Mrs POLE. Yes.
Mr. SEIBERLING. Without any heavy overhead or anything, of
that kind?
Mr. POLE. Yes.
Mr. DUNBAR. You are opposed to holding companies, so far as
the Government is concerned?
Mr. POLE. As an ultimate system; yes. As a possible step toward
branch banking it has many good features.
Mr. DUNBAR. This step toward branch banking—the tendency
would be for holding companies to develop?
Mr. POLE. If no legislation were enacted
Mr. DUNBAR. Then, legislation would have to be enacted, in
order to prevent the development of holding companies? To what
extent have you holding companies? You spoke about that a while
.o—only as State permits them to out into adjoining territory.
There is no Federal law on the subject?
Mr. POLE. There is no Federal law on the subject.
They are developed to the extent that already there are included
in such holding companies 2,069 banks, which are one-twelfth of all
the banks in the United States.
MT. STEAGALL. If you will pardon me
Mr. DUNBAR. Yes.
Mr. STEAGALL. Mr. Pole went over those figures once already.
Mr. POLE. Yes. Those banks embrace $10,500,000,000 of loans
and investments, which is nearly one-sixth of all loans and investments
in the United States, and the group system of banks is growing most
rapidly. There are new groups bemg formed every week and I hear
rumors from all over the country of large amounts of capital being so
employed.
Mr. DUNBAR. You think branch banking would prevent the growth
of group banking?
Mr. POLE. I do to a very large extent.
Mr. DUNBAR. One more subject and I am through. You said
that branch banking—at least I understood you to say it—would help
prevent the centralization of money in New York and other money
centers and would decentralize it and distribute capital all over the
country. Am I correct?
MT. POLE. Yes.
Mr. DUNBAR. That was the contention put forward for the adoption of the Federal reserve system and that failed. Capital has been
centralized more in New York since the establishment of the Federal
reserve system than ever before Now, then, how would branch
banking, be any different from the Federal reserve system? Would not
most ofour branch banks be centralized right in New York and where
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we had branch-banking corporations, say, in Pittsburgh and St.
Louis, would they not still report right to New York as they do now?
Mr. POLE. I am not prepared to accept your premises as correct
Mr. Congressman. While the banking resources of New York have
tremendously increased since the establishment of the Federal
reserve system, the resources of the other 11 Federal reserve districts
have also tremendously increased, but as to whether or not New
York has increased out of all proportion to the others, I am not
prepared to say.
Mr. STRONG. Might I suggest that in the other districts, the
Federal reserve banks are not quite as close to Wall Street, and
that such close association tends to a concentration of wealth?
Mr. DUNBAR. Is it your opinion that the Federal reserve system
has decentralized wealth and money?
Mr. STRONG. It certainly has not. It has centralized money every
place where there is a Federal reserve bank.
Mr. DUNBAR. It has centralized it every place there is a Federal
reserve bank, but, in your opinion
Mr. STRONG. The big centralization has been in New York,
because the Federal Reserve Bank of New York City is close to
Wall Street—I mean in the same city.
Mr. STEAGALL. I am wondering about this: If the branch banking
plan gives us a system of banks strong enough to compete with the
strong monopoly tending banks, what need have we for the Federal
reserve system?
Mr. POLE. The large banks now are heavy borrowers at certain
periods and would no doubt continue to use the facilities of the
Federal reserve banks.
Mr. STEAGALL. You do not think that would undermine or destroy
the Federal reserve system—the elimination of the small unit bank?
Mr. POLE. I think that it is quite possible that under the present
system, which has grown out of group banking, some small unit
banks might leave the system.. Already some groups have been
formed, which are operating outside of the Federal reserve system.
Mr. STEAGALL. You think that evil is to be feared in the present
situation?
Mr. POLE. I do not think an important branch bank would undertake to operate outside the Federal reserve system.
Mr. DUNBAR. I have nothing more, Mr. Chairman.
The CHAIRMAN. MT. Strong.
Mr. STRONG. Mr. Comptroller, while the chairman has gone over
very carefully one subject which I wanted to discuss, there is a matter
I want to take up further with you and that is the examination of
national banks. The information I want to get is this: The bank
examiners are not paid from the Government Treasury, are they?
Mr. POLE. The banks, Mr. Strong, are assessed for the cost of the
examination.
Mr. STRONG. Who sets the limit on the salaries for the examiners?
Mr. POLE. The salaries of the examiners are fixed by the Comptroller of the Currency, with the approval of the Federal Reserve
Board.
Mr. STRONG. In the course of your examination by the chairman,
you stated that our bank examiner department is now practically a
training school; that you take them before they are experienced and

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that after they have been with you a certain time and become experienced, some big bank comes along and takes them away from the
service.
Mr. POLE. That is quite often the case.
Mr. STRONG. Why are you not justified in paying salaries sufficiently large to hold good and experienced men in the service, as
long as the banks that do take them away from you have to pay the
expense anyway; why not pay them enough to hold them—those
best qualified to examine banks?
Mr. POLE. The position of bank examiner, Mr. Strong, is a difficult one. He has to be away from home a great deal and has to
travel a great deal. It is not, in itself, a very attractive life.
Mr. STRONG. What is the average salary that you pay?
Mr. POLE. I am furnishing a complete list of that.
Mr. STRONG. Well, about what?
Mr. POLE. $5,000.
Mr. STRONG. Well, why not pay a salary sufficient to these men
so that they will stay in the service, regardless of the inconvenience?
Mr. POLE. I doubt if you could offer them enough money for that,
Mr. Strong.
Mr. STRONG. Did you ever try it?
Mr. POLE. The service could be undoubtedly improved by offering
better salaries.
Mr. STRONG. Have you ever tried it?
Mr. POLE. Yes; salaries have been considerably increased during
the last few years.
Mr. STRONG. But have you tried to keep men from going out into
private life, by increasing their salaries?
Mr. POLE. Oh, yes.
The CHAIRMAN. Will you yield to me a moment?
Mr. STRONG. Yes.
The CHAIRMAN. I will say that in my conversation with some of
these splendid men that I happen to know, I have observed a spirit
of loyalty to duty, a spirit of craftsmanship, so to speak, where
many of these men stay as national-bank examiners because of the
pride they have in their work and because of a realization of the
importance of it, and that they were rendering a real service, and it
is my belief that they would stay in the positions at a lower salary
oftentimes than what banks would pay them, because of their pride
in their work. They realize the high quality of their work.
It is my observation that you would not have to meet the high
salaries paid by banks in that respect, if a moderate salary were
paid these men doing this important work.
Mr. FORT. Is not that true through all the technical branches of
the Government service?
The CHAIRMAN. I think it is true, especially in the Department of
Agriculture. It is true undoubtedly all through the Government
service, that men do not have to be attracted by the salaries they
receive in the Government, and many of them are doing their work
at particularly small salaries. I know several men in the Agricultural Department who could go out in general work and draw $25,000
a year, who are now drawing $5,000 a year or less in the department.
I think there are many of those men under Mr. Pole who feel the
same way about it.

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Mr. STRONG. The point I was trying to bring out was this: These
bank examiners are the guardians of the funds of the people. Their
examinations protect the people who have the deposits in the banks—
a tremendous fund and a tremendous trust—and yet you say that,
when a man gets very proficient, some private bank takes him away
from you and yet you say that the banks themselves that eventually
pay the larger salaries to your examiners to get them away from you,
are under obligation to pay the cost of the examinations, and, necessarily, would have to pay the larger salaries you might have paid
them to keep them in the service. Therefore, why would it not he
the proper policy for you to pay salaries sufficient to hold these men,
especially when they go out into private life, they go to the same
banks or other banks, which are assessed for the expense of these
examinations. Why not pay salaries sufficient to retain these men
in the service?
Mr. POLE. There is a consideration there that requires sonic
thought. The banks, under the law, are assessed in accordance with
their total resources. In the case of large banks, of course, they can
easily pay whatever the costs may be. In the case of small banks,
the present examination fee, is quite an amount for a small bank to
pa
r. STRONG. Don't you think they should pay it in order to give
the public protection?
Mr. POLE. The earnings of small banks are so limited that any
increased expense would have to be taken into consideration as
involving an additional burden.
Mr. FORT. As a matter of fact, the Government only allows a salary
of $9,000 to the Assistant Secretary of the Treasury, who is over the
comptroller, who is over the examiners. You can not start by raising
any one point without first rehabilitating the Government service
and raising the officers still higher.
Mr. STRONG. If he has power to assess banks to pay for examinations, lie can pay sufficient salaries to keep efficient and experienced
examiners. Their services to the public is very, very great and they
have a very great responsibility.
Mr. Poi.. There are a great many practical difficulties. In a
general increase of salaries of examiners, for the purpose of making.
their positions more attractive, so that the examiners will stay in the
service, the increase would have to be general, and, in order to save
for the service, perhaps, six men, you would have to increase the
salaries proportionately of perhaps 12 or 15 or 20 men.
Mr. STRONG. Why would you have to do that?
Mr. POLE. Because you have to make the scale generally uniform.
Mr. STRONG. Is there any law that requires that?
Mr. POLE. No; but it is a matter of practice.
Mr. STRONG. But as a matter of good business—you do it in
business?
Mr. POLE. I think that would involve a great deal of dissatisfaction if you should raise the salary of one man who has been in the
service three years, four or five thousand dollars a year, and do not
raise the salary of another man at all who has been in the service
perhaps the same time. The question would be that of efficiency—
Mr. STRONG. Certainly.
Mr. POLE. And that is very largely a matter of opinion.

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209

Mr. STRONG. It ought not to be a matter of opinion.
Mr. POLE. It is not an easy question to settle.
Mr. STRONG. It is exactly what you would do in private life. If
You have an efficient man who has been with you 3 years and an
inefficient man who has been with you 10 years, you would raise
the salary of the efficient man and put him in the position of trust.
Mr. POLE. We endeavor to do that.
Mr. STRONG. I think it would be a bad policy to say that you
have to raise all of them because you want to keep a few outstanding men.
Mr. POLE. My feeling is that if you were to pick out 100 men
and raise their salaries to the point of.being able to compete with
commercial banks from which.they might have offers of perhaps
double what they are now getting—and which offers are frequently
made—it would cause a great deal of disturbance in the service.
I think your idea is perfectly sound, but I think it would have to
be worked up to the point you aim at gradually.
That is being done; salaries have been quite markedly increased
during the last few years.
Mr. STRONG. Who has charge of the regulation of the salaries—
yourself or the chief examiners?
Mr. POLE. Myself, with the recommendation, usually, of the chief
examiner who knows the man best.
Mr. STRONG. Naturally he would hesitate to advance some one or
two men over his fellows, but it seems to me that the interest of
the public in this matter is so very, very great, that it ought not to
be the policy to let good examiners and good men go out of the
service because of offers of large salaries by commercial banks, who
would have to pay their salaries if they were kept in the service.
What salaries are paid to chief examiners in the different districts?
Mr. POLE. I will furnish that information.
Mr. STRONG. You do not know?
Mr. POLE. Yes.
Mr. STRONG. Why not state them?
Mr. POLE. Mr. Reeves, of New York, gets $20,000 a year.
In District No. 1, the salary of the chief examiner is $13,000.
In District No. 3, it is $15,000.
In District No. 4, it is $10,000.
In District No. 5, it is $10,000.
In District No. 6, it is $12,000.
In District No. 7, it is $12,000.
In District No. 8, it is $15,000.
In District No. 9, it is $11,000.
In District No. 10, it is $15,000.
In District No. 11, it is $13,000.
In District No. 12, it is $15,000.
Mr. FORT. Will you let me ask the comptroller one question?
Mr. STRONG. Certainly.
Mr. FORT. What is the salary of the Comptroller of the Currency?
Mr. POLE. $12,000.
Mr. STRONG. Then, your chief examiners are paid considerably
more than yourself and other men in the Treasury Department and
in your own department?

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Mr. POLE. A great many of them are paid more than I am, Mr.
Congressman. I am not so well posted on the salaries of other
departments.
Mr. STRONG. Do the chief examiners examine banks themselves?
Mr. POLE. To make a complete physical examination of a bank,
I would say not often. They are invariably on hand wherever there
is a bad situation—they cooperate with the board in shaping policies
and remedying undesirable situations.
Mr. STRONG. What is the highest salary paid a bank examiner?
Mr. GOLDSBOROUGH. Mr. Strong, is it not your idea to prevent
these bank failures that exist in the unit system by providing a better
system of examination?
Mr. STRONG. Certainly. That is why I am asking these questions.
What is the highest salary paid to bank examiners outside of the chief
examiners?
Mr. POLE. My recollection is that the highest salary paid is $9,500.
Mr. STRONG. What excuse is there for paying $21,000 to a chief
examiner, considerably more than you receive, and only up to $9,500
to the man who stands between the banks and the people's interest?
Mr. POLE. It is $20,000 in New York.
Mr. STRONG. Well, $20,000.
Mr. POLE. The chief examiner in New York has a very responsible
position.
Mr. STRONG. What is it?
Mr. POLE. He is in contact with all the national banks in New
York. He consults with them on questions of policies and has supervision of the examinations of the entire second Federal reserve district and must be a man of wide experience and possess qualifications
which fit him for that important position.
Mr. STRONG. Do you think he is in a more important position than
the Comptroller of the Currency, who has control of the whole
system?
Mr. POLE. Modesty prevents my answering that question.
Mr. STRONG. Also the Secretary of the Treasury, a Cabinet officer?
It seems to me the salaries in the comptroller's office, as far as the
examiners are concerned, could be revised in the interest of the
people.
The chief examiners are paid very high salaries while the examiners,
who stand between the banks and the depositors, are not being paid
enough.
Mr. FORT. That is the exact policy the gentleman urged a moment
ago—the policy the banks follow. The chief executive would get a
higher salary than the man out on the road in the work. You
suggested that we should pay salaries high enough to hold the men.
In outside employment, the executive in charge would be getting
a greater salary
Mr. STRONG. But here is a figurehead that gets $20,000 and the
man who does the work gets $9,500 and less.
Mr. POLE. He is an executive and not a figurehead.
Mr. STRONG. But he does not do the work that protects the
people. He confers with the banks.
Mr. POLE. No; and I would not say that the president of the
United States Steel Corporation goes out and makes steel. He is
a very important executive nevertheless.

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Mr. STRONG. He is not in your department?
Mr.POLE. No.
Mr. FORT. I agree—
Mr. STRONG. I decline to yield, Mr. Chairman. I do not want to
get into an argument over that.
One of the principal reasons for your statement in favor of branch
banking—the setting up of branch banking systems—is that there
' have been so many failures in the last nine years.
Mr. POLE. That is the principal reason—to offer something that
Will remedy that situation.
Mr. STRONG. Why did you take the last nine years for an example?
Mr. POLE. Because the failures have been increasing in numbers
during the last nine years.
Mr. STRONG. Why not include nine years before that?
, Mr.POLE. I thought nine years was far enough to go back. The war
has been over for 9 years-10 years—and it seems to me that most
businesses have been reestablished on a normal basis, but banking
has lagged behind and instead of getting better in the rural commuruties, is getting worse and worse while every other business is prospering.
Mr. STRONG. What percentage of failures are due to inefficient examinations, because you can not pay proper salaries?
Mr. POLE. Very few of them.
Mr. STRONG. Then, that is not the reason they fail?
Mr. POLE. No, sir; I would not say so.
Mr. STRONG. Will you put into the record, at this point, the number of bank failures prior to the nine years you have used in your
first statement?
Mr. POLE. The number?
Mr. STRONG. Yes.
Mr. POLE. I am already furnishing that for the record. Would you
like to have this reinserted?
Mr. STRONG. No; you need not encumber the record.
Mr. POLE. My information will cover the number of bank failures
for every year since 1904.
Mr. STRONG. Is it not a fact that the reason we have had so many
bank failures in agricultural States in the last nine years is really due
to the deflation that followed the war?
Mr. POLE. That has accentuated it.
Mr. STRONG. That has been principally the cause in the agricultural
States?
Mr. POLE. Very largely.
Mr. STRONG. Very largely the deflation of agriculture-Mr. POLE. The deflation of agriculture has accentuated it.
Mr. STRONG. Very largely?
Mr. POLE. To a material extent.
Mr. STRONG. You know that during the war the Government
selected men to go out and urge agricultural States to produce more
food, do you not, and the result of that encouragement was that the
farmers extended their farming and credits, and then, when the war
came to an end they were in debt from an inflation of their farming;
they were in debt to the banks and those frozen credits that had been
held during all these years were the causes of these failures, were they
not?
Mr. POLE. To a considerable extent.

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Mr. STRONG. For instance, I know a great many banks that have
had to take over farms, because of loans that were extended during
and after the war. They could hold them in my State for but five
years when they are forced to sell them. The losses were such that
failures followed.
Now, do you think it is fair to urge a condition such as that as a
reason for putting out a branch bank system over the nation?
Mr. POLE. I think that a branch bank system extending to the rural
communities would be decidedly helpful.
Mr. STRONG. All right. Tell us how branch banking would have
handled the situation when deflation came after the war.
Mr. POLE. In one respect they would have been much more careful
in the manner in which loans were made.
Mr. STRONG. Why? Would they have had better information?
Mr. POLE. They would have had better judgment, probably.
MT. STRONG. Why would they?
Mr. POLE. Because they are men of wider banking experience.
They lend money more scientifically. They perhaps lend it less on
character and more on actual intrinsic values and are generally
more conservative.
Mr. STRONG. You think they would not have been patriotic
dui4ng the war and loaned money to help produce food?
Mr. POLE. I would not say that it is very patriotic to lend other
peoples money to irresponsible borrower.
Mr. STRONG. Nobody asked you that.
Mr. POLE. What did you ask me?
Mr. STRONG. Read the question.
(The reporter read the question.)
Mr. POLE. I take it that the banker lends other people's money
and if he does not lend it with judgment, he is not performing any
patriotic duty.
Mr. STRONG. Then your idea is that during the time the Government was urging the farmers to increase their production and the
banks to lend them money, that the branch banks would not have
responded?
Mr. POLE. I could not uphold the position that the Government
would ask the banks to make improvident loans.
Mr. STRONG. Now, did I ask anything like that?
Mr. LETTS. I submit that the Comptroller is answering the question.
Mr. STRONG. All right, let us have the question read and see if he is.
(The reporter read the question.)
Mr. STRONG. Now, read his answer and see what he said.
(The reporter read the answer.)
Mr. STRONG. Now, did I ask anything like that?
The CHAIRMAN. Referring to your statement that branch banks
would not lend on character as security, I am reminded that during
the Pujo investigation of the money trust, when Mr. J. P. Morgan
was on the stand, he made the statement that character loans were
regarded by him as good and sometimes the best security; that he
had loaned as high as a million dollars on a man's character. That is
quite in contrast with your statement.
Mr. POLE. Not at an. I can conceive of numerous instances where
men would lend on character, and I think character is perhaps the

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most important element in granting a loan, but it must be taken in
connection with other things and not solely character. A man's
ability to pay must also be taken into consideration.
Mr. STRONG. Now, the point
Mr. POLE. A man of ever such good character might have his
ability to repay questioned.
Mr. STRONG. The point I am trying to bring out is not that the
banks made bad loans at the time they were made. During the
War the 4-minute men were asked to go into the picture shows and
make talks and were furnished data upon which they could present
the facts to people, and one of the things suggested was that the
farmers of the country should produce more food, not only to feed our
men in France, but also the Allies, and the bankers were urged to
support them. I made such speeches myself, in which I pointed out—
pardon me, if I am going to make this examination, I should like to
have the attention of the comptroller.
I was sent data for one speech myself in which I was asked to urge
the farmers to go to the banks and buy Liberty Bonds and pay only
10 per cent in cash and 90 in debt for the balance and go to the banks
myself personally and see that they did it and that was done. They
were also urged to produce more food, and if they needed money, to go
to the banks for it; and the banks were expected to make such loans.
The banks did not make bad loans. They made loans which wee
good at that time. Then deflation came. The value of land, horses
and cattle and sheep and everything went down and the loans were
poor.
Mr. GOLDSBOROUGH. Will the gentleman yield? What caused the
deflation? We have heard something about that in the committee.
Mr. STRONG. There is a difference about that. My opinion was the
inflation that was permitted after the war caused it.
The point I am trying to get at is this: What would these branch
bankers have done under those conditions? Would they have refused
to make the loans?
Mr. POLE. To answer this question as to what would have happened under a situation involving a state of facts which did not exist,
would be rather venturesome.
Mr. STRONG. Nobody has asked you anything of that kind. I
have stated facts and asked what would your branch banks have
done during the war; would they have made these loans that afterwards became bad?
Mr. POLE. I think such branch bank systems as existed during the
war did make them.
Mr. STRONG. Did make them?
Mr. POLE. Yes.
Mr. STRONG. And did not have any losses?
Mr. POLE. Yes; they suffered losses, but we are operating now
10 or 12 years after the time you are speaking of.
Mr. STRONG. The deflation came in 1920 and 1921. I am asking
these questions now, 10 years after that. Those frozen loans have
carried over?
Mr. POLE. And the bank failures 10 years after the war are increasing in number.
Mr. STRONG. But the frozen loans—the examiners in the State
bank departments and in your own department are urging. the closing
up of those frozen loans, and that is what is causing the failures now.

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Mr. POLE. It is an interesting fact that there are numerous
instances where banks in the same town, side by side, have operated
over a long period of years, before the war and since the war, and that
some banks have succeeded and others have failed, with the same
conditions to contend with, same localities—a question largely of
management.
Mr. STRONG. That is your opinion, but I know banks where there
were two banks in the same town, both of whom took over about the
same number of farms. One bank happened to be in position to
induce someone to buy those farms. The other bank was not in that
position and could not find anyone to buy them and it had to close.
It was not a matter of judgment. They both loaned the same
amount of money practically on the same security.
The point I want to bring home to this committee is that the
increase in the losses of banks in the agricultural country is because
of the deflation since the war and it is not fair to assume that your
branch banking system would have remedied it unless it refused to
make the loans.
Mr. POLE. I think that a system of branch banking, if it had been
in effect in those days, would have managed its business in such a
way that had these losses occurred, it would have been large enough
and strong enough to have been able to absorb them, whereas the
small bank is on such a narrow earning basis that if an unusual loss is
sustained it can not stand it.
Mr. STRONG. Do you think if the owners of these branch banks hi
the rural communities found they would have these large losses they
would have put up the money and taken the losses?
Mr. POLE. I do not think so—or the unit banks either.
Mr. STRONG. Is it not one argument in favor of branch banking
that the parent banks, buying the branch bank, will retain the local
management that understands the people in the community and
their credits?
Mr. POLE. That is often the practice.
Mr. STRONG. Then, you would have had the same men at the heads
of the banks if you had had branch banking?
Mr. POLE. You would have had the same man, but the policies of
that branch would have been directed by experts at the head office.
Mr. STRONG. Well, the experts would not have known what value
the securities had; they would have had to depend on the local
management.
Mr. POLE. To some extent.
Mr. STRONG. Certainly.
Mr. LETTS. But that would be a matter of applying a policy.
Mr. STRONG. The applying of the policy at that time would have
been to make the loan or not. At that time the security was good.
We had, after the war, a gentleman lay down on this table loans
from a western bank made to a sheep raiser. The sheep at the time
the loan was made were worth about $9.50, and he loaned $3.50,
and we had him lay down alongside that loan the account of what
those sheep sold for in Chicago after the transportation cost and commissions were paid and it was about 35 cents a head. No one could
have foretold a loss of that kind. Now,what would the branch bank
have done in that circumstance?

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Mr. POLE. If that loan had been made by a large branch bank,it
would have been able to have absorbed such losses, whereas had he
borrowed the money from a small bank, it might not have been able
to do so.
Mr. STRONG. That gentleman was here and he told us in executive
session that if that kind of testimony got out it would break 47 banks
with which he was connected in the Northwest. He was making a
plea that we use our influence to urge that the loans be not called.
I should like to put into the record the fact that 35 cattlemen from
Kansas came to this Capitol headed by Governor Stubbs, asking for
an arrangement to prevent the calling of cattle loans, and the Secretary of Treasury helped to raise $100,000,000 to be deposited in
Chicago to relieve the situation, yet the loans at the time they were
made by the banks were considered good. It was simply the aftermath of the war and the deflation that caused the failures.
And such failures are not fair argument that our system of unit
banks is unsound and we ought to have a branch banking system?
Mr. FORT. As I understood the comptroller's argument as to the
greater soundness of branch banking, as he urges it—and the gentleman from Kansas knows I am not committed to it—it was that
branch banking would produce a greater diversification of loans,
because the same bank would be making both city and country loans
and could therefore stand losses in one line of business without
affecting its solvency. .
Mr. STRONG. That might apply to your country, but not to an
agricultural district, where all lousiness depends on agriculture.
Mr. FORT. Would it not apply to a Kansas City bank with branches
out in Kansas, with both types of loans?
Mr. STRONG. I am pointing out that the banks would not have
made the loans and in that way have embarrassed the country, or
they would have made them and suffered the same losses. Whether
they could have made them and met the losses, I do not know.
Mrs. PRATT. hit not true, Mr.Strong, that some of the losses which
some of the farmers sustained, were due more or less to speculation
on their part? Were they. not relying on the food prices that prevailed during the war and instead of merely using the land they had
to produce food, did they not go out and buy more land with the possible presumption that they were going, thereby, to make more
money?
Mr. STRONG. That is undoubtedly true in individual cases.
Mrs. PRATT. They pyramided, so to speak, and the losses wore,
largely, speculative?
Mr. STRONG. Some were, no doubt. Up in Iowa I think they
indulged in that kind of speculation, but in general, in Kansas, they
did not. In my State they cultivated more land more intensively, and
went into debt to get the machinery with which to do it.
Mr. LETTS. I admit there was more or less of that in Iowa, but
it was done with the concurrence of the banker in a great many
instances, and, as I stated for the record a few days ago, some of our
bankers not only put the second mortgages into their own little banks
but sometimes the thirds: They sometimes sent the first and the
only good one to some insurance company and oftentimes, as I
stated before, it was found that the first and the second mortgages
did not supply enough money to buy an additional piece of land,
and it became necessary to have a purchaser take out some additional

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insurance upon which the banker was getting a commission. Altogether it was not only a spirit of speculation which existed in the
farmer, but one which existed in the banker as well.
Mr. STRONG. Certainly.
Mr. LETTS. In a great many instances.
Mr. SEIBERLING. You do not mean to say that the depreciation in
farm lands on account of the deflation after the war, was any greater
than the depreciation in industry?
Mr. STRONG. The deflation in agricultural, products was greater.
Mr. SEIBERLING. I do not think so.
Mr. STRONG. Two million farmers lost their farms, but a great
many more lost their entire working capital.
Mr. SEIBERLING. In our cities, within 30 days, the raw materials
and products on hand depreciated 50 per cent, more than $100,000,000,
in the plants in our community.
Mr. STRONG. I remember that we passed a bill before this committee, putting in the step rate interest plan and it was represented
that it was done to check the inflation in New York, but they did
not put it into effect in New York City—but in Kansas. I appreciate
the whole country was deflated, but agriculture suffered most because
they were left in debt, with the prices of their products below the
cost of production.
I know losses to occur from instances of that kind that the bankers
could not have controlled; great financiers could not have controlled—
no one could control. A lot of money was lost in the stock market
recently. That can not be charged to the impotence and inability
of the men who lost the money.
I am holding that our bankers in our agricultural districts are not
incompetent to run banks. They are the same men who would be
used, under a branch banking system, to run the banks as managers.
These banks failed because of the effort during the war to increase
production and the deflation that followed, and it is not fair to make
that an argument for branch banking.
Mr. LETTS. May I add to what I said a moment ago, by making
further reference to the matter of deflation in the agricultural regions;
we had been accustomed, year after year, to have supplied all the
money necessary at harvest time to move the crops and to enable the
farmers to carry their young animals over the winter and fatten them
and send them into the market when they were prime and would
bring the highest prices and furnish the best products to the consuming public. The year of the deflation, for some reason or other, from
some policy perhaps the loans were called; instead of supplying the
credit to which we were accustomed, the existing loans were called
and the farmers were required to gather up everything they had on
their farms and sell it M order to meet the demands, even to the point
of driving young animals—pigs, lambs and calves—off their farms so
that the year following they did not have the necessary animals on
their farms to go ahead in the normal way in the breeding and raising
of stock.
Mr. STRONG. And was it not the custom of those farmers to give a
mortgage on the farm to the bank in order to carry over those conditions, and when they gave up the farms to the banks and the banks
became vested with the title, they were entitled, under the law, to
hold them only five years before disposing of them, and it was being
forced to dispose of a lot of those farms that broke the banks?

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217

Mr. LETT& I hope, out of these hearings will come some sort of
understanding that will develop a banking policy under which, at
no time in the future, can it ever happen that loans will be called at
harvest time, and when it will require men to dispose of their young
animals and deplete the farms and bring on ruin as it did a few years
ago.
Mr. STRONG. In regard to the monopoly of money and credits
that will ensue from a national branch-banking system, you are
Proposing in each of the 12 districts—I presume these are the Federal
reserve districts or like districts—I understand you call them trade
areas; you will set up 12 trade areas in the United States and confine
branch banking to each one of those areas.
Mr. POLE. That is not my suggestion.
Mr. STRONG. Well, what is it?
Mr. POLE. That branch banking should be extended to within the
trade area, but as to the extent of that trade area I have not
suggested, but have said that in the most extreme case it should not
be permitted to extend beyond the Federal reserve district lines.
Mr. STRONG. Who would grant that permission?
Mr. POLE. Congress.
Mr. STRONG. Then your idea is that in each one of the 12 trade
areas, as determined by Congress, should be set up a branch banking
system that should not be allowed to run out to another trade area.
Mr. POLE. There might be, in some instances, a Federal reserve
district consisting of a trade area. In other Federal reserve districts
the entire district may more than cover the situation and it might be
necessary to set up three or four areas.
Mr. STRONG. I thought you said you would confine it to 12 trade
areas.
Mr. POLE. I made no such suggestion as that.
Mr. STRONG. Who would determine whether they could extend
outside of the trade areas?
Mr. POLE. The law would cover the extent to which branch banking might be extended.
Mr. STRONG. What is the objection to extending them from one
trade area to another.
Mr. POLE. I should like to see the trade areas limited to the point
where each important center would develop its own branch system
and in an orderly manner without permitting any bank to cover the
entire country with branches, even if it were so disposed.
Mr. STRONG. Then you would only have branch banking groups
in each trade area?
Mr. POLE. Radiating from a central point.
Mr. STRONG. How would you prevent holding companies from getting control of all these trade area branch banks?
Mr. POLE. The probabilities are that the holding companies would
disappear if they were given the greater advantage of being permitted to operate branches instead of members of a group.
Mr. STRONG. You think it would have a greater advantage?
Mr. POLE. I think the operating advantage would be sufficient
Mr. STRONG. What do you mean by "greater advantage"?
Mr. l'oLE. I said "operating advantages."
Mr. STRONG. Yes. Well, what do you mean by that?

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Mr. POLE. Under the present system a unit bank has to keep an
entire board of directors and full set of officers.
Mr. STRONG. I am talking about the danger of group banking or a
holding company getting possession of all the trade areas and you
say that you hope to build up strong enough branch banks in each of
the trade areas, so that there would be no Incentive for that.
Mr. POLE. I do not quite understand your question. I think that
it was the suggestion there should be some regulation as to how far
groups should be permitted to consolidate or branch banking systems
should be permitted to consolidate.
MT. STRONG. Why?
Mr. POLE. So that their operations could be confined to their own
trade areas and not extend all over the country.
Mr. STRONG. What is the objection to extending all over the
country?
Mr. POLE. I do not think anybody is advocating nationwide
branch banking foi* the moment. It is looking entirely too far ahead.
Mr. STRONG. When we passed the McFadden bill, the Comptroller
of the Currency thought it would be sufficient to limit the branches
to the city in which the parent bank was located. Now the Comptroller of the Currency says we should establish 12 trade areas.
Mr. POLE. You keep referring to 12 areas. I did not limit it to 12.
trade areas.
Mr. STRONG. Now you believe in extending the branch banking to•
cover the different trade areas?
Mr. POLE. Yes.
Mr. STRONG. Now, would not the same desirability of enlarging the
system apply if somebody would urge that it should be made nationwide branch banking?
Mr. POLE. I would not be in favor of that. It is on entirely too
large a scale and would present operating difficulties which I do not
know whether the supervising authorities would be in a position to
cope with.
Mr. STRONG. When we discussed the McFadden bill we had a great
deal to say about getting the nose of the camel under the tent as far
as branch banking was concerned and some of us thought it could
be limited, if it was an evil, and it was generally admitted that it
was an evil—be limited to the city in which the parent bank was located. They said that the State banks in the larger centers were
putting .in branches, which embarrassed the national banks, but if
the national banks were permitted to have branches in the cities where
the parent banks are located, that would meet the situation. Now.
your suggestion is that we extend the range of branch banking to
trade areas and it seems to me that the same argument will eventually
lead us into favoring an extension of branch banking so that it will
be nation-wide. What would be the objection to nation-wide branch
banking?
Mr. POLE. If nation-wide branch banking were permitted by
Congress it might create a condition where large banks might establish branches all over the country without respect to the natural flow
of trade to any central community,in addition to which the operating
difficulties would be so great that the supervisory authorities will have
trouble in coping with it.
Mr. STRONG. You have no fear of a money and credit monopoly
if you had nation-wide branch banking?

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BRANCH, CHAIN, AND GROUP BANKING

219

Mr. POLE. I am so far from thinking that nation-wide branch
banking would ever be 'permitted, that I have not given a great deal
of thought to what might happen under such asystem. _
Mr. STRONG. Would not that be one danger if we had nation-wide
branch banking?
Mr. POLE. I say I have not given a great deal of thought to such a
contingency as nation-wide branch banking. I do not think it will
happen for years to come. . .
Mr. STRONG. Chain banking is extending and becoming nation
Wide?
Mr. POLE. I am not advocating it.
Mr. STRONG. I thought you said a moment ago that as a step to
branch banking it might be advisable. .
. Mr. POLE. I said that group banks might have some characteristics which are desirable as a step toward branch banking, but not
as an ultimate system.
Mr. STRONG. How do you regard chain banking?
Mr. POLE. I am not in favor of chain banking.
Mr. STRONG. You are only in favor of group banking as an ultimate
step toward branch banking?
Mr. POLE. I said it might possibly make the inauguration of
branch banking more orderly.
Mr. STRONG. When you cover a trade area with branches, would
there not be the tendency toward a monopoly in that trade area of
money and credits?
. Mr. POLE. I do not see why !here should be any greater monopoly
in a trade area than there is in bankmg now. If branch banking
were permitted, the big banks in any metropolitan center would take
advantage of such an opportunity and would be just as much in
competition with each other as they.are to-day.
. Mr. STRONG. Do you think there is much competition in banking
In the northern part of California to-day?
Mr. POLE. Yes.
Mr. STRONG. You think there is much competition between the
independent banks and the Bank of Italy?
Mr. POLE. I think they are competitors; yes.
Mr. STRONG. Has it not been the history of the Bank of Italy that
it has absorbed whatever bank it wented and forced that absorption?
Mr. POLE. There are numerous towns in California where the
Bank of Italy operates side by side with a unit bank.
Mr. STRONG. But they generally force the unit bank to sell out to
them if they want it?
Mr. POLE. I say there are plenty of instances where they operate
Bide by side and do not force them to sell out.
Mr. STRONG. They may have an agreement. Is it not a fact that
he Bank of Italy have forced banks to sell out to them in numerous
instances?
Mr. POLE. I am not informed of that.
Mr. STRONG. There have been instances of that right in Washington, have there not?
Mr. POLE. Not that I know of.
Mr. STRONG. Let me call your attention to the fact that a man by
the name of Savage, one of the old and experienced bankers, had
a bank at Columbia Road and Eighteenth Street, and one of the

a

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BRANCH, CHAIN, AND GROUP BANKING

banks in Washington put in a branch within half a block of him, and
being unable to buy or force him out of business, purchased the land
at the back of his bank and announced they would build an immense
bank overtowering his bank and finally forced him to sell out against
his will. That is true, is it not?
Mr. POLE. I do not know about those facts.
The CHAIRMAN. Will you yield to MC?
MT. STRONG. Yes.
The CHAIRMAN. You spoke a moment ago to the effect that you
were not in favor of chain banking. Will you state your reasons why?
Mr. POLE. I have already defined a chain bank. The particular
danger is that if a member of a chain fails, it drags with it the entire
chain.
The CHAIRMAN. Under those circumstances, then, in view of that
statement, should we permit membership in the Federal reserve system of chain banking, where it is operated by a bank in the Federal
reserve system?
Mr. POLE. That would be a matter, I think, Mr. Chairman, for the
Federal Reserve Board to cover, would it not?
The CHAIRMAN. Well, you are ex officio a member of the Federal
Reserve Board.
Mr. POLE. But I am not authorized to speak for the board.
The CHAIRMAN. You are in charge of examinations of all national
banks and many national banks are now owned and operated by
chains. These banks are being operated under your supervision and
you have already expressed the difficulties which you encounter in
the examination of these banks where they are intermingled with other
companies and control and you have said that you should have authority to examine these affiliated companies. I think, under the circumstances, you are the proper one to answer that question.
Mr. POLE. Chain systems of banking are frequently composed of
both State and national banks. The national banks are, perforce,
members of the Federal reserve system and as to whether or not it
should be denied such affiliation because its stock is owned by an
individual or group of individuals, is a question which I would not
be prepared to answer now. The question would seem to involve,
possibly, the expulsion of a national bank from the system because
it was a member of a chain.
The CHAIRMAN. Well, if a national bank was violating methods in
its operation which tended to endanger the security and perhaps
cause the failure of that bank would you not as comptroller, feel
justified in taking drastic action?
Mr. POLE. I would not say chain banking is operating in any
sense illegally. The law permits it.
The CHAIRMAN. You just said its existence is a dangerous situation.
Mr. POLE. Did I say that?
The CHAIRMAN. The reason I am asking these questions is that
this question of chain banking has been considered in this country
for many years, and in some instances, it has succeeded, where it
was in strong hands, and in other instances, where it was in weak
hands, it has failed, and caused great suffering and disaster.
Mr. POLE. Yes.
The CHAIRMAN. There are a great number of chain banks ill*
operation to-day. It is very difficult to know whether they are
strong hands or in weak hands. I have no doubt there are some

BRANCH, CHAIN, AND GROUP BANKING

221

in the hands of people who are not as capable as they should be in
Operating such institutions. Exploitation may be taking place but
national banks are involved in those chains. I think it raises a very
serious question in regard to the future conduct of banking in the
United States, as to whether we are going to permit our national
banks to be tied up in chain banking and I would like to know your
frank opinion in regard to it.
Mr. POLE. Personally, I am not in favor of it.
The CHAIRMAN. Well, one way to prohibit it would be to deny the
national banks that are parts of chains the right to continue as members of the Federal reserve system. Don't you think, if the continuation of such a system endangers national banks, that drastic action
should be taken?
Mr. POLE. I should like to see some legislation which would prohibit the operation of chain banks.
The CHAIRMAN. Do you know of any legislation that could be
enacted that would be more effective than to forbid them membership
in the Federal reserve system?
Mr.POLE. That,of course, would not prevent a chain of banks from
operating outside of the system.
The CHAIRMAN. But it would protect the national banking system.
Mr. POLE. Yes.
Mr. FORT. May I ask a question right following your line, Mr.
Chairman?
The CHAIRMAN. Yes.
Mr. FORT. Mr. Pole, don't you feel that if we recognize definite
abuses anywhere in the system we should proceed to correct them
even though that involved unscrambling some things that have
already happened?
Mr. POLE. I do.
Mr. FORT. And following up Mr. McFadden's question further,
have we not, in addition to the power of debarring from the Federal
reserve system, a still more potent weapon, the right to prohibit any
bank to clear checks that violate our theory of sound banking?
Mr. POLE. I imagine that would be possible.
Mr. STRONG. In view of the fact it is common knowledge that
wherever chain banking or group banking or branch banking is permitted, it is spreading very rapidly, do you not believe that if your
System of establishing branch banking m trade areas is permitted,
that eventually,inside of those trade areas will be only one or perhaps
two groups of branch banks?
Mr. POLE. Legislation might be enacted to prohibit two free consolidations of banks, eliminating competition thereby.
Mr. STRONG. Then you believe it would be dangerous if but one or
two groups of branch banks were established in the country?
Mr. POLE. I am not in favor of a banking monopoly. I would like
to see a continuation of banking competition.
Mr. STRONG. How are you going to prevent it under your system?
Mr. POLE. My system?
Mr. STRONG. Under the system you propose, I mean.
Mr. POLE. I think that that might be taken into consideration by
Congress through legislation preventing consolidations of such groups.
100136-30—vor,1, PT 2-9

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BRANCH, CHAIN, AND GROUP BANKING

Mr. STRONG. Bt there would be no groups established until after
we created a trade area. For instance, in California, will we say we
will tear down the Bank of Italy's branch banks and reduce them.
Mr. POLE. I do not think the law would be retroactive.
Mr. STRONG. Do you think there could be any hope of building up
another group that could compete with the Bank of Italy?
Mr. POLE. There is more than one group that competes with the
Bank of Italy in California.
Mr. STRONG. I understand they had an understanding between
the group in Los Angeles and the group in San Francisco, under which
the Bank of Italy would take the northern part of the State and the
group in Los Angeles would take the southern part of the State, but
when I was out there some time ago, there was a great deal of excitement when the Bank of Italy bought a bank in Los Angeles in alleged
violation of the agreement.
Mr.POLE. I know nothing of such an agreement, but outside of the
Los Angeles group there is a very strong competition out of San
Francisco itself.
Mr. STRONG. There are a few strong banks, of course.
Mr. POLE. I am talking about a single very important branch
banking system.
Mr. STRONG. How many branches have they?
Mr. POLE. They are in keen competition with the Bank of Italy,
as far as I am informed, with considerably more than 100 branches.
Mr. STRONG. Do they extend out into the rural districts?
Mr. POLE. Yes.
Mr. STRONG. Outside of the towns adjacent to San Francisco?
Mr. POLE. Yes.
Mr. STRONG. Then your idea is that there would be competition
' in the trade areas?
between branch banks
Mr. POLE. My idea is that I would see to it that there was competition by preventing too free consolidations of groups and large
banks having branches.
Mr. STRONG. If you think it necessary to give them the extent of
territory that a trade area would make, it would necessitate having
a very large number of branches?
Mr. POLE. That is true.
Mr. STRONG. All right, now. You mean you would say to one
branch banker,"You must have a branch in this town, but the other
branch bank group can not?"
Mr. POLE. Not at all.
Mr. STRONG. How would you prevent a final working out of a
monopoly?
Mr. POLE. I doubt, in the first place, whether that would be very
much to be feared, because I think that there would be sufficient
opportunity in the banking business for certainly more than one
bank and the chances are there would be sufficient opportunity for a
number of banks in a large town, as there is now and the mere fact
that the banks were given the privilege of branches would not
diminish the number of important units in metropolitan centers.
The CHAIRMAN. Suppose the First National Bank of New York
the Chase National Bank of New York and the National City Bank
ofiNew York should decide to merge or consolidate: Could that be
done without your permission?
L Mr. POLE. It could not.

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223

The CHAIRMAN. What would be your attitude, for instance, following up that hypothetical situation, and the question Mr. Strong has
asked you, if, say, those three banks should want to consolidate?
Would you approve or disapprove?
Mr. POLE. I would not express any opinion on that now. When
We have a request for consolidation we look into all the facts and
circumstances and our decision is determined upon our findings.
Mrs. PRATT. May I just ask one question m connection with Mr.
Fort's questions?
The CHAIRMAN. Yes.
Mrs. PRATT. How can you debar a national bank from the Federal
reserve system just because it is a member of a chain banking group
if it complies with the regulations, because, of necessity, it is no
longer a national bank if it is not a member of the Federal reserve
System?
Mr. POLE. That is correct.
Mrs. PRATT. HOW WOLdd you proceed?
Mr. POLE. There is no way under the present law. A national
bank is, perforce, a member of the Federal reserve system.
Mrs. PRATT. You can not debar them unless you find something
wrong with the particular bank?
Mr. POLE. You could not even then, as long as it held its national
charter.
Mrs. PRATT. Unless it ceases to be a national bank
Mr. POLE. It would remain a member of the Federal reserve system. If it ceased to be a national, bank it would become a question
of whether or not it would be eligible or wish to come in as a State
member.
Mr. FORT. It could be done by an amendment of the law.
Mr. LErrs. How could you accomplish it?
Mrs. PRATT. You would have no jurisdiction over a chain bank
unless it be a member of the present Federal reserve system?
Mr. POLE. No.
Mrs. PRATT. And you can not differentiate between the national
banks?
Mr. POLE. No.
Mrs. PRATT. A national bank would cease to be a member of the
chain system if it is not a member of the Federal reserve system?
MT. POLE. Yes.
Mrs. PRATT. And that could not be changed without changing the
law?
Mr. POLE. No.
The CHAIRMAN. While it is 1 o'clock, the House has adjourned,
and I am informed by Mr. Strong that he can finish within a few
minutes. I think we had better let Mr. Strong proceed.
Mr. BUSBY. Before Mr. Strong proceeds, may I ask a question?
Mr. STRONG. Go ahead.
Mr. BUSBY. Do you know of any national banks whose stock is
held or a majority of whose stock is held or controlled by a holding
corporation?
Mr. POLE. Yes.
Mr. STRONG. As I understand it, your position would be that as
comptroller, you would seek to restrict branches in the trade areas
from forming a monopoly through competing with and forcing
independent banks to sell out to them?

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BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. I do not know of any way in which a bank can be forced
to dispose of its stock. It would not require any legislation for that.
I can not conceive of any Comptroller of the Currency authorizing
the establishment of a branch in a town or a community where
independent banking was supplying all the banking needs of such a
community.
Mr. STRONG. Well, they allowed a branch bank to be placed on
Eighteenth Street within a few hundred feet of a bank that was satisfactory to the people there.
Mr. POLE. Of course there is a lot of difference between what I
intended to convey to the committee when I spoke of branch banking
in the rural communities, and what you speak of, which is city branch
banking. In the city branches are more in the nature of a convenience to the bank's clients and has no reference to the safety of a
small bank.
Mr. STRONG. That is true. Of course I am opposed to branch
banking because I fear a monopoly of money and credit. Especially
do I think such monopoly will work against the agricultural States,
and if permitted, I think it will finally dominate and control the
Government, just as the Second United States Bank did when it
forced a bill for the renewal of its charter through Congress by loaning
money to Members of Congress and to the newspapers, and would
have succeeded but for the veto by Andrew Jackson. I am afraid
of any monopoly built up by group or chain or branch banking.
I believe it would have more power than the Government.
Mr. POLE. Has there been a monopoly of banking in countries
where branch banking is in effect?
Mr. STRONG. I have been told that there is. I was in Canada
once when a gentleman, who was in the manufacturing business, told
me that they had forced his private bank out of existence through a
branch bank and then declined to extend credit to him. That was a
monopoly in that town; so much so that he sold his business. He
was forced not only to sell his interest in the bank, but his interest
in the manufacturing concern, because his competitor was interested
in the branch bank.
Mr. POLE. In a very large number of towns in Canada there are
not only two branch banks, but three and four competing keenly
with each other.
Mr. STRONG. That may be, but here we have unit banks and then
a branch banking group comes in and forces those unit banks out of
existence in order to get control of the banking in that community.
That was done in the building up of branch banks in California
by the Bank of Italy. I had a banker out there tell me he had a
bank that he operated a great many years and raised a boy and sent
him to school with the purpose of having him succeed him and there
came an offer to buy from the Bank of Italy and he refused. They
then said they would put a bank building alongside him and they
went so far as to buy a lot near him and still he refused. Then
one day some men walked in and said, "We have purchased the
accounts of your customers and we want the money right now."
Being unable to comply, he sold his bank. I can not say whether
that is true, but the man was vouched for by his friends as a thoroughly reliable man. I am pointing out a condition that might arise.

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225

How will you prevent a final monopoly of banking in trade areas
where you permit branch banking? Will the comptroller step in
and forbid that kind of business?
Mr. POLE. Why should there not be legislation on that point?
Mr. STRONG. Without legislation—
Mr. POLE. I think it would be extremely undesirable if any single
bank were permitted to monopolize the banking business of any
area or section of the country. I am perfectly in accord with your
idea.
Mr. STRONG. We had a law restricting the branch banking to
the city where the parent bank was located. Unable to violate that
law they started group banking systems and they are doing indirectly
what the law prevented their doing directly.
Mr. POLE. Not under the national law. They are being formed
under State laws.
Mr. STRONG. But you can not pass laws wbich will provide in
every case where a branch bank shall or shall not be established.
Mr. POLE. If you will leave that to the discretion of the comptroller, as far as I can speak for myself, there would be no monoply.
It might be, Mr. Stiong, that in givmg consideration to this question,
you might say that the discretion should be in the comptroller and
possible with some other officials, with the idea of carrying out a
national policy governing the consolidation of banks and preventing
monopoly in banking.
Mr. STRONG. From your testimony I am quite willing to believe
that if you were the comptroller you would try to prevent the
establishment of a monopoly in branch banking. I believe you would,
but how about the next comptroller?
Mr. POLE. He might have a different view?
Mr. STRONG. He might believe a monopoly would be the right
thing.
Mr. POLE. That is true.
Mr. STRONG. A comptroller, for instance, came before this committee several years ago and made a positive statement against
branch banking and yet you now come before us and favor it.
Mr. POLE. Yes.
Mr. STRONG. Suppose these trade areas would be established, in
which branch banking would be permitted, and they would
finally dominate the banking interests in that district—would
there be any use of the Federal reserve system after they so controlled?
Mr. POLE. Oh, there is no question in my mind but there will
always be use for the Federal reserve system.
Mr. STRONG. Would not they dominate and control the Federal
reserve bank in their trade areas?
Mr. POLE. Undoubtedly to an extent.
Mr. STRONG. Then, they would virtually, in fact, be the Federal
reserve system?
Mr. POLE. I am filing a brief, if you recall, on that very question,
as to the possibilities or probabilities of members of a chain being
able to elect directors of the Federal reserve bank of its district,
which will cover that.
Mr. STRONG. And there would be that possibility?
Mr. POLE. It might be theoretically possible, but, as a matter of
practice, quite unlikely that it would happen.

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Mr. SEIBERLING. The comptroller referred a few moments ago to
countries having branch banking. I wonder if you could tell us the
countries having nation-wide branch banking.
Mr. POLE. England and Canada are two of them.
Mr. STRONG. I believe I have no other questions. I will put into
the record at this point, as I have suggested to the chairman, the
statement of former Comptroller Dawes, made to this committee, In
opposition to branch banking.
(The statement referred to is as follows:)
You have invited me to express my views to your committee doubtless for
the reason that as Comptroller of the Currency I have general supervision over
the national banks. I wish to state clearly at the outset that the statements
which follow are made by me solely upon my responsibility as Comptroller of
the Currency. They are not intended in any way to represent the views of
the Federal Reserve Board of which I am a member ex officio.
With your permission I shall confine my discussion primarily to the subject
of branch banking—the outstanding problem in our banking system to-day.
On the side of the National Government this question is simultaneously before
the Federal Reserve Board and the comptroller; before the board in the matter
of the extension of branch banking by the State member banks in certain States,
and before the comptroller as a question of preserving the integrity of the
national banking system in those States. Since the national banks constitute
the backbone of the Federal reserve system, it becomes necessary therefore for
me as comptroller, in this discussion, to refer to the situation before the Federal
Reserve Board.
The organization of the Federal reserve system was possible because of the
power of the National Government to enforce the cooperation of the national
banks. At its inception it was primarily an instrumentality of coordination,
imposed upon the existing national system. At the present time, of the 31,000
banks in the United States 9,916 are members of the Federal reserve system,
and of the members of the Federal reserve system 8,292 are national banks.
The assets of the national banks as of June 30, 1923, were $21,511,766,000, as
compared with the assets of the State member banks amounting to $12,293,124,000.
The national bank act does not permit national banks to engage in the exercise
of general banking functions beyond the limits of the municipalities in which they
are located. They can not, therefore, enter the general field of branch banking.
These elementary facts are stated in order to bring out the obligation of the
Federal reserve system to the national banks, and the extent to which the Federal
reserve system is dependent upon the national banking system. Except for the
national banks the Federal reserve system could not have been organized, and
if a conditions is permitted to develop which should seriously and permanently
cripple the national banking system it would be a direct and possibly fatal blow
to the Federal reserve system.
The development of the American banking system has been an evolutionary
process, and the preeminent strength which it possesses in world finance at the
present time is in large measure due to the fact that it took its form in a gradual
and orderly way, meeting by practical adjustment conditions as they developed.
It is distinctly not an adaption of any foreign system nor is it a structure conceived
and built by any individual or group of individuals at a given time involving the
rigid enforcement of a ready-made theoretical plan. Under our system of banking, the most stable and most rapid economic development that the world has
ever seen has taken place.
From time to time efforts have been made to substitute for the old machinery
a system which might seem to be theoretically and technically more perfect.
The frontal attacks of the proponents of foreign banking systems have invariably
broken down without, in any substantial manner, permanently modifying or
affecting the general principles of American banking. The genius of the American
people for independence in matters of local self-government is thoroughly ingrained and will never succumb in any clean-cut issue where the choice rests
between centralized control and personal and community independence.
At the present time no direct or open attack is being made on these traditional
principles. The danger which confronts our present banking system lies in an
insidious and gradual undermining influence which is not so much the outgrowth
of a conscious effort to introduce a new system as it is the result of a natural desire

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227

to secure temporary benefits for particular individuals and banking institutions
Without consideration being given as to the ultimate effects on the highly complicated and efficient machinery of American finance and exchange. It is peculiarly
a time when these indefinite tendencies should be precipitated into their essential
elements.
If a new system and theory of banking is in progress it should be determined
Whether or not it is a desirable system, and if a desirable system it should be
encouraged, fostered and put into effect as rapidly as possible. If it is not a
desirable system that fact should be developed and steps should be taken now to
eradicate it before a condition has developed which would involve a great national
disturbance and injustice to individuals and communities.
The above remarks are intended to apply to the general subject of branch
banking. By branch banking I mean an association of banking houses operating
in one or more cities or towns but all under the discretionary control of the board
of directors of a parent bank and upon the capital of such parent bank.
'Unless the State member banks enter into branch banking there is, in my judgment, no material divergence of interests between the State and national banks.
If, however, State member banks engage in unlimited branch banking it will mean
the eventual destruction of the national-banking system and the substitution for
it, and eventually for the Federal reserve system, of a privately owned and highly
centralized financial control of the banking machinery of the United States.
It is this belief which impels me to discuss at some length present tendencies
in branch banking, and if the interest of your committee is largely centered on
the status of nonmember banks it yi proper to say that these nonmember banks
are almost entirely independent unit banks and any substitution for the present
System would have as vital an effect on their future as it would have upon the
Member banks and on the old independent unit banking operations of the nationalbanking system.
In support of the general contention that the principle of branch banking has
been carried to such an extent as to constitute a definite trend in certain localities
the following facts are submitted:
Branch banking is permitted with various modifications in the following 18
States: Arizona, California, Delaware, Georgia, Louisiana, Maine, Maryland,
Massachusetts, Michigan, Mississippi, New York, North Carolina, Ohio, Oregon,
Rhode Island, South Carolina, Tennessee, and Virginia.
The laws of some of these States restrict the establishment of branches to the
city or county of the location of the parent bank, while others permit branches
to be established in any part of the State. in California, for example, 82 of the
State banks are operating a total of about 475 branches. In that State, one bank
Operates 28 branches, one bank 19 branches, another about 71 branches in 48
different cities, another about 72 branches. Four banks in California operate a
total of 190 out of the 475 branch banks in the State. In the State of Massachusetts, chiefly in the vicinity of Boston, State banks and trust companies are
operating several hundred branches. In the State of Michigan upward of 300
branches of State banks are in operation. In the city of Detroit 14 banks are
Operating about 200 branches and there are in Detroit only three national banks
left in operation. In the State of New York about 251 State banks are operating
branches. In the United States to-day it is reported that 517 State banking
institutions have in operation 1,675 branches.
The figures used above are not intended to be authoritative or complete, and
are used only for the purpose of illustration. They are, I believe, sufficient to
indicate that the issue has long since passed the theoretical stage and has reached
the status of a practical condition.
Granting that a State legislature may properly enact legislation permitting the
local State banks to engage in branch banking, the larger questions remain, first,
as to the effect of such legislation upon the national banks operating in such
States under the national bank act as administered by the Comptroller of the
Currency, and, second, the effect upon the Federal reserve system of admitting
to or retaining in membership such State banks engaged in branch banking.
In view of the facts stated above I may safely say that branch banking already
exists in the United States, and that it is distinctly a practical and not a theoreiical issue.
The discussion of branch banking seems naturally to divide itself into three
main questions:
First. Is a reserve system, either governmentally or privately controlled,
necessary?

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BRANCH, CHAIN, AND GROUP BANKING

Second. Can the present Federal reserve system survive the imposition upen
it of large and powerful chains of branch banks which, in practice as well as in
theory, are privately owned and privately controlled reserve systems?
Third. Can a general system of branch banks exist simultaneously with a
system of independent unit banks?
If it should be concluded, in the consideration of these questions, that the
Federal reserve system is necessary and that it can not survive the strain upon it
of systems of branch banks, and that branch banks will mean the elimination of
independent banks, it will then, I believe, be a logical and necessary conclusion
that the issue is a clean-cut one as to whether the country prefers a system of
privately owned branch banks or a reserve system under Federal control.
As to the first question, namely, the necessity for a reserve system, it seems
hardly necessary, in view of the record of the existing organization, to enter into
any extended arguments, but it would, perhaps, be well to state some of the
basic considerations on account of which it was given its present form. The
principle of a central bank has been a controversial one for over a century. In
deference to the widespread and thoroughly American distrust of the centralization involved in a single Government bank 12 banks were established in different
sections of the country in order to secure the closest possible contact with the
local member banks and a thorough understanding and adaptability to community conditions. Through the operations of the 12 individual units a proper
sympathy with an understanding of local conditions and needs is secured, while
at the same time, through the Federal Reserve Board, a liaison between the
districts is secured and the detachment necessary for a proper compromise between local interest and national policy. Through the Federal reserve system
the transfer of funds from points of surplus to points of deficit is accomplished
with the primary purpose of promoting the best interests of the whole country
and not with a view to enabling individuals or sections to reap a financial advantage at the expense of others. If it were assumed that the instrumentality
for the transfer of funds could be provided by a private reserve system, such as
a branch banking institution, it could hardly be fairly contended that the controlling influence would be other than profit. Necessarily, in adjustments of
this kind the interests of a branch bank or individuals must be private profit
and not public welfare.
The whole Federal Reserve System bears a very striking analogy to the general
principles which underlie the American Government, being founded upon
system of checks and balances calculated to preserve local independence under
centralized and coordinating control: It would be so distinctly a step backward
and so manifestly a dangerous proceeding to destroy the regulated cooperation
of banking facilities that it seems to me entirely unnecessary to discuss further
the necessity for some sort of a reserve system, and the issue is, should it be done
by governmental coordination or private centralization?
The second point referred to, as to the ability of the Federal reserve banks
to survive the imposition upon the system of large privately controlled reserve
systems, is a practical one which at the present moment faces the Federal Reserve
Board. The question as to the duties and rights of the board to interfere in
the extension of a system which, in the opinion of many might contain the seeds
of a development which will mean the eventual destruction of the Federal
reserve system, is by no means a simple one, either legally or from the standpoint
of policy. The board, however, clearly has the moral and legal right to refuse
admission to the system of any institution which either because of its financial
condition or the method of its operation is unsound, and it has the same right
to deny the privileges of the Federal reserve system to a member bank under
similar conditions. It is reasonable to assume that a bank, for administrative
purposes, might safely control 10 branches; but the same bank under American
conditions might not, in safety to its depositors and general creditors, operate
a thousand branches. If the Federal reserve system takes a neutral position
on the general issue of branch banking and refuses to sanction the admission to
the system or request the withdrawal of banks which are operating more than
a safe number of branches, they will be faced continually with decisions of a
highly controversial nature and which are not susceptible of reduction to elemental formula3. The local situation, the personal equation, the temporary
financial conditions, and a thousand and one conflicting influences will have to
be balanced and considered in every application for a branch. However wise
their decisions the board will, of necessity, frequently appear to be arbitrary
and improperly partisan. The publication of their reasons for action in particular cases would frequently be productive of injustice to the individual applicant
and disturbance to the financial community. If the reasons for decision in these

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229

'matters were not made public, in my opinion, the system would be subjected
to such attacks and insinuations as would eventually seriously impair its standing and be destructive of its dignity and influence. In order to avoid these
consequences the board has it in its power to adopt a general policy of clarification
and control.
The elementary considerations which I have stated above and purpose to
elaborate further seems to me to justify a decision on the part of the authorities
to limit definitely the extent to which member banks may indulge in the establishment of branch banks.
As a practical consideration, aside from the broader aspects of the case, it
Must be constantly borne in mind that the Federal reserve system can only be
successfully maintained if the administrative authorities have an adequate
knowledge of the conditions of the member banks. This necessitates examination, which, in the case of the national banks, is provided by the Comptroller of
the Currency. National banks can not engage in banking beyond the limits of
the city in which the insdtution is located. In the examination of State banks
the Federal reserve system is compelled to rely on its own examiners and such
incidental and voluntary assistance as it can secure from the various State
officials.
The examination of an institution with branches and subsidiaries is a very
difficult one. The interdepartmental relationships vastly complicate it. It is
More difficult to examine 10 institutions of a given size which are associated
in a branch banking system than it would be to examine 10 independent institutions, as all of the transactions between the different branches have to bCinvestigated, and eliminations and adjustments made to produce a composite picture
and prevent the improper manipulation or shifting of assets. This can not be
done satisfactorily wtihout a simultaneous examination of parent band and each
one of the branches. This may be construed as an ex parte statement, but it
bears the weight not alone of my individual opinion but of the employees of the
comptroller's office who have been engaged in the examination of banks for many
years. Bank examination involves very much more than a mere scrutiny of
figures. Questions of moral character, of local reputation, of valuations of securities, of conformity to laws and rulings—these and many other elements enter into
a proper examination. In the case of the examination of a very large bank, say
With 75 to 100 branches, it would be impossible to mobilize a force of examiners
of the ability to make an intelligent analysis of the situation in each individual
community even if it is to be assumed that the character of the banker is not a
in the condition of the institution.
The last stated considerations are incidental as compared with the more important one which involves the ability of the Federal reserve bank to meet the
mobilization demands of an association of institutions under the control of a
single interest having the power to concentrate the requirements of all of the separate institutions into one demand. This demand might be made practically
Without notice in a period of stress, on account of necessity or with a desire to
Produce a certain condition in the community which might be opposed to the
general interest but favorable to that of the particular institution. To say that
if a large proportion of the banking interests of a State are centralized in the hands
of five or six or a dozen branch banking institutions and that these institutions
will not combine, either as a result of direct conferences or agreement or of mutuality of interests, is to ignore the fundamental basis of human action. If any
lessons are to be drawn from the development of large industrial enterprises in
the United States it is that the principle of centralization, when once inaugurated,
Will proceed, unless interfered with by governmental action, to a point of complete concentration in an individual, or a group dominated by an individual.
Should a situation of this kind develop in any Federal reserve district the Federal
reserve bank would either be eliminated as a factor in the financial community or
be virtually under the control of such a group.
As to the question of whether or not it is possible for independent unit banking
systems to exist and operate in conjunction with a branch banking system, very
. from the results of the operations of branch
definite conclusions may be drawn
banking systems in other countries.
Branch banking is in vogue in England, Scotland, Ireland, Canada, Australia,
New Zealand, France, and other parts of continental Europe. I understand it is
also in operation in the Latin-American countries. According to figures published
in the bulletin of the American Institute of Banking for July 1923, in 1842 there
were in England 429 banks and in 1922 only 20 banks, of these 20 banks, 5 controlled practically all of the banking of the nation. There are about 7,900
branches in operation. In Scotland there are only about 9 banks with about
1,400 branches, and in Ireland about 9 banks with about 800 branches.

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BRANCH, CHAIN, AND GROUP BANKING

In 1885 in Canada there were 41 independent banks. Under the operation
of branch banking, the number was reduced to 35 by the year 1905. I am
informed that in Canada to-day there are only 14 banks, operating about 5,000
branches. There are no independent unit banks in western Canada, in fact
none west of Winnipeg. Banking control through the branch system is concentrated in the cities of Montreal and Toronto.
It has been authoritatively stated that there are only 6 unit banks in New Zealand, and 20 in Australia. (See Statesman Yearbook for 1923.)
Experience in other countries definitely indicates that independent unit banks
do not exist parallel with branch banks. As indicating that this is not necessarily
due to conditions which exist abroad, but might not exist in the United States,
the following points are adduced, which to my mind, show that there are such
inherent antagonisms between the two systems that they could not, under any
circumstances long operate together in the same country.
Branch banking is, in its essence, monopolistic. The financial resources of a
number of communities are put under the control of a single group of individuals.
Funds liquidated in one community may be used to develop other communities
at the discretion of the officers of the central bank. The economic development,
therefore, of a given territory under the control of a branch would depend upon
the policy of the bank. The bank would have the power to retard or to encourage
the development of a given community or individual enterprise. In this connection it has been well said that if the sudden creation of great branch banking systems shall result in withdrawing funds from the support of rural communities
in order that they may be invested in self-liquidating commercial paper originating
elsewhere, then it will be true that sound abstract banking principles will have
been applied, but at a cost to the future development of the rural communities
that will far outweigh any advantages that may be gained.
In a system of independent unit banks, the bank which best serves the community is the bank which is most certain to live the longest and be the most
profitable to its stockholders. Since the type of man who starts a bank in a
small community is essentially constructive, his natural associations and sympathies are with men of constructive type, and he extends the facilities of the
bank most liberally to them. His loans take into account as a first consideration
character and moral responsibility. He is naturally inclined to encourage young,
aggressive, and enterprising individuals who will, in the course of time, bring
business to the institution as he succeeds, and will develop commercial and
industrial enterprises and be a factor in the creation of corporate and private
undertakings, all of which will be feeders to the bank. As this type of individual
is usually not the possessor of high-class collateral at the beginning of his career,
the banker is dependent in a large measure on the character, of which he can only
be sure by personal contact and acquaintance.
The distinctive accomplishment of the banking system of the United States is
its contribution to enterprise and its stimulation of growth; its criterion is service.
The European standard is safety first, last, and all the time.
It can well be said that the rapid economic development of America has been
largely due to the policy of the pioneering unit banks which recognized this
principle of service. It is inconceivable that the representative of a nonresident
board of directors should be granted the authority and the discretion to make a
type of loan which is based on character, knowledge of local conditions, and
ultimate benefits to be realized by the community and by the banks. While it
requires a high order of ability to make this class of loan, the banking history
of the United States would show, in the main, a surprisingly small mortality.
These loans, however, on account of their small size in individual cases, and
difficulty of ascertaining their intrinsic value, do not afford a basis for discount
with other banks in case of stress, and no bank could exist if it were dependent
entirely upon them. If, across the street from the unit bank making this sort
of loan, were the agent of a great branch banking institution, this agent would
very quickly acquire the larger and from the narrow banking standpoint, the
desirable business of the town. This he could do by offering lower rates of interest
on loans and higher rates on deposits than local conditions would ordinarily
justify, which, in the nature of the case would probably be withdrawn as soon
as the independent unit banks of the town were finally eliminated. This is a
process which has been pursued in the evolution of our great industrial enterprises which have had to be curbed by the action of the Sherman antitrust law
and other governmental action.
The opportunities for coercion on the part of large institutions with branches
scattered over a whole State are very great. This coercion might take any one
of a number of forms. The connection of the branch banks with out-of-town

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231

customers of the institutions of a community permits of pressure being readily
brought.
Under the Federal reserve system, and through his relations with his correspondents, the competent unit banker is able to secure for the larger customers
of his town facilities which are beyond the abilities of his own institution to
grant. The branch banker can, in the case of every large customers, grant these
facilities more directly and to that extent is rendering a special service to the
community, but the ultimate result of these influences is to give the easiest
obtainable and most desirable business to the branch bank, leaving the unit
bank to take care of the enterprises of the town which have not already reached
a condition of independence.
The expression has been used as applied to .one State where branch banking
exists on a large scale that the branch banks skim the cream and the unit banks
are left with the skimmed milk, the result being that the unit banks have gone
out of existence and the borrower who is a good moral risk but can not produce
a certain form of collateral is left to depend on the good graces of a representative
of a branch bank who is frequently the possessor of all the discretionary powers
of the local railroad agent and no more.
One of the monopolistic influences exerted by the branch banker is the ability
to secure, by the payment of higher salaries, the transfer to other points of the
efficient employees of the unit banks. A general procedure in the creation of
branch banking systems in one of our American States has been the absorption
of local unit institutions. During the first few years the operations of these
local unit institutions have, in many cases, been successful because the enterprising and pioneering talent that created the bank is still retained in an official
capacity, but men of this type will not long. consent to hold positions which are,
in their essence, merely advisory and there soon substituted therefore the type
of employee who must be bound by rigid instructions and is capable of inter. way. In case of an acute financial disturbance
preting them in only a mechanical
demanding immediate action it necessary for the representative of the branch
bank to refer back to the head office for instructions as to his course of action,
and a delay is occasioned by red tape which frequently makes it impossible for
them to help in an emergency, even when they have the desire.
The relations of the national bank to operations in branch banking have been
the subject of a very widespread misunderstanding. In order that the situation
. present comptroller requested an opinion of
might be clarified and defined, the
the Attorney General which has Just been handed down. A previous opinion
given by Attorney General Wickersham was to the general effect that a national
bank might not de novo establish a branch bank. The present opinion from
the Attorney General makes it clear that none of the major or important incink may be exercised beyond the limits of the
dental functions of a national bank
city in which the parent institution s located. This opinion also indicates that
certain functions of a national bank, incident to the banking business, may be
be carried on at fixed points within the city limits and outside of the four walls of
the banking house. This opinion is not inconsistent with that of Attorney
General Wickersham, and the practical application which will be made of it
Will be that certain national banks will be permitted to establish what are
virtually tellers' windows in places more or less removed from the banks, but in
the city limits, where they may take deposits and cash checks. The discretionary powers which are inherent in such transactions as making loans, purchasing
securities, and similar activities will not be permitted to be carried on in such
located at a distance from the parent institution.
It seems to me unnecessary at the present time to do more than make the
. force of the opinion of the Attorney
above reference to the legal situation. The
General just handed down would as a practical matter remove the national banks
from the branch bank controversy since a national bank can not engage in the
banking business outside of the city limits of its location and inside of the city
limits it may under certain conditions perform only limited functions at a distance from the banking house.
I am of the opinion that the comptroller could not properly permit the establishment of these outside activities by a national bank, such as teller's windows,
in any locality where the State laws or practices prohibit the State banks from
rendering similar services..
Authorization to national banks to establish such additional offices will be of
great advantage in certain localities where the State banks are already extending
their services in this manner. In such cities as New York, Cleveland, Detroit,
and California, the national banks will be able to reach their customers in the
matter of making deposits and cashing checks in the same way that their coin-

1

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BRANCH, CHAIN, AND GROUP BANKING

petitors do in this single important aspect of the banking business. At the present
time, in the city of Cleveland there are only three national banks, and in the
city of Detroit only three. This will enable the national banking system to really
eneter these two great cities, from which they have previously been excluded,
perhaps not on equal terms, but at least on a living basis.
It is my opinion that the major question of branch banking is not in any way
affected by this differentiation of the functions of the tellers' windows except to
mitigate the handicaps that at present exist in some great cities and that it can
not by any possibility be used for the extension of the principle of branch banking.
The banking arrangements of any individual city are distinctly a matter for
local determination. When the extension of branches passes the city lines and
becomes State wide a condition such as I have previously described is created,
under which the whole balance of the Federal reserve and unit banking system
of a large section of the country is disturbed and the fire will, in my opinion, very
quickly jump over State lines.
If the branch banking movement can not use the Federal reserve system as"an
instrumentality for its extension, it will probably never become a great menace,
and with the national banks extended a reasonable measure of facilities for self
protection within the limits of the municipalities in which they operate the
national banking system and the Federal reserve system can be maintained in
their present status.
First, that the development of branch banking, unless curbed, will ban the
destruction of the national banks, and thereby the destruction of the Federal
reserve system and the substitution of a privately controlled reserve system for_a
governmental system of coordination.
Second, that if the Federal Reserve Board has not the power to refuse the admission of institutions engaged in general branch banking, and to curb the further
extension of this principle by member baaaks, they should be given the power.

(Whereupon, at 1.45 o'clock p. m., the committee adjourned until
Tuesday, March 11, 1930, at 10.30 o'clock a. m.)

X

anch, Chain, and Group Banking

HEARINGS
BEFORE THE

COMMITTEE ON BANKING AND CURRENCY
HOUSE OF REPRESENTATIVES
SEVENTY-FIRST CONGRESS
SECOND SESSION
UNDER

H. Res. 141
AUTHORIZING THE BANKING AND CURRENCY COMMITTEE
TOjSTUDY AND INVESTI ATE GROUP, CHAIN
AND BRANCH/BANKING

MARCH 12 AND 14, 1930

VOLUME 1
Part 3

UNITED STATES
GOVERNMENT PRINTING OFFICE
100136

WASHINGTON: 1930

COMMITTEE ON BANKING AND CURRENCY
LOUIS T. McFADDEN,Pennsylvania, Chairman
JAMES G. STRONG, Kansas.
ROBERT LUCE, Massachusetts.
E. HART FENN,Connecticut.
GUY E. CAMPBELL,PennsylvanIa.
CARROLL L. SEEDY, Maine.
JOSEPH L. HOOPER, Michigan.
GODFREY G. GOODWIN, Minnesota.
F. DICKINSON LETTS,Iowa.
FRANKLIN W. FORT, New JerseY.
BENJAMIN M. GOLDER,Pennsylvania.
FRANCIS SEIBERLING, Ohio.
MRS. RUTH PRATT, New York.
JAMES W. DUNBAR,Indiana.

OTIS WINGO, Arkansas.
IIENRY B. STEAGALL, Alabama.
CHARLES II. BRAND, Georgia.
W. F. STEVENSON,South Carolina.
T. ALAN GOLDSBOROUGH, Maryland.
ANNING S. PRALL, New York.
JEFF BUSBY, Mississippi.

PHILIP G. THOMPSON. Ct.rh.
Ii

CONTENTS
Pelt
235

Pole, Hon. John W., Comptroller of the Currency, questioning of
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BRANCH, CHAIN, AND GROUP BANKING
HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,
Wednesday, March 12, 1930.
The committee met in the committee room, Capitol Building at
10.30 o'clock a. m., Hon.James G.Strong (acting chairman) presiding.
Mr. STRONG. The committee will come to order, please. The
chairman has left with me his list of names of members of the committee to be called in their order, but, before starting to call them,
I want to put into the record a letter handed me by Congressman Box
of Texas, written to him by one of his constituents on this subject.
Mr. BEEDY. About what?
Mr. STRONG. Branch, group, and chain banking—on this subject.
would like to have the clerk read it.
(The clerk thereupon read the letter referred to, at the conclusion
of which reading, the following occurred:)
Mr. BEEDY. Mr. Chairman, I was thinking, as the letter was
being read, that we are just starting in on these hearings. I, personally, would like very much to show every courtesy to Congressman
fox, but I am wondering if it is not going to be rather dangerous
and lead to a great deal of misconception, if we start printing letters
indiscriminately in the record.
For instance, I think the use of the word "chain" in that letter is
not strictly correct.
Mr. STRONG. I think he refers to branch banking in Canada.
Mr. BEEDY. Exactly; and when he makes his references to the
Canadian banks, he is speaking about branch banking.
I do not think we ought to let these generalizations go into the
record when the party is not here to be questioned. He makes some
very sweeping assertions in his letter and on just what he bases them,
the committee has no means of knowing. While I do not want to
take an arbitrary stand, I should like to know what the committee
thinks about it.
Mr. FORT. It also seems to me that here we are getting a very
strong statement from Mr. Pole, and it breaks the continuity, in
the record, of his testimony and of his questioning, to insert something like this into the middle of it.
Mrs. PRATT. Mr. Chairman, I want to say that I have received
innumerable letters along that line. The question of banking is
Particularly interesting to my district, but I agree with Mr. Beed7
....and with Mr. Fort that it is simply cluttering up the record to permit
Members of the House to bring in the letters they receive from constituents
/1r. BEEDY. And every letter introduced would prompt another
Congressman to bring in an opposing letter to match it.
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Mrs. PRATT. Would it not lead to the introduction of a tremendous
amount of.correspondence?
Mr. STRONG. Mr. Box handed it to me, stating that with the
man's experience, as given in the letter, and his visits to Canada,
he thought it would be helpful to the committee. He did not want
to come before the committee himself, but wanted to have the letter
placed in the record.
I have iiresented the request, and if you want to refuse it, all
right.
Mr. FORT. I do not think the statement should go into the record
without an opportunity to examine the witness.
Mr. STRONG. If the committee wants to bar this letter, all right.
Mr. SEIBERLING. It is difficult to discriminate among the letters.
For instance, I have a circular letter from some radio company
protesting against certain features of branch banking.
Mr. LETTS. Why would it not be a safe rule to permit members
of the committee to introduce such letters as they think important
and which come to them personally, and to bar others, unless the
action of the committee is to the contrary?
Mr. FORT. That does not open the door to any cross-examination
of the witness, as to his information. I think we are going to get
. that we should have an oppora lot of information that way, and
tunity to cross-examine those making the statements.
Mr. LETTS. You may have f! letter from some one in your district
that you think contains some important facts, and you, personally,
call tell us something about the man and about his experience.
Mr. FORT. I have a lot of them.
Mr. LETTS. SO I thought, in my suggestion, we ought not to bar
let ters offered by members of the committee.
Mr. GOLDSBOROUGII. Would it not bc.3 better to take the letters
and use them as the basis for cross examination?
Mr. STRONG. Whom would you cross examine?
Mr. GoLnsnoRouan. When you take a witness, you could say,
"I have received such-and-such a letter," and ask him about the
statements contained in that letter or letters, and then it would give
him a chance to answer.
Mr. FENN. It seems to me since these hearings have been so well
advertised throughout the country and a special rule adopted toward
them in the house, gentlemen interested in them should take the
opportunity and occasion to come here themselves. Personally, I
have no objection to the introduction of the letters, except from the
standpoint of encumbering the record.. You will get one letter one
way and another the other way. I think these ex parte statements
are of no particular value. They are of no value to me, and I think
the other members will take the same view.
Mr. GOLDSBOROUGH. If you have a letter that you think is pertinent, you can then ask the witness about it.
Mr. BEEDY. In order to get. the sense of the committee, and in
order not to seem to make this personal in its application to Mr.
Box's request, I move that the committee do not include in the record
any letters except those which are submitted by witnesses who are
testifying, in amplifying statements which the witnesses make before
the committee.
Mr. FENN. I second the motion.

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235

Mr. STRONG. I just want to call attention to the fact that it is the
habit of the chairman very often to introduce matters sent to him.
Mr. BEEDY. He can do it through witnesses.
Mr. GOLDSBOROUGH. That, then, includes the chairman?
Mr. BEEDY. Yes.
(The motion was carried.)
STATEMENT OF J. W. POLE—Resumed

Mr. STRONG. Mr. Luse is the next interrogator, but he is delayed,
and Mr. Fenn is the next.
Mr. SEIBERLING. Does this letter go out of the record?
Mr. STRONG. It is not included in the record. The chairman has
adopted the plan of going down the committee, according to the rank
of the members, giving them each another chance to cross-examine
M.Pole, and you are next, Mr. Fenn.
Mr. FENN. I have no other questions.
Mr. STRONG. Mr. Campbell is next. He is absent. Mr. Beedy
is next.
Mr. BEEDY. I do not care to question Mr. Pole.
Mr. STRONG. MY. Hooper is next.
Mr. HOOFER. I have not asked any questions yet, because I was
away when my turn came. I should like to ask one or two questions
that have been brought up or suggested by the letter that was read
here.
will say to Mr Pole that my attention has been called to a letter
which covers the banking situation in Canada. The Canadian system,
Mr. Pole, is a system of what sort of banking?
Mr. POLE. Branch banking.
Mr. HOOFER. The banking business in Canada is largely done by a
small number of large banking organizations, such as the Bank of
Montreal, the Bank of Nova Scotia, the Royal Dominion Bank of
Canada, and others of that kind—is not that true?
Mr. POLE. Yes, sir.
Mr. HOOFER. This is typical of branch banking? The banks
Which the Bank of Montreal controls out through the Dominion of
Canada are branches of that bank, are they not?
Mr. POLE. The question has to do with the branch banking system
as it is operated in Canada?
Mr. HOOPER. In the Dominion of Canada.
Mr. FENN. May I interrupt a moment?
Mr. HOOFER. Certainly.
Mr. FENN. The Canadian banks have not only branches throughout Canada proper, but I know the Bank of Nova Scotia, the Bank of
Montreal, and the Royal Bank of Canada, and others have branches
in the West Indies, too.
Mr. POLE. Yes, and overseas.
Mr. FENN. The banks in general—
Mr. POLE. I had not quite finished my answer.
Mr. FENN. I wanted to point out how widely that system is operatr. POLE. Very widely. The branch banking system in Canada
differs very materially from the branch banking system which I

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BRANCH, CHAIN, AND GROUP BANKING

suggested, the difference being that they cover the entire country.
My plan would be to develop a branch banking system within restricted trade areas.
Mr. HOOPER. Your idea, Mr. Pole
Mr. POLE. Instead of having 10 banks, as they have in Canada,
the probability is that we would have several hundred banks in this
country.
Mr. HOOPER. I was not trying to contrast the system in Canada
with that of the United States, but what I wanted to ask you was:
Bank failures are very rare m Canada, are they not?
Mr. POLE. Very rare.
Mr. HOOPER. And they have banks operated through the small
towns, through the rural regions of the Dominion, in much the same
way as in the United States?
Mr. POLE. Very much so.
Mr. HOOPER. You will find branches of the Bank of Montreal or
of the Bank of Nova Scotia in the small villages of 500 or 1,000 in
Canada, as you will find branch banks or State banks of similar size
in the United States?
Mr. POLE. Yes, sir; in competition with one another.
Mr. HOOPER. The reason why there has been a scarcity of failures
or a dearth of failures in the Canadian small towns, has been that the
large banks protect the institution if trouble comes to the branch—is
not that true?
Mr. POLE. Yes, sir.
Mr. HOOPER. And in Canada, at least, branch banking has worked
out very much to the advantage of the financial situation in that
country?
Mr. POLE. I am under that impression.
Mr. FENN. I do not think they have ever had any other system.
Mr. POLE. No, sir; not within recent years.
Mr. FENN. I suppose there is no other country in the world that
has the dual system that we have?
Mr. POLE. NO, sir.
Mr. FENN. I think you stated to Mr. Fort a few days ago that the
tendency in all the principal countries of the.world—England, France,
Germany, and other great European countries—is the same tendency
as in the United States; namely, the centralization of the banking
business in the capital, which is usually the metropolis of the country?
Mr. POLE. That is true, with the possible.exception of some little
difference with regard to the system which is in force in Germany.
They have a number of small independent banks in Germany in addition to the banks operating from the large centers, and the record of
failures of these small independent banks in Germany last year was an
imposing number.
Mr. HOOPER. They have a large number there?
Mr. POLE. Yes, sir.
Mr. HOOPER. And that was not true of the other-Mr. POLE. Among the small banks.
Mr. HOOPER. One or two more questions.
In your preliminary statement you mentioned various reasons for
the lack of success of the small banks located in small places remote
from the larger centers?
Mr. POLE. Yes, sir.

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237

Mr. HOOPER. You spoke of the lack of diversification, for instance.
I assume that same lack of diversification would be found in Canadian
towns of small size?
Mr. POLE. Yes, sir.
Mr. HOOPER. In the West they would be lending money on wheat
or on wheat lands, and in the forest territory, where lumber is produced, that would be the principal item?
Mr. POLE. Yes, sir.
Mr. HOOPER. I suppose in Canada, as well as the United States,
there is not the general diversification in the banking loans in the
small towns as in the large centers, like Montreal and Toronto?
Mr. POLE. No.
Mr. HoorEn. What, then, would you say is the reason that the
Canadian bank system has proved more solid and sound in the way
of absence of failures than in the United States?
•Mr. POLE. I think their system is responsible for the absence of
'allures largely by reason of the fact that the metropolitan banks are
niore scientific in their management and are enabled to diversify and
absorb such losses as occur.
Mr. HoOPER. Is the banking system of Canada superior to the two
aYstems in the United States—do you think, generally speaking?
Mr. POLE. The results of the situation, with regard to the rural
districts, are far more satisfactory.
. Mr. HOOPER. Do you think that the bankers of the higher grade
la Canada are, generally speaking, abler men,in their line of business,
than in the United States?
Mr. POLE. I should be unable to answer that.
. Mr. HOOPER. What I was seeking to find out was the reason why,
a country with 8,000,000 of people, with less opportunity for
ueveloping genius along those lines, why the Canadian system, for
a long time, has really been more stable, as far as failures are concerned, than our own, as it apparently is?
, Mr. POLE. I think an independent unit system, such as ours, is
'au able to care for a general situation than a branch banking system.
Mr. STRONG. Will you tell us, if you know, to what extent the
k4overnment controls these banks in Canada? What is the GovernMent control over banks?
Mr. POLE. There is very little Government control. There is no
System of examination in Canada. Reports are filed with the comnlissioner of banking and are analyzed by him, in addition to which
the banks are examined by certified public accountants, which
accountants are approved by the banking department.
Mr. STRONG. Mr. Pole, you stated that you thought that, under
Your plan of branch banking in the United States, we would have
ally more hundred systems of branches than they do in Canada.
"ill you explain to me why you arrive at that conclusion?
Mr. POLE. My reason for that, Mr. Chairman, is that under my
Proposal, a system of branch banking would be developed from the
?netropolitan centers. Undoubtedly, if opportunities were given
banks in such centers of operating branch systems there is no reason
hY there should not be a very large number of important groups
wiveloped from each metropolitan center.
Mr. STRONG. Would not that be true in Canada?

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BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. They have a nation-wide branch banking system there
My suggestion is that we have a regional branch banking system.
Mr. STRONG. Would that prevent a branch banking system froin
excluding others?
Mr. POLE. It would prevent them from operating nation-wide
It would not prevent the growth of a big branch system within fi
restricted area.
Mr. STRONG. Would not there be a likelihood of a monopoly
within the big area?
Mr. POLE. I think there would be bank competition throughoul
this country, and I see no reason why there should be a greatei
fear of monopoly beyond the metropolitan area than there is within
the cities now.
There is plenty of competition in the different cities. To extend
the areas would not make for lessened competition. I think it would
stimulate it. The opportunities for profit would be greater.
Mr. STRONG. Mr:Luce is here now, and we will ask him to proceed
with his cross-examination.
Mr. LUCE. Mr. Pole, it requires some ingenuity to think of som(
question that has not been asked you already.
Mr. POLE. I think you are right, Mr. Luce. I was afraid the coin.
mittee had overlooked the fact the committee might want to call
other witnesses than myself.
Mr. LUCE. We look to you as the main fount of information
I shall try not to cover ground already covered.
I wish to address myself to the broader principles at stake radio
than to details. Let me sketch hastily the background for m3
questions.
About 30 years ago the country got very much excited over monop•
oly from the formation of big business.institutions of one sort oi
another. It would seem as if every generation must go through a period
of excitement over the question of monopoly and, judging from th(
speeches in the Senate recently, we are entering another spasm of thal
sort and it would be of use, I think, to bring out whether the presenl
situation in banking will add any fuel to the flame.
First, let me say that the people got alarmed 30 years ago over thi
obnoxious features of monopolies, price cutting, rebates, the destruc.
tion of small competitors, and other processes that were supposed tc
be particularly exemplified in the Standard Oil Co. has it come tc
your observation that the extension of branch banking so far hal
produced evils of that sort?
Mr. POLE. A far as I know, Mr. Luce, the branch banking system(
which are in operation in this country. and abroad have been rathei
conducive to keener competition than is in existence in a great man3
parts of our country under the unit system of banking.
Mr. LUCE. You might well elaborate that, if you will, and show in
how that develops—through the placing of branches in the same pine(
by two banks, for example.
Mr. POLE. In very many places in Canada and in very many
places in England, in comparatively small places, there are as many
as two, three, and even four branches of large metropolitan banks
and they carry to those small commufuties the complete banking
service of those important metropolitan institutions, and I have neve]

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239

heard but what competition among the branch banking systems is
anything but extremely keen.
Mr. LUCE. In California, or elsewhere, have there been any instances brought to your attention where a branch of a great bank has
tried, by any unfair methods, such as price cutting or what would
correspond to it in the banking world—where such tactics have been
adopted by a big bank in order to destroy a little bank?
Mr. POLE. I do not know that I can recall any instance of the kind.
In California, in every important town, there is, as far as I know, no
banking monopoly. The branch banking systems are operating in
keen competition with one another in many towns, in addition to the
unit banks.
Mr. LUCE. Now, turning to the question suggested by the development in my own neighborhood, it has been observed that the striking
tendency in banking in New England is the entrance into the investinent field. More and more our national banks are resorting to
investments for the use of their funds.
I am not prepared to admit that it is the function of Congress to go
beyond securing safety in the matter of banks, but even that factor
May enter into what I want to call to your attention. You are, of
course, aware of the growth of trust companies in New England.
They have larger opportunities for business and greater chance to go
into promoting. Of course, you are familiar with the fact that some
of our sizable trust companies failed as a result of going into the
investment business.
If it is the function of the Government to interfere in such emergencies, is it your expectation that branch banking—that is, the concentration of banking into few groups—would increase or diminish
the likelihood of investment banking, assuming for the moment that
investment banking has its objections?
Mr. POLE. My belief is that the distribution of securities would be
a part of the bank's regular business much more than it is to-day and
that their importance as underwriters and distributors might be
developed even to the point that the bulk of the investment business
in this country might eventually be done by the large banks.
Mr. LUCE. We have hitherto conceived the purpose of commercial
banking to be what I might call the brief aid it gives to commerce and
industry rather than long-time investment of capital.
Are you quite sure that the present tendency is altogether admirable?
Mr. POLE. The attitude of the people of this country is changing
very rapidly with regard to investments. The business of banking is
alSO rapidly changing until to-day banks have become great institutions, operating m every financial direction, and there have been
recently instances where'banking corporations have underwritten and
distributed independently of New York, unusually large underwritings
and I think, under proper regulations, there)would be no reason to
anticipate any very great danger in the extension of such activitiv.
Mr. LUCE. Now, let me bring your attention to a particular phase
of the investment of moneys; that of the savings accounts of large
numbers of people and, on an average, a small amount from each.
, Anyone who has watched the progress of things in. our neighbornood—I speak only from that information—I will not say views with
alarm, but views with much interest the entrance of commercial

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BRANCH) CHAIN) AND GROUP BANKING

banking into the handling of the small savings of the people. In
Massachusetts we have thought such savings peculiarly deserving of
governmental protection. To illustrate, we went so far as to insist
that no savings bank and national bank should exist in the same room;
they should not exist in the same building unless there was a solid wall
without any opening between the two; the reason, of course being
that it was thought unwise to permit the commercial bank to have
resort to the small savings of the people.
There have been several disastrous failures, as the result of the
opportunity of national banks to invest the savings of the people.
Yet, to-day, I find in a national bank—and a very good bank, too;
not a great bank, but a successful bank, where I have a small deposit—
I find a wicket there for savings accounts, and I see here and there
advertisements of Christmas savings clubs, and pretty soon they will
have birthday savings clubs and wedding anniversary savings clubs—
and it is suggested that we may have to have baby clubs, too; in other
words, the national banks are making a drive all over the country to
take away the business of the savings banks; to get that money to
invest in commerce or in industry or in various business activities,
involving the investment of large amounts of capital.
We have very strictly confined the use of the people's savings—and
I always use the word 'people" with some fear of being suspected of
demagoguery. However,I know of no other way to characterize the
savings of millions of persons who desire, first of all, protection of
their money and, secondarily, a fair amount of interest.
By the way, I might say that I am constantly irritated in Washington by observing the announcement of national banks that will
pay as much as 3 per cent and sometimes 33 or even 4 per cent for
savings, when, in the savings banks of my own State, I think no bank
is paying less than 5 per cent, and I think some are still continuing to
pay 5)4 per cent. The magnanimity of the Washington banks amuses
me. [Laughter.]
Now,I am very much concerned about this proposal to concentrate,
in commercial institutions, without these safeguards in the matter of
investments, what has resulted from the thrift of many millions of
our people.
In Massachusetts we have also a requirement strictly limiting the
class of securities that the savings banks can buy and it is a common
thing to use that as an illustration of perfect safety. You will find
it in banking literature—the protection thrown around the savings
banks by the Massachusetts law. It is a standard that other States,
to some extent, try to reach. I fear not enough, as yet.
Is it your judgment that it is a wise thing—and of course I am
going somewhat beyond the instant problem before us, assuming we
are really making a study of the whole banking system of the country—do you think it is a wise thing, a prudent thing, to put savings
of the citizens of the country at the command of commercial institutions, with the many dangers that accompany the lending of money
for commercial projects?
Mr. POLE. Congress has given national banks the right to accept
savings. The matter has been subject to a great deal of discussion
as to whether or not savings deposits should be invested in certain
characters of securities. In the case of national banks, I think the
law is unfortunate in that it permits banks to enter into a contract

BRANCH, CHAIN, AND GROUP BANKING

241

With its savings depositors, giving the bank the right to require 30 or
60 days' notice before withdrawal. Occasionally this has resulted in
a preference of the regular deipositors—the demand depositors—
because the clause has been put into effect. There is, of course, no
notice required with respect to demand depositors.
I personally have felt that if this 30 or 60 day clause is going to be
Maintained the savings investments should be segregated for the
Savings depositors, and those investments should be regulated. Under
such circumstances, I think, there would be no danger.
Mr. LUCE. At present there is nothing in the way of intermingling
of all the funds of a national bank, is there?
Mr. POLE. Nothing at all.
Mr. LUCE. I do not get clear in my mind what might be the effect
of the extension of branch banking upon this pvticular feature of the
Situation. Do you think it would conduce to greater or to less safety
for savings deposits, if we had branch banking, than if we had the unit
banking?
• Mr. POLE. I think it would be conducive to much greater safety
ni that a large part of the deposits, of rural districts are saving dePosits and the result, over the last 10 years, has been very disastrous
to savings depositors under our unit system of banking, under branch
banking as I have heretofore pointed out there would be few bank
failures, and consequently greater safety to the savings depositors.
Mr. LUCE. It would be quite practicable, under branch banking, to
require the segregation of the savings deposits?
Mr. POLE. I think it would, if Congress saw fit to do so.
Mr. LUCE. When the McFadden bill, so-called, was passed a few
Years ago, in view of this particular phase of the question, I was a
peat deal exercised about the permission given to banks to invest a
larger part of their money in real estate loans. My view, however,
did not prevail, and banks now have a much larger opportunity to
lend with real estate as the security.
Have you any knowledge as to how far that has been used? Of
C011rse in a most general way, has it resulted in a considerable increase
in real estate loans by the national banks?
Mr. POLE. Some banks have taken advantage of the liberality in
the law to extend their investments in real estate. There is, however,
another aspect of the matter and that is that banks acquire, in protection of debts, which have been previously contracted, perhaps as
niuch real estate as they invest in under the McFadden Act directly.
Mr. LUCE. That provision was the result of competition between
national banks and State banks or, what we, in our neighborhood,
Call trust companies. It was pointed out to us that a man who came
into a national bank and could not get a loan, backed up by his property, would go across the street to his State bank, so that the national
bank lost a customer, which brings me to a still broader aspect of this
Whole problem.
There is, in economics, the familiar law known as Gresham's law,
Pnder which the baser metal drives out the costlier metal. We have
in this country, existing side by side, two systems—the national bank
eYstem and the State bank system. In many States State banks have
Nuch more freedom of action than national banks. It seems to me,
in hearing the arguments in this room for 10 years, that, perhaps

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BRANCH, CHAIN, AND GROUP BANKING

quite unconsciously, a great war is going on—an economic war—
between the two systems, and that.the State banking system is the
baser instrument of the two.
Do you have any apprehension that no legislation we might be
able to pass will prevent the poorer system from driving out the better
system? In answering that, you might also comment upon what will
be the effect of the branch banking system on trust companies and
State banks of the country. Would it tend to lessen
Mr. POLE. It would depend very largely upon the provisions of the
act. It would undoubtedly take a long time, under present conditions,
for the principles of the Gresham law to apply with complete effect.
On the other hand,I can not conceive of the national system driving
the State banks out of business, unless the provisions of the national
banking act were madq so attractive as to invite them into the national
system.
Mr. LUCE. You would make it a matter of moral suasion rather
than compulsion?
Mr. POLE. By all means.
Mr. LUCE. Is it not a fact that in this great flood of bank failures
that we have had in the last 10 years, the State banking systems have
shown themselves greatly inferior to the national banking systems?
Mr. POLE. Over the country as a whole; yes.
Mr. LUCE. And if we were to assume that it is our function to
protect, as far as possible, the depositors, particularly those who make
savings deposits, is there any place where we can stop short of putting
the State banks out of business?
Mr. POLE. Under a branch system, as heretofore suggested, Mr.
Luce, I think that the particular attraction would be the element of
safety which appeals to the public at large, and if the general impression got out that the branches of a national bank were a safer place
to deposit money than in an independent State bank, I believe that
the State banks would naturally become less and less important in
that community and that the branch of the national bank would
become more important—from the standpoint of safety, if for no
other reason.
Mr. LUCE. That is all I have to ask.
Mr. STRONG. Mr. Beedy.
Mr. BEEDY. Inasmuch as you have passed me, may I ask now a
question suggested by Mr. Luce's questions?
Mr. STRONG. Certainly.
Mr. BEEDY. If it becomes desirable for a closer supervision of
banking by the Government, would the concentration of the banking
business in branch banking groups tend to increase or diminish the
efficiency of such Government supervision?
Mr. POLE. The system of supervision would have to he adapted
to the new system, which could be easily done.
Will you ask that question again, please?
Mr. BEEDY. If it becomes desirable for a closer supervision of
banking by the Government, would the concentration of the banking
business in branch banking groups tend to increase or diminish the
efficiency of such Government supervision?

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243

Mr. POLE. My idea would be to make the supervision of the banks
more efficient than it is to-day. I think it would be easier to do that
under branch banking, in that there would be fewer banks to examine.
Mr. BEEDY. Then, your answer is—
. Mr. POLE. And, by adapting a better method of examination than
is in force to-day, the advantage would all be in favor of branch

banking.

• Mr. BEEDY. Your answer is, then, that the concentration of bank1.ng business into branch banking groups would make it easier for
the Government to make a supervision of the banking business
Which would result in an added element of safety to the depositors?
, Mr. POLE. I think so, by reason of the fact that, under a branch
n.anking system, where large institutions would.develop, the questten.of policy would be given more consideration than under the
detailed examinations which are made of unit banks to-day.
It might be, even, that there would have to be a more or less conttnuous examination going on. The Government would probably
,ave a much closer contact with the executive committees and with
tne directors of banks, so that it would have first-hand knowledge of
ant.change in banking policy, as applied to any particular institution.
Mr. BEEDY. That is all, Mr. Chairman.
Mr. STRONG. Mr. Goodwin.
Mr. GOODWIN. Do you have any record of any failures in the
Canadian banking system, as it has been operated?
Mr. POLE. Yes; there have been failures.
Mr. GOODWIN. Of the parent bank as well as of the branches?
Mr. POLE.1 Yes.
Mr. GoonwiN. Have these failures been of large proportions?
Mr. POLE. There have been no failures of recent years. My
Collection is that the last failure was, about 10 years ago, of the
'tome Bank of Canada.
Mr.
I think several days ago, in answer to my question
at thatGoonwiN.
time, you stated that, in your opinion, supported by the
advice of your counsel, branch banking could be.pernutted under
tne national law in those States where branch banking, is by the law
01 those States now prohibited.
Mr. POLE. That was the advice of counsel.
Mr. GOODWIN. Is that advice in writing?
Mr. POLE. Yes, and will be supplied for the record.
Mr. GOODWIN. You also stated that, in your opinion, no national
Panic should be chartered with a capital of less than $100,000; that
1,8, it could not operate successfully and profitably with a capital of
Jess than $100,000. Did I understand you correctly?
Mr. POLE. I said that that had been recommended by several as
4
,. remedy for the existing situation; that no bank should be estabushed with a capital of less than $100,000. It was not my recommendation.
Mr. Goonwix. If that should be adopted, would that apply to
°auks already chartered? Would they have to comply with the
same law as to capitalization?
Mr. POLE. I do not know what Congress could do in that direction.
I assume that that law would not be retroactive, if any such law
Were passed.

244

BRANCH, CHAIN, AND GROUP BANKING

Mr. GOODWIN. It would apply only to those banks which maY
be chartered in the future?
Mr. POLE. It is not my suggestion at all that banks should be
limited to $100,000. I have already expressed opposition to it.
Mr. GOODWIN. That is all, Mr. Chairman.
Mr. STRONG. Mr. Letts.
Mr. LETTS. Mr. Pole, when I questioned you before, it was largelY
with respect to the Bank of Italy and the Bancitaly Corporation and
the Transamerica Corporation. 1 have before me what purports th
be a reprint from a report recently compiled by the research department of the Los Angeles stock exchange. Have you seen that report?
Mr. POLE. I have not, Mr. Letts.
Mr. LETTS. I have no way.of knowing whether the information
contained in it is authentic. It is stated here that the information and
figures are obtained from sources deemed reliable. It shows that the
Transamerica Corporation is a holding company, total capital investment,over $1,150,090,000; that its subsidiaries perform a wide variety
of functions, including banking in all its phases; insurance, real estate,
the financing of investments, brokerage business, securities, underwriting, and many other things.
I find this statement:
The size of this combination is roughly indexed by the fact that its work is
not only nation-wide but world-wise; that its controlled subsidiaries operate 525
banking offices and numerous investment houses.

It contains a table showing the holdings of the Transamerica Corporation, indicating that it holds 99.6 per cent of the stock of the
Bank of Italy, which is abanking concern; that it holds 99.93 of the
Bancitaly Co. of America, sureties, realty, and so forth, and
various other banking houses; the Bancitaly Mortgage Co., total
invested capital $1,983,817; owned 100 per cent by the Transamerica
Corporation; that it owns the California Joint Stock Land Bank,
capitalized at $1,399,050-100 per .cent; that it owns the Pacific
. at $3,000,000, by possessing
National Fire Insurance Co., capitalized
100 per cent of its stock; the Bancitaly Agricultural Credit Co.,
capitalized at $1,006,620; possessing.100 per cent of that stock; in
addition to that it has banking operations and investments operations
in Italy.
The information contained would indicate that within eleven
months after its organization, the Transamerica Corporation paid a
stock dividend of 150 per cent. Would the fact that this stock
dividend was paid in September, 1929, have any relation to the
contention which was made by Mr. Busby a few days ago, that the
Bank of Italy was bankrupt at the time its holdings were taken over
by the Transamerica Corporation—would it have any bearing on
that inquiry, would you say?. I think Mr. Busby showed some figures
which indicated a sharp decline in the value of the stock of the Bank
of Italy. Have you given any thought to that?
Mr. POLE. I have not seen the circular to which you refer. If you
are speaking of any evidence of the Bank of.ltaly being bankrupt, of
course we are very certain there is nothing.like that.
Mr. LETTS. I was wondering if there was incident to the taking over
of this stock by the Transamerica Corporation—
Mr. POLE. 1 have no official information as to the stock dividends
or any transactions in connection with the Transamerica Corporation.

BRANCH, CHAIN, AND GROUP BANKING

245

Mr. BUSBY. Mr. Letts, if you will permit, I will make a short
statement and give you what I said the other day.
Mr. LETTS. Yes.
Mr. BUSBY. It was this, that on June 5, 1928, the Bank of Italy
stock on the San Francisco Exchange had reached 293. On June 11
a drive was made by certain competitive banking interests on the
Bank of Italy standing, and before night on June 11 this stock, which
that morning opened at 286, had been driven down to 125. On the
11th of October following that, the Transamerica Corporation was
organized for the purpose of taking over all the stock, or as much
stock as it could get in hand, of the Bank of Italy, the Bancitaly
Corporation, and the other subsidiaries that you have alluded to in
the pamphlet you hold in your hand, and their stocks were taken over.
Now, the Transamerica Corporation stock was exchanged on the basis
of one and three-fourths shares of Transamerica stock for each Bank
of Italy share. The Bancitaly Corporation, which was an investment
and trust corporation owned by the Bank of Italy,stock was exchanged
for Transamerica Corporation stock share for share. At the present
time the Transamerica Corporation stock is quoted on the stock
exchanges of the country at 45. Now, one and three-fourths times
would be 78% that the Bank of Italy stock would sell for if it were
in existence against 293, where it stood when it started its skidding
Performance.
,My proposition was that that was a virtual failure of the institution
w its 299 branches, a failure from the standpoint of its maintaining
with
its financial integrity among the other business institutions of the
country.
That is all I desire to say now.
Mr. PORT. The gentleman has overlooked the fact that in between
there was a 150 per cent stock dividend, so that he has to take his 78
and multiply it by 2%,for each shareholder now has 2% shares for each
one he then had.
Mr. BUSBY. I intend to go into that later.
Mr. LETTS. That, of course, was the gist of my inquiry.
Mr. BEEDY. That would make the present worth of that stock 192
Plus.
Mr. BUSBY. Taking that phase of it, it has dropped at least 100,
13nd other banks in the same locality have not dropped so much.
Mr. BEEDY. How does that compare with the drop in other bank
stock in the recent crisis—National City, for instance, and some of the
strongest banks in the country?
Mr. BUSBY. National City Bank stock ran up so high that it split
Into $20 shares and so mystified the public that they did not know
What happened.
Mr. LETTS. I will pass that for the moment.
Mr. POLE. May I say this for the record, that I think it is only fair
to say that the fluctuations of the stock of the Bank of Italy or the
Transamerica Corporation have been a matter of comment, but the
Condition of the Bank of Italy has not changed in. any way and is
Lustas good now as it was before these fluctuations took place, and, as
I said the other day, it is a bank that has grown steadily during all
of these stock transactions and ramifications from a very small bank
to a bank of more than a billion dollars in resources.
100136-30—voL 1, PT 3-2

7

246

BRANCH, CHAIN, AND GROUP BANKING

Mr. BUSBY. I would like to add one thing in reply to what Mr.
Fort said about the Bank of Italy stock, and that is that the friends
that I have who have Bank of Italy stock have not been let in on any
such bonanza as Mr. Fort pointed out. They do not know anything
about that share dividend, if it happened, and I very seriously doubt
that.
Mr. LETTS. This is a stock dividend of the Transamerica Corporation.
Mr. BUSBY. The holders of Bank of Italy stock are still in the lurch
which I described.
Mr. LETTS. I am only speaking of the Transamerica Corporation.
Mr. FORT. That was the price the gentleman used, the price of
Transamerica Corporation stock translated into Bank of Italy.
Mr. LETTS. I shall pass that for the time being. It is somewhat
iside from my general inquiry.
I note this statement with respect to the expansion policy of the
Transamerica Corporation:
This great combination is in a position to assure itself profits in many fields.
Its banks provide the funds necessary for any desirable deal; its own investment
houses underwrite stocks and bonds, which may be marketed and protected by
its wide-flung bond houses and securities companies; its banking and investment
houses can divert tremendous business to its insurance company; its banking
offices may act as agents for the farm loan and real estate mortgage companies;
its real estate companies can help to liquidate foreclosed real estate of other
departments; its stock trading and brokerage companies have tremendous sources
of information and almost ulimited financial support.

Now, I would like to inquire of the comptroller whether or not this
information is to his knowledge substantially correct?
Mr. POLE. I have no information with regard to the expansion program of the Transamerica Corporation. It does not come under our
supervision, Mr. Letts.
Mr. LETTS. The particular thing that I am interested in, as perhaps was noted from the trend of my questions the other day, is
that a very serious consideration exists in connection with this feature, that if we accept branch banking as the less of three evils, perhaps—branch banking, chain banking, and group banking—are we
avoiding the pitfalls and the dangers that are incident to group
banking after all? Does not this report indicate that the Bank of
Italy with its 300 branches is controlled, after all, by a holding company through the medium of its board of directors that sits back of
the screen, subject to no supervision or regulation whatever as a
banking organization, and is there any way to safeguard the Nation
against such control of the banking interests and banking policies of
the country through the medium of one or more strong holding companies if we go to the branch banking system as advocated in your
formal statement?
Mr. POLE. There should be some control of and some supervisory
power over holding corporations, and I suggested in my report to
Congress that that be given to the comptroller where the stock of the
national banks is,held in large part by such corporations.
Mr. LETTS. Well,, if seems quite clear that by simply going to
branch banking we are not avoiding the dangers that, are incident to
group control.
Mr. POLE. Of course, the Transamerica Corporation is one which is
engaged in the business of both group and branch banking. The par-

BRANCH, CHAIN, AND GROUP BANKING

247

tisular activity of the Bank of Italy is a branch banking operation.
as to whether Congress would want to legislate prohibiting the
entire capital stock, with the possible exception of directors qualifying
shares being held by such a corporation, that would be a matter that
I should think might have consideration. Under the present laws, of
course it can not be prohibited.
Mr. LETTS. Mr. Chairman, I would like at this point to insert in
the record the information which I find in this report. It is brief,
and the information will be of interest.
Mr. STRONG. If there is no objection, it is so ordered.
(The pamphlet referred to is reproduced below.)
TRANSAMERICA CORPORATION
LA rePrint from a report recently compiled by the Research Department of the Los Angeles Stock Exchange
Statements and figures herein while obtained from sources deemed reliable are not guaranteed]

INTRODUCTION
Transamerica Corporation is a holding company organized to coordinate the
"Iork of a number of financial institutions. Total capital investment is over
1,150,000,000. Its subsidiaries perform a wide variety of functions, including
oanking in all its phases, insurance, real estate sales, and financing, investment
,,
1 1!1 brokerage service, securities underwriting, and many others. The size of
combination is roughly indexed by the fact that its work is not only nationLide, but world-wide; that its controlled subsidiaries operate 525 banking
"".!,ees and numerous investment houses.
t It 18 difficult to visualize the extent of the Transamerica system, or to estimate
he amount of capital invested in it. The table set forth on the following page
Presents a general outline of the structure, omitting minor subsidiaries.
lngs of principal banking and auxiliary companies controlled or effectively
°ki•
controlled through Transamerica Corporation
—
Company

Business

Rank of Italy, N. T. At S. A-ankitaly Co. of America
'fie Bank of America
National
ssociation, N. Y.
uencamerica-Blair
Corporation
fiank of America of California--

Banking, 294 offices
Securities, realty, etcBanking, 34 offices in New
York.
Security underwriting, 31 of11-

("°rPoration of America
Oakland Batik
1,4tnea d' America e d'It alia_ _
araorproio (corporation)
Bankital
Co
California tiortgage
Joint Stock Land

COS.

Banking, 148 offices in callfornia.
Holding company for 8 banks._
Banking, 12 offices in California.
Banking (in Italy), 29 offices k
Investment business in Italy J
Dealers in mortgages
Farm loans

reelfic National Fire Insurance Fire insurance
Co.
fiankitaly Agricultural
Credit Farm loans
Co.

Total invested
capital

Shares
owned

8106,253,731.00
400,000,000.00
74,451,204.00

1,991,941
1,29g, 125
705,501

Per cent
99.60
99.93
49. 30

53,000,000.00

705,501

49. 3e

33,068,432.00

778,292

97. 29

20,000,000.00
6,461,752.00

778,292
14,390

97. 29
71.95

23, 100,000.00
1,983,817.00
1, 399,0.50.00

804, 112
10,000
9, 100

40. 20
100.00
100. 00

3,000,000. 00

50,000

100.00

1,006,820.00

10,000

100. 00

DEVELOPMENT
Transamerica Corporation was organized in October, 1928, to bring under a
single ownership the Bank of Italy and Bancitaly Corporation, together with a
!lumber of smaller cooperative companies. From the resulting reorganization
the present Bank of Italy, N. T. & S. A., and Bankitaly Company
America
70 lerged, as the two principal subsidiaries of Transamerica. BankitalyofMortgage
ç0., Bankitaly Agricultural Credit Co., National Bankitaly Co., California Joint
4Stock Land Bank, Pacific National Fire Insurance Co., and
Commercial Holding
O. were the remaining original subsidiaries.

248

BRANCH, CHAIN, AND GROUP BANKING

The corporation's first year has witnessed a steady development. Thevfirst
major incident was the acquisition of control of the Bank of America National
Association, in March. A portion of it was exchanged for a stock interest in the
underwriting and investment banking firm of Blair & Co. Shortly thereafter the
investment arm of the Bank of America National Association was merged with
Blair & Co. to form the Bancamerica-Blair Corporation. The Bank of America
National Association and the Bancamerica-Blair Corporation are now owned
share-for-share by the same stockholders, and form one of the strongest links of
the Transamerica chain.
Control of the Bank of America of California was obtained in June, and The
Oakland Bank (Oakland, Calif.) and the Pacific National Bank (Los Angeles,
Calif.) have also been acquired this year. The nine Pacific National Bank offices
have been absorbed by the Bank of Italy, N. T. & S. A., and the Bank of America
of California.
The latest developments are new organizations. Bancamerica-Blair has
organized Interstate Equities Corporation to act as an investment trust, probably
to take a primary interest in Bancamerica-Blair underwritings, and had financed
it to a large extent privately. Intercoast Trading Co. has, on the other hand,
been financed one-third by Transamerica and two-thirds by Transamerica stockholders under rights. The Intercoast Trading Co. is operated to deal substantially in stocks listed in Los Angeles and San Francis°, and should be a powerful
and profitable addition to the Transamerica group.
EARNINGS

Transamerica in 1928 reported earnings of $97,373,000 on the companies in
the original Transamerica group, equal to $11.12 per share on Transamerica'
8,747,594 shares then outstanding.
For the first half of 1929 Transamerica reported earnings on the companies in
the group of $49,185,173, equal to $5.47 per share on the average number
(8,988,631) of shares outstanding during the half-year. However, these earnings
do not include undistributed earnings of Bank of America National Association,
Bancamerica-Blair Corporation, Bank of America of California, Oakland Bank,
and certain other companies in the group in which Transamerica's holdings are
less than 99 per cent. It would appear that the $49,185,173 of earnings come
mainly from the original Transamerica companies.
The 150 per cent stock dividend which was recently paid has, of course,
increased the number of shares outstanding, and reduced the earnings per share.
In terms of the new stock the half-year's earnings per share become $2.14 on
22,996,725 shares now outstanding. The number of new shares to be outstanding
shortly will be 23,226,692.
DIVIDENDS

Transamerica has paid a quarterly dividend of $1 per share in cash since ita
organization, and in April and July of this year also paid 1 per cent in stock.
These payments were made on the old stock, prior to the 150 per cent stock
dividend. The number of outstanding shares was multiplied by two and one
half when the 150 per cent stock dividend was paid to stockholders of record
September 10, 1929. Dividends on the new stock will be at the annual rate
$1.60 in cash and 4 per cent in stock dividends. This is the exact equivalent of
the dividend paid on the old stock.

a

YIELD

Based on the dividends of $1.60 per annum and 4 per cent per annum in stock,
Transamerica (new) yields the following as of the prices listed below:
Per ceng
Price:
7. 20
-------------------------------------------------------$50
0
,
$55---------------------------------------------------------- 6. 0
61
$60---------------------------------------------------------- 6.
$65---------------------------------------------------------- 6. 46
EXPANSION POLICY

Transamerica has made a policy of expansion through the exchange of Transamerica stock for those of the desired companies, and the ability of its management is manifest in the steady progress and development of such subsidiaries.

BRANCH, CHAIN, AND GROUP BANKING

249

This great combination is in a position to assure itself profits in many fields.
416 hanks provide the funds necessary for any desirable deal; its own investment
.11Ouses underwrite stocks and bonds, which may be marketed and protected by
lir wide-flung bond houses and securities companies; its banking and investment
09ses can divert tremendous business to its insurance company; its banking
ices may act as agents for the farm loan and real estate mortgage companies;
u43 real estate companies can help to liquidate foreclosed real estate of other
dePartments; its stock trading and brokerage companies have tremendous
Sources of information and almost ulimited financial support.
, Transamerica is now strongly entrenched in California and New York, has
tloPor.tant European branches, and through Bancamerica-Blair, National
Pankitaly Co., and America Investment Co. has an underwriting and investment
011piliesS which is nation-wide. Expansion in New York and California is still
going forward. Furthermore, there is talk of liberalizing the banking laws to
Permit national banks in every State to have branches, and such legislation
Would possibly result in Transamerica's embarking on a vigorous program of
bank expansion. Certainly there is no reason to believe that Transamerica's
exPansion program is complete, and the banking field is one which offers the
greatest opportunity to its diversified facilities.
While it is generally assumed that Transamerica Corporation is now acting as
a holding company exclusively, controlling only its known subsidiaries, many
Well-informed people believe that the Transamerica subsidiaries are acquiring the
litnek of prospective additions to the Transamerica chain.
ASSET VALUES

Transamerica's balance sheet of December 31, 1928, gave total cash and
investments of $1,093,449,250, equal to approximately $125 per share on 8,747,594
*hares outstanding. This would indicate a book value of $50 per share on the
'new stock.
MANAGEMENT

.t,While the Transomerica Corporation is generally conceded to be controlled by
"e group of financiers associated with A. P. Giannini in the original development
laf Bank of Italy and Bancitaly Corporation, the board of directors includes
trominent bankers and business men from practically all of the merged organizaions. The former moving spirits of the Bank of America, N. A., Blair & Co.,
and other merged companies have been taken into the Transamerica directorate,
lvhich now numbers 22 people. Experience in every phase of the widespread field
Covered by Transamerica is thus to be found on the board of directors.
Transamerica's 22,996,725 shares are owned by more than 135,000 stockholders,
aking an average holding of approximately 170 shares. While there are, no
toubt, many large holdings of Transamerica, there are also many thousands who
flave bought a few shares as a permanent investment. Transamerica officials
nave announced that they hope to increase the number of stockholders to 500,000,
and a special effort is being made to sell the new shares recently authorized in
bznall amounts, preferably to individuals living outside of California. These
Policies are intended to develop a large sympathetic and geographically-scattered
group of stockholders, who will provide the nucleus for a growing clientele, and
Will help to mold a friendly public attitude toward the corporation.

T

DIRECTORS OF TRANSAMERICA CORPORATIoN
A. P. Giannini, president Transamerica Corporation, San Francisco, Calif.
A. J. Mount, president Bank of Italy, N. T. & S. A., San Francisco, Calif.
._James A. Bacigalupi, director Bank of Italy, N. T. & S. A., San Francisco, Calif.
P. C. Hale, vice president Bankitaly Co. of America, San Francisco, Calif.
A. Pedrini, vice president Bankitaly Co. of America, San Francisco, Calif.
L. M. Giannini, president Pacific National Fire Insurance Co., San Francisco,
ahif
. A. E. Sbarboro, vice president Pacific National Fire Insurance Co., San Franelse°, Calif.
W. E. Blauer, vice president Bankitaly Mortgage Co. and vice president
A,alifornia Joint Stock Land Bank, San Francisco, Calif.
Dr. A. H. Giannini, chairman board of directors, The Bank of America, N. A.,
'levy York City.

250

BRANCH, CHAIN, AND GROUP BANKING

Edward C. Delafield, president The Bank of America, N. A., New York City.
J. E. Rovensky, vice president Bancamerica-Blair Corporation, New York
City.
Leon Bocqueraz, chairman board of directors, Bank of America of California,
San Francisco, Calif.
E. J. Nolan, president Bank of America of California, Los Angeles, Calif.
C. N. Hawkins, vice president Bankitaly Agricultural Credit Corporation,
Hollister, Calif.
W. H. Snyder, vice president Commercial Holding Co., New York City.
George A. Webster, vice president Commercial Holding Co., San Francisco,
Calif.
W. F. Morrish, vice president Corporation of America, San Francisco, Calif.
C. R. Bell, vice president Corporation of America, San Francisco, Calif.
Elisha Walker, president Bancamerica-Blair Corporation, New York City.
Harry Bronner, vice president Bancamerica-Blair Corporation, New York City.
Hunter S. Marston, vice president Bancamerica-Blair Corporation, New York
City.
W. W. Garthwaite, president The Oakland Bank, Oakland, Calif.

Mr. LETTS. There is just one other question, Mr. Comptroller.
Have you given any consideration to the tax question? Many of our
States are finding it necessary to reexamine their tax plans, and one
question that exists in the minds of many of the legislators is whether
or not the national banks are bearing their proper part of the taN
burden of the States.
Have you given any consideration to that problem?
Mr. POLE. Yes. The comptroller's office is on record as being in
favor of the existing section 5219. No recommendation was made
by me, so that the former recommendation that we do not advocate
any change in that stands. However, the matter is being given consideration by the American Bankers' Association and is being investigated very thoroughly, which may possibly enable us to offer some
suggestions at a later date.
Mr. LETTS. Under a branch system, the parent bank would place
in each state only such assets and banking facilities as were deemed
to be necessary to meet the conditions and to render the appropriate
service—is that not correct?
Mr. POLE. Yes.
Mr. LETTS. In relation to chain merchandising, we find that it i5
never possible to find enough in stock and wares on the shelves in
January, when the assessor makes his visit, to furnish any kind of a
proper tax basis. An individual merchant, a unit merchant, milY
have, we will say, $150,000 worth of stock on his shelves, and he is
assessed accordingly. A chain hardware store across the street frotu
him will have about $3,000 worth of stock on its shelves, and a requisition sheet lying on the manager's desk, and when he sells a hoe or
a hatchet, he writes "hoe" or "hatchet" on his requisition sheet, and
sends that to Chicago or to some other center, and the stock is in that
way replenished, to the point that in many instances there chain
merchandising corporations are obviating the difficulties and the expense incident to storage by getting away from storage, by keeping
their merchandise in transit and using their railroad cars for their
storage purposes.
Will we have any corresponding difficulties in that regard if we go
to branch banking?
Mr. POLE. I do not know what amendments there might be in the
law with respect to such a contingency, Mr. Letts, but this I do know,
that whatever new methods of taxation must be adopted to cover such

BRANCH, CHAIN, AND GROUP BANKING

251

a situation, the branch bank would be far better able to meet that
expense than would the unit bank.
Mr. LETTS. I think that is all.
Mr. STRONG. Mr. Fort.
Mr. WING°. Judge Letts, his answer assumes that Congress by
legislation might affect that matter. There might be another questto.n that would arise that nothing but a Federal Court could determine, that it was beyond the power of Congress to grant that power.
Congress can not grant taxing power to the States at all. We might
say to the States that they can tax these banks as they please, that
we will make no restrictions, and yet the difficulty to which Judge
Letts points would be one that would still have to be met.
As an illustration, suppose that you had your parent bank in MeinPhis, Tenn. It is a foreign corporation so far as Arkansas is concerned,
and all the efforts of the Arkansas Legislature to enforce its taxation
might meet with the same situation that arose in the case that was
settled in the Supreme Court,in the Western Union case, under what
they called the Wing° Corporation Act that I was the author of in
the State senate.
So it is not so easy as you suggest, that Congress should simply
handle it.
Mr. POLE. It was not my idea that that would be necessarily an
ainendment by Congress, but it might be by .a change in the State laws
with regard to taxation, and I feel that section 5219 that, as far as we
are concerned, banking capital shall not be assessed at a greater rate
than other similarly invested capital, is for the time being satisfactory.
, Mr. WnsToo. I thought, however, that he was calling attention to
tne difficulties that might arise.. .
Mr. LETTS. My particular point is this, if I may make it plainer,
and if you will pardon me, Mr. Wingo, that there will be no invested
capital represented by the branch. The invested capital will be in
the parent institution.
Mr. POLE. Well, I would not be able to answer offhand on an
intricate question of taxation as to what modifications the State might
fincl necessary to make in such a contingency.
Mr. LETTS. Well, of course, if there is no invested capital, that
can not be made the basis of taxation, and yet the States should have
some part of its tax burden borne by an institution which renders that
service and has that privilege within the community.
Mr. POLE. The States do not ordinarily overlook the opportunities
lor adjusting their taxing systems— .
Mr. LETTS. It is a very difficult question.
Mr. POLE. Extremely.
Mr. LETTS. In my State we have a tax commission that is making
a study of that matter and that has been looking into the matter for
a long time, and I think that in a great many States they are finding
that it is quite necessary that they reexamine their tax methods;
they must get on some kind of a new basis, because there have been
So many new and novel situations arise in business and
the manner
of handling property.
Mr. WINGO. Mr. Chairman, if I may right there, I still think that
the comptroller does not catch the point I am seeking to impress
uPon him, that it is not an easy matter, either for Congress or the

252

BRANCH, CHAIN, AND GROUP BANKING

States, to handle this question. We will take the illustration that I
used awhile ago. The parent bank is in Memphis, and it says that
Arkansas is in its trade territory. It will have, say, several small
branches like they have in these small villages on these plantations
across the river in Arkansas where they will have an office open two
or three days a week, and the Legislature of Arkansas, under the
decisions of the courts, can not arbitrarily say that they will assess
them on the basis of their capital, because the courts say that they
can not do that, that they have tried that once. The corporation
will take the position that it has a desk and so much furniture in
Arkansas, but the physical deposits are not there, that they are in
Memphis. Three days in the week there are some papers brought
there by the manager in his bag, and that is all that is there outside
of the furniture. It will take a more ingenious law or plan than
anyone in this room has worked out whereby that State can tax
other than the actual physical furniture in that branch.
That is the difficulty you are thinking of, Judge Letts, is it not?
Mr. LETTS. Precisely.
Mr. LUCE. May I interpose a statement there? For about thirty
years I have made my bread and butter out of a corporation that
does business both in Massachusetts and New York, and during that
time every year we have had to apportion the amount of capital
used in each of those two States, and it has not proved to be an
insurmountable proposition.
Mr. WINGO. For the corporation?
Mr. LUCE. For the corporation.
Mr. WINGO. I am familiar with that apportionment business, and
it is not satisfactory to the States. The corporation always to the
State, "Challenge our apportionment if you want to, and into the
courts we go," and they cite certain decisions of the courts to support them.
Mr. LETTS. Would it be as easy and as simple as you indicate,
Mr. Luce, if you had a parent organization in New York City, with
branches throughout the entire Nation?
Mr. LUCE. It makes no difference what the comparative size of
the corporation is. The proposition is not to tax the material assets
of the corporation, but we are asked to furnish figures from which
a computation may be made as to the relative proportionate use of
that capital in the two States.
Mr. LETTS. That was just a harmonious plan that was used to
take care of your situation, was it not?
Mr. LUCE. I am not sure about that.
Mr. LETTS. It was a harmonious plan of taxing companies in one
State and the other?
Mr. LUCE. Oh, no; my State holds that it has the right to tax the
capital used.
Mr. LETTS. I understand that, but how did you make this apportionment?
Mr. LUCE. We do not make it. We furnish the figures and let
them make it. We give them the figures of our business.
Mr. LETTS. But who had authority to make that apportionment?
Mr. LUCE. The tax commissions oi the two States.

BRANCH, CHAIN, AND GROUP BANKING

253

Mr. LETTS. Well, it was by mutual and satisfactory agreement
that they were able to arrive at it, and there is nothing in the law of
either State that controlled the matter, as I understand it.
Mr. LUCE. The law of Massachusetts has a yardstick by which it
nleasures the amount of capital used in Massachusetts.
Mr. LETTS. But that would not be binding in my State.
Mr. LUCE. But, as a matter of fact, the thing works out without
Rny difficulty.
Mr. LETTS. By the harmonious action of the officials that are
Charged with the duty of levying the tax.
Mr. LUCE. Of course, it is possible that one State might claim that
a much larger proportion of the capital is used in its borders than
the other State would be able to admit.
Mr. LETTS. And would not the difficulties be multiplied in putting
'branches in 48 States?
Mr. LUCE. Well, I can only answer that as far as I know the thing
'lees not happen.
Mr. LETTS. You do not have difficulties?
Mr. LUCE. Not in my State of any appreciable consequence.
Mr. LETTS. A good many of the States now feel that there must be
sonle kind of a readjustment along those lines.
Mr. BEEDY. It think, for the purpose of the record, that it ought
to appear that there is no proposal before the committee at the present
tinie that would authorize the establishment of branches in 48 States.
At best, the only proposal that has been suggested is the limitation
of branches within the areas of 12 commercial districts, so that your
tquestion would simply go to the extent of the size of the branch°anking system.
Mr. LETTS. I take it that Congress might decide now to permit
°ranches within certain trade areas, and another Congress might
take another step at a later time, and it is quite conceivable that it
alight become nation-wide.
M.BEEDY. Oh, yes.
Mr. WING°. I do not want the comptroller put in the attitude of
saying on the record that the question of taxation would be an easy
°fle, which it is not. I suppose he recognizes that the taxation
Problem is a very difficult one, and, with the shifting conditions, it
oecomes a constant problem that has to be met. I assume that they
are handling it in some way in connection with the Bank of Italy,
and that as they extend branch banking they will work out a way,
!Ind the courts can be determined upon to protect the interests of
both the States and the banks; but I do not want it to appear to the
attorneys and directors of banks who may read this record that the
te°Mptroller who is making this recommendation to us that we have
60 Pass on treats the taxation problem as a light one.
, Mr. POLE. I intended to convey to you, Mr. Wingo, that I realized
that the taxation problem was a most intricate one, and I reiterate
that.
Mr. STRONG. Now, Mr. Fort.
Mr. FORT. Mr. Pole, on this tax problem, we now have a statute,
SS YOU pointed out awhile ago, by which the Federal Government
r,estricts and limits the powers of the State to tax national banks so.
that the capital invested in national banks shall be treated the same
aS other capital in the State similarly employed.

254

BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. That is correct.
Mr. FORT. I assume that that act has been sustained in the courts?
Mr. POLE. I am sure it has.
Mr. FORT. If we have, then, the power to put on that type 01
limitation, we would also have the power,if we saw fit, would we not, ta
draw a statute providing—and I am just suggesting this, not having
thought through this particular matter—that each national bank
which had branches shall pay in each city or in each town where it
had branches a tax proportionate to the volume that the deposits from
that branch bear to its entire resources, or something of that sort?
Mr POLE. That would seem to be entirely reasonable.
Mr. FORT. In other words, we have the power, if we choose to usi
it, to establish a rule of taxation for national banks which will compel
them to pay taxes?
Mr. POLE. I feel sure that the States tax the national banks by
permission of Congress. That is my understanding.
Mr. FORT. And we could compel it as well as permit it? That iS
we could compel the bank to pay?
Mr. POLE. That would be my idea.
Mr. FORT. We have had a lot of discussion here about the Bank ot
Italy. I do not hold any brief for their system of banking or of hold,
ing companies, but, as a matter of fair consideration of this whole
question,substantially.the same thing that is happening in the Bank ol
Italy group is happening in other banking groups in this country, ie
it not?
Mr. POLE. The same methods of transacting business and the sarn€
developments along the line of branches is going on with respect to
other banks.
Mr. FORT. And the same development in the line of affiliated
organizations of one type or another?
Mr. POLE. In a greater or less degree.
Mr. FORT. For example, the Chase National Bank in New York
today has the American Express Co. as a part of itself, has it not?
Mr. POLE. I believe that is true through the Chase Securities
Co.
Mr. FORT. As a result, today, in effect, the Chase National Bank jE
operating branch banking of a type throughout all of the cities of an)
importance in the United States and Europe, is it not?
Mr. POLE. It is operating a branch system directly in the city oi
New York and, through its Securities Co., I think over the country
in the manner suggested by you.
Mr. FORT. All of the business of the American Express Co. is
banking business of a type, is it not? I do not mean that they all
necessarily depositary banks, but they do a banking business, do theY
not,in exchange,in the issuance of letters of credit, and in the issuanci
of traveler's checks?
Mr. POLE. That is my understanding.
,
'
Mr. FORT. So that we already have at least one affiliated organize
brand'
in
is
engaged
which
certain
of
forms
States
United
the
tion in
banking, not only nation wide, but world wide?
Mr. POLE. Yes.
Mr. FORT. And somewhat the same thing is true—and, of course
it is a part of the Bankitaly group—of the Bancainerica since it9

BRANCH, CHAIN, AD GROUP BANKING

255

?fhliation with the Blair Corporation, is it not? They are is-uing
letters of credit and doing a banking business throughout the world
and in the larger cities of the United States?
Mr. POLE. That is true.
,., Mr. FORT. And the same thing is true with the National City and
uaranty Cos., or their affiliates, and the Chicago Continental 85
‘
jummercial Bank?
Mr. POLE. In many respects.
Mr. FORT. So that we already are faced, as a practical existing
Iluestion and not a mere future possibility, with the expansion of some
t°rIn. of branch banking activities, both nation wide and world wide,
031 some of our large banks?
Mr. POLE. Other than by the Transamerica Corporation?
Mr. FORT. Yes, other than by the Transamerica Corporation.
Mr. POLE. Yes.
Mr. FORT. And in some cases those functions are really carried on
4,1' the bank as a bank, are they not? For instance, the Bankers
Pust Co., of New York, as I understand, has no security affiliate,
t°,!it has securities offices and letters of credit offices, and so forth,
uroughout this country and Europe—is not that so?
Mr. POLE. I think you are correct. Of course, the Bankers Trust
0. is not a national bank and I have no official information with
ard to its operations.
r. FORT. Now, in that connection, you have spoken, under the
questioning of Mr. Luce—
,
t Mr. BUSBY. Will the gentleman yield at this point, before he leaves
nat matter? I want to call attention to the fact that I was not
Pointing out these things that you have asked about—
Mr. FORT. I was referring to Judge Luce's questions.
tl fact that the Transamerica Corporation
But t the
h_ Mr. BUSBY.0
ad been formed to take care of all the interests of the Bank of Italy,
which has not happened in any other system.
_Mr. FORT. It has happened in the Chase National Bank taking
()ler the American Express Co.
d Mr. BUSBY. No; not by a holding corporation formed indepeneLltly of all these units, to take over all the units under a new name.
31r. FORT. Mr. Pole, in regard to the question of the shift which
'
s".r. Luce, I think, very aptly described as from the finer to the baser
utem of banking, the shift from the national to the State system,
.at has been the shift in terms of resources between the two systems
elrl,e_e the passage of the McFadden bill?
s '-wr• POLE. There have been four and a half billion dollars of resQurces that have been converted from the national to the State
'
38,t_em within the past 10 years.
sk Air. FORT. Is that a net figure, or have there been corresponding
'lifts of State to the national that would reduce that?
Mr. POLE. No, that is the total resources of all national banks of
,
1 7 millions of resources and over which have left the national system
1thin the past 10 years, as set out in my report to Congress.
1,0ince the passage of the McFadden Act (Feb. 25, 1927) to March
', 1930, the total resources of the 377 national banks which have
"rle into the State systems is approximately $3,400,000,000, while

P

256

BRANCH, CHAIN, AND GROUP BANKING

the total resources of the 181 State banks which have come into the
national system during the same period is about $2,700,000,000.
Mr. FORT. Have you the figures in number of banks?
Mr. POLE. I shall be glad to supply that.
MT. FORT. I should like to see it.
Mr. WINGO. Right in that same place, will you insert the resources
of State banks and the resources of national banks on the date the
McFadden Act passed, and the same figures of resources of State
banks and resources of national banks on the last available date, or
at the present time?
Mr. POLE. I will be glad to.
Mr. WINGO. Pardon the interruption, but I wanted to get the whole
picture there.
(The information called for is reproduced below.)
This office had no call showing the resources of national banks as of FebruarY
25, 1927, but did through process of calculation estimate the total amount cf
resources of national banks on that date as being $25,136,426,000. No figur6I
were available, however, for State and private banks. The nearest availablt
figures on call reports for State and private banks and national banks was June
30, 1927, four months subsequent to the passage of the McFadden bill, on which
date the total resources of 7,796 national banks was $26,581,943,000. Total'
resources for 19,265 State and private banks was $41,550,615,000. The total
resources for 7,536 reporting national banks as of June 29, 1929, was $27,440,228,000, and the total resources for 17,794 State and private banks as of Juc,e
29, 1929, was $44,732,277,000. No later figures are available for State and pr'
vate banks but the total resources of 7,408 national banks as of December 31,
1929, was $28,882,483,000.

Mr. FORT. Now, we have also had some discussion as to the
political power resulting from these various systems. Is it not 0
fact also, Mr. Pole, that these changes in the banking systems, of
branch banking and group banking and other affiliations of banking
power, are resulting in an enormous concentration of economic poweir
apari from political power?
Mr. POLE. It would seem that that would be natural.
Mr. FORT. And that that is running along correlatively and simal
taneously with an aggregation of economic power in our industry an'
in our merchandising?
Mr. POLE. Undoubtedly.
Mr. FORT. The tendency everywhere seems to be toward the
establishment of greater units under single control?
Mr. POLE. Yes.
Mr. FORT. It has seemed to me, parenthetically, that we are
somewhat getting to the point where we have got to consider the
aggregation of economic power, through control of personal property t
as England was forced three or four hundred years ago to consider
it when all property was real property. If this aggregation. cf
economic power through consolidation of banking resources is movIng
as fast as it is, do you still feel, as you said awhile ago, that allowing
these great banks of deposit to go into the investment field and the
origination of securities is wise, or should they be restricted and held
out of the investment and origination .of securities altogether and
forced back into what used to be called banking?
Mr. POLE. A very important factor in the banking business 10
dealing in securities, and it is becoming more and more important 0

BRANCH, CHAIN, AND GROUP BANKING

hie

es
0
te
or
Ia

ry
of
te
)le
ne
oh

tsl
ne
risi,

lie
s
of
itg
r,

re

is
,
or
of
4
lg
le
Id
id

itl
a-

257

,the commercial business of the bank appears to be coming less and
ras Profitable.
L Mr.. FORT. Let us get a clear view of what we mean by dealing in
85eunties, Mr. Pole. Dealing with securities and dealing in securities are two different things, of course?
Mr. POLE. Yes.
, Mr. FORT. Can you see no possible basis for a differentiation
between the function of loaning on securities held by somebody else
and the function of originating securities and selling them to someuo!iy else?
Mr. POLE. A very wide difference.
Mr. FORT. Granting that there is a difference there, are they, in
Your judgment, as a supervising bank official, the type of functions
that should be in the same hands?
Mr. POLE. I know of no dangerous developments to date, Mr. Fort.
Mr. FORT. No; but that does not go to the theory.
Mr. POLE. NO.
Mr. FORT. Banking, as it has been regarded traditionally, is the
receipt of deposits and the loaning of money, is it not?
Mr. POLE. Yes.
Mr. FORT. Now, the loaning of money to-day, by virtue of the
transformation in our business and economic structure, has become
Increasingly a loaning on securities rather than a loaning on names
or on individually-owned business Do you feel that it is
sound
blinking—and I am not precommitted one way or the other—or
80und banking theory that the same man should sell me a security
and then determine how much he should lend me to buy it?
Mr. POLE. I can not see any objection to banks going into the
underwriting and the distribution of securities on a large scale.
Mr. FORT. In the one case the psychology of the banker is that of a
lender whose sole consideration is the safety of the loan and the making
,Of a loan that is wise for the borrower to have; do you see no difference
netween that psychological viewpoint and the viewpoint of the sales°I who is making money or profit out of selling the security on which
the loan is sought?
Mr. POLE. Yes, I see a very great difference.
Mr. FORT. In that psychology?
Mr. POLE. A very great difference in that psychology.
Mr. FORT. Now, the trust powers of banks have been exercised to
a very great extent, have they not?
Mr. POLE. To an increasing extent.
Mr. FORT. And are continuing. The percentage of increase is
really tremendous, is it not?
Mr. POLE. Remarkably large.
. Mr. FORT. That results in the control of very large resources going
'oto the hands of the management of banks, that management having
40 financial interest whatever in the funds in its control, does it not?
Mr. POLE. It certainly does.
. Mr. FORT. In other words, it is another step by which we are pass;f1g from the owner controlling his property to somebody else control'lag it for him?
Mr. POLE. I think you are correct.
, Mr. FORT. Now, if an individual is trustee under a will or a voluntary trust, he may make no profit whatever, directly or
indirectly,

,.-

,I

258

BRANCH, CHAIN, AND GROUP BANKING

out of the funds in his hands as trustee, other than his legal corn'
mission, may he?
Mr. POLE. That is correct.
Mr. FORT. And if he does he is liable to removal, and also to
deprivation of his profit, and, simultaneously, to make up any loss
which may have occurred on one transaction, while being denied a
profit on the other transaction. Is there any sound reason why the
same rule should not apply to corporate trustees?
Mr. POLE. I think not.
Mr. FORT. Then should banks which are corporate trustees be
permitted to deposit the funds of the trust with themselves, excePt
that they pay as interest the same earnings that they make?
Mr. POLE. I should say that under regulation there would be fie
objection to it.
Mr. FORT. Why not? If it were a private individual, he would not
be allowed to do it, would he?
Mr. POLE. I think that the trust department might proper Y
deposit its uninvested trust funds in the commercial department of
a bank, which it does to-day, such deposit being covered by securities
under governmental regulation.
Mr. FORT. And then, when deposited in the commercial depart'
ment, they become subject to the ordinary hazards and investments
of the bank, do they not?
Mr. POLE. They are protected by a deposit of securities with the
trust department, covering the full amount of deposit.
Mr. Foal% The individual trustee under a will is covered by a
surety bond, is he not?
Mr. POLE. Yes.
Mr. FORT. SO that there is no difference between the one case alr
the other?
Mr. POLE. As far as the security is concerned; no.
Mr. FORT. But the individual trustee would not be permitted,
even though under bond, to utilize the funds in his custody as trustee
in his own business and make a profit?
MT. POLE. That is correct.
Mr. Form Nor would he be permitted to buy securities from hillself or from a corporation which he owned?
Mr. POLE. That is true.
Mr. FORT. Now, all that I am asking is this, that as a matter of
sound theory, is there any reason why a corporate trustee should
have broader powers in this respect than individual trustees? .
Mr. POLE. I probably see no reason why there should be ail
difference there.
Ailr. FORT. Is it not possible, under the present situation of securitY
affiliates, as was brought out by somebody else the other day, for
the little actual stock ownership of a bank to be in its own securitY
affiliate?
Mr. POLE. There is no law prohibiting that at present. I have
suggested that where the stock is held by these securities companies)
or where there is a securities company that is closely affiliated with
the bank, that the supervisory authority should be extended to such
corporations.
Mr. FORT. The fact is that the stock of security affiliates and the
stock of the banks themselves are traded in as a unit, is it not?

BRANCH, CHAIN, AND GROUP BANKING

RI"
to
SS

be
pt

ao
ot
of
tts

259

Mr. POLE. That is quite often the case.
Mr. FORT. Is there anything in the national bank act that permits
that?
Mr. POLE. There is nothing prohibiting it.
Mr. FORT. The tieing of the two stocks together so that neither
could be sold separately from the other.
Is there anything in the national bank act that permits voting
trusts on national bank stock?
Mr. POLE. There is no mention of voting trusts as far as I know.
Mr. FORT. Are there any court decisions on that subject in regard
to national banks?
Mr. POLE. I am sure there are.
Mr. FORT. Which way? Do you know? Are they legal or illegal?
Mr. POLE. I have not the information on that.
Mr. FORT. If Mr. Await knows the decisions, I wish he would put
them in the record.
Mr. AWALT. I can not offhand tell you the exact decisions, but
illegalhere7as a decision in New York State on a voting trust, holding it
and there was a decision in one of the southern States holding
a voting trust illegal.
Mr. WINGO. That was not with reference to national banks,
Was it?
, Mr. AWALT. I do not believe either one had reference to national
,°auks.
Mr. WINGO. I do not think they were. I remember that I had
occasion to ask about that.
Mr. AWALT. I might say that we have consistently opposed voting
trusts in our office.
Mr. FORT. That is what I was coming to. I think generally that
there is a feeling that a voting trust of bank stock at least is against
the 131113lie interest.
Mr. POLE. There is.
Mr. FORT. Is there any logical difference between a voting trust
On the bank stock and the ownership of the majority of the stock of
that bank by a corporation?
, Mr. POLE. As a matter of practice, there would be great similarity
ul the operation of the two ideas.
Mr. FORT. In the one case the man would have his voting trust
Certificates for his holding, and in the other he would have a certificate
of stock in the Transamerica Corporation, or whatever it might be
,that owned the stock of the bank, but in either case the control is
locked, is it not?
Mr. POLE. Yes.
Mr. FORT. Do you feel that the locking of control of banks through
anY form of device is a desirable thing?
Mr. POLE. I think it is undesirable.
Mr. FORT. In the examinations of banks having trust departments,
are the securities held by the banks for their own account crosschecked by number and in other ways against the securities held by
the bank for trust accounts?
Mr. POLE. Those are kept entirely separate.
, Mr. FORT. You seal the one box so that they can not be transferred
cack from box to box until you make your examination?

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BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. We do. We take care of that situation.
Mr. FORT. Has the question come to you in any way that will give
you grounds for an opinion as to whether we should, now that banking has become so largely a matter of loans on collateral, in addition
be
to our 10 per cent limit, or some other limit, of resources that may
that
a
make
amount
lending limit as to the
loaned to any borrower,
can be loaned on the securities of any corporation?
Mr. POLE. I have not given that any consideration.
Mr. FORT. Now that collateral loans have replaced personal loans
to such a large extent, do you not think it is something that we should
think of?
Mr. POLE. I think it might be given consideration.
Mr. FORT. Is it not essential if you are going to get real diversification of investment?
Mr. POLE. I do not know that I would say that it would be essential. I think it might be desirable.
Mr. Fora. In regard .to branch banking again, has the branch
banking system in California, in your judgment and from your
vision of it, produced really strong banks in the small towns? That
is, have the branch banking systems penetrated into the very small
towns as well, or have they only gone into the larger towns? larger
Mr. POLE. They are in very many small towns as well as the
ones.
Mr. FORT. You have said that branch banking will intensify competition. Has not its tendency.so far been, as applied to city-wide
of
banking, to reduce the competition in the sense of the number
indetime
same
it
.
has
the
at
stronger
while
furnished
competitors,
pendent banks, larger individual banks?
Mr. POLE. I think that might be true as to the cities.
Mr. Fora. Would not the same thing be true in the country?
Mr. POLE. The small unit banks in the cities have very frequently.
been replaced by branches, and there are branches on almost every
block of one bank or another, thus increasing competition with, it Is
true, a less number of competing systems. I think that the large
cities would reach out into the rural sections and the competition
would be just as keen there.
Mr. FORT. You have spoken of the fact that the branch banks
would be stronger by virtue of a greater diversification of loans, which
I think is a very sound observation.
Mr. POLE. Yes.
Mr. FORT. That has not necessarily been true, however, of our
great city systems has it?
Mr. POLE. I should say so, in their diversification of loans with
respect more, of course, to industries than to rural credits. There
of
are greater opportunities for diversification in the cities by reason
there.
of
on
industries
diversificati
the g,reat
Mr. FORT. I think the panic of 1920 is far enough back so that we
1921,
can perhaps talk about it a little. Is it not true that in 1920 and
straits?
some of the very largest banks in America were in pretty tight
Mr. POLE. I have heard that some of them were.
Mr. FORT. But were not permitted to fail .because of the danger
to the whole banking structure of the Nation if they did fail?
Mr. POLE. I think that is correct, Mr. Fort.

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BRANCH, CHAIN, AND GROUP BANKING
3

261

. Mr. FORT. Is not the explanation in part of the absence of failures
the Canadian system the fact that they have not been allowed to
Lail? Was not that the case just two or tome years ago, where one
mink was on the verge of failure and was taken over by two or three
of the other major systems of Canada?
Mr. POLE. I think that may account in some measure for the few
!allures which do occur in the metropolitan centers. That is also true
in this country.
Mr. FORT. In Canada, too. It is true in a group system. In other
Words, if a bank gets so big that its failure would be a shock to the
whole banking structure, somebody is going to step in and take it over
and not let it fail, whereas that does not happen with these little
country banks.
Mr. POLE. That is undoubtedly true.
, Mr. FORT. So that in part the safeguard to the small country town
is not altogether from the diversification?
Mr. POLE. Not altogether.
. Mr. FORT. Or from the greater capital, in the sense that it enables
It to stand the shock but from the fact that the size will make it inadNrisable for other banks to let it fail.
Mr. POLE. That is an important factor.
Mr. FORT. Now, we have developed in these questions of you, Mr.
role, a very great deal of interesting thought from which it might
!PPear to some of us at least that perhaps our loss of banks from the
national system to the baser system, as Mr. Luce very well called it,
could be in either of two ways. One is by extending the powers of
iational banks and the other by endeavoring to force improvement
banking methods among State banks. One would be as effective
4S the other, would it not?
Mr. POLE. I do not know how we could force improvement in the
121It 1agement of State banks.
Mr. FORT. Not in the management, but in the code.
Mr. POLE. The code?
Mr. FORT. The code under which they operate. You said, in
c
ePSWer to a question the other day, that we had the power, if we
tu,ose to exercise it through the Federal reserve system, to lay down
Ines which every State bank would have to live up to.
Mr. POLE. As a condition of membership.
Mr. FORT. As a condition of membership, or, I assume, as a condi'Ion of having their checks cleared.
Mr. POLE. I think that Congress might pass legislation to that
effect.
Mr. FORT. So that we have the power if it is wise to use it?
Mr. POLE. As far as I know, Mr. Fort.
s‘Mr. FORT. But, in any event, so far as moderate regulation of the
b'Ette banks goes, we have unquestionably the power through the
ederal reserve system?
Mr. POLE. I should say so.
e Mr. FORT. So that we can approach the question of the strengthIling of the national system from either angle we choose, either by
aking the membership in the Federal reserve system mean a better
ank
the or by extending to the national banks more of the privileges that
State banks now enjoy, or other privileges that the State banks
gto not enjoy, as in your suggestion?

l

r

100136-30—voL I, PT 3-3

262

BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. I think that might be said to be correct.
Mr. FORT. Somewhere in between there probably is a balance that
represents what we ought to do?
Mr. POLE. Yes.
Mr. FORT. The'shift from the national to the State system reallY
will not be stepped if we permit either chain or group banking while
the States still give greater advantages to the State banks?
Mr. POLE. I do not think I understand the question.
Mr. FORT. I will ask my question differently. All of us are,
vitally concerned with this shift of resources out of the national
system into the State system.
Mr. POLE. Yes.
Mr. FORT. If the State laws continue to permit greater flexibilitY
in banking practice to banks incorportaed under State charter then
we do under the national charter, and we continue to permit groug
and chain banking, will not the tendency be for the groups sou
chains to transform their national banks that they own into State
banks?
Mr. POLE. I think that tendency would be so if they did not'
attach too much value to their membership in the Federal Reserve
System. I think, howeyer, if privileges were given to national
banks which would permit them to cross State lines with branches it
would attract a great many State banks into the national systeni.
Mr. FORT. That I see.
Mr. POLE. If they were permitted to cross State lines, which is the
important factor there.
Mr. FORT. But we have not found, practically, that the extension
of branch banking facilities to national'banks in cities has not retained
their resources in the system, has it?
Mr. POLE. Not at all, because that extension was to meet State
bank competitors and gave the national bank no superior advantlige•
Mr. FORT. On the contrary we have lost four and one-half billion
in three years, in spite of extending that privilege.
Mr. POLE. From the national system, but not from the Federal
Reserve System.
Mr. FORT. We have lost that because of the greater flexibilitY
permitted banks under the State laws, have we not?
Mr. POLE. That is correct.
Mr. FORT. I think that is all.
Mr. WINGO. May I ask a few questions along the line of the
questions Mr. Fort has been asking?
A moment ago, on the voting trust proposition—
Mr. BEEDY. Will you permit me, before we leave this particulfir
subject to ask one question?
MT. WINGO. Yes.
Mr. BEEDY. It has been developed here in answer to a questii,n
that the one thing that might tend to check this shift from the nation
to the state system would possibly be the attraction of membershil)
in the Federal Reserve System, which membership would be doul)1Y
attractive if the national banks were permitted to establish brand""
beyond State lines. I do not want to say to the committee that I
have given extensive consideration to that very problem, but I Irv°
in my possession a consideration of the cases bearing upon the right
of Congress to pass a law authorizing national banks to establish

tit
4111

4Q,a1

0

BRANCH, CHAIN, AND GROUP BANKING

263

branches in States,even where the State law does not permit it. You
recently answered a question which was asked you as to the power of
4ational banks under Federal law to establish branches in more than
?ae State irrespective of State lines. You said you though there was
ilch
or you had been so advised. Have you any legal opinion
in w power,
•
tiPonming which you could put in the record at this point as bearing
this subject?
Mr. POLE. I have, and shall be glad to do so.
(The opinion referred to is as follows):
NOVEMBER 16, 1929.
Mei
nerandum for the comptroller.
You have requested my opinion as to the constitutional power of Congress to
altIthorize the establishment of branches by national banks irrespective of
State
Ems.
,ej!
r order to fully cover the question involved, it is necessary to go back to the
',,olishment of the first bank of the United States in 1791.
enacted the national bank act and the
Fed legal theory upon which Congress upon which
efie,oeral
Congress authorized the
reserve act is the same as that
oeslolislunent of the first bank of the United States in 1791 and the second bank
the United States in 1816. When the first bank was proposed in
Congress,
ke constitutionali
ty of the bill was seriously debated but a majority of both
,Ilses supported it. The act as passed provided in part:
the;It shall be lawful for the directors of aforesaid to establish offices
wheresoever
eh, shall think fit in the United States, for the purposes of discount and deposit
and
same
the
manner, as shall be practiced
upon the same terms, and in
at
the'he bank; and to commit the management of such offices, and the making of
re said discounts, to such persons, under such agreements, and subject to such
,,ulations as they shall deem proper; not being contrary to law, or to the conof
rei1ent the bank." signed the bill after considering the
Washington
official
\y,Ltil for and against its constitutionality. The first bank of the Unitedopinions
States
established
eight branches in several States,
oPened December 12, 1791, and
ely, in Boston, New York, Baltimore, Washington, Norfolk,
Charleston,
baonah, and New Orleans. This is the first precedent of the establishment of
rtillielles by national banks. Upon the occasion of the failure of Congress to
,44,_e'Ar the charter of the bank, which expired in 1811, the constitutional question
again raised and some of the opposition against the renewal was upon the
I,a4k.
4W that Congress was without power to establish and maintain
a national
THE SECOND NATIONAL BANK OF THE UNITED STATES, 1816-1836
ple„,e attempt to finance the war of 1812-1814 without any banking instruCo'ality under the control of the Federal Government proved so disastrous that
!Ogress in 1816 passed a new bill to charter a bank of the United States simiyettoo the first bank, President Madison approving the act, having the year
before
44,e,d a similar measure which did not meet his views. As compared with
the
to,ti' bank of the United States there was little difference between their organiand purpose.
kit,;;_ue second Bank of the United States likewise established branches in
various
ttet7 in the Union. In 1818 the legislature of the State of Maryland passed an
o ”tane effect of which was to place a special tax upon the branch of the Bank
e United States in operation in Baltimore. The Baltimore branch'refu
sed
tlitnY this tax• its cashier, McCulloch, was sued in the State court
and a judgair,",' sustained
'against him by the court of final jurisdiction. He thereupon
out a writ of error under which the case was brought before the
Supreme
Coh
"rt of the United States. Here for the first time the constitutional power of
%ide
lress to establish the bank, and of the bank to establish branches, was conCell, by that tribunal. (McCulloch v. Maryland, 4 Wheat. 424.)
41411 'ne following year, 1819, the State of Ohio imposed a tax of $50,000 on
444 of the two branches of the Bank of the United States, established
at Ciiiand Chillicothe. Upon the refusal of these branches to pay the tax
the
terll on behalf of the States seized $98,000 in money. The State officials conWere arrested by the Federal authorities and tried in the Federal
Circuit
rt. where judgment was rendered against them to restore to the
bank with

264

BRANCH, MAIN, AND GROUP BANKING

interest the funds seized. An appeal was taken to the Supreme Court of the
United States (Osborn v. Bank of the United States, 9 Wheat. 738), where agaill
the constitutional power of Congress was brought into question and formed 'be
basis of the opinion.
The opinions in both of these cases were written by Chief Justice Marsh
and for practical purposes can be considered as one case, the second being ell
elaboration and a review of the first.
The principles decided in these cases may be briefly stated as follows:
(1) Congress has the constitutional power to incorporate a national bank.
(2) The existence of State banks can have no influence upon the question rd
this paramount power of Congress.
(3) "After the most deliberate consideration, it is the unanimous and decked
opinion of this court that the act to incorporate the bank of the United States
is a law made in pursuance of the Constitution, and is a part of the supreme We
of the land. The branches.proceeding from the same stock, and being conduel
to the complete accomplishment of the object are equally constitutional.°
(McCulloch Case 4 Wheat. 424.)
tile
(4) Congress, having the constitutional power to create a national bank,
faculties
also the constitutional power to determine, authorize, or create the
(onecessary to enable it to perform the services for which it was created and C se
gress alone is the judge of the means to be employed in the exercise of tlu
faculties.
er
The Supreme Court of the United States in these two cases upheld the Pes,
in
permiss°
the
branches
establish
without
various
to
States
of a national bank,
or authority from the State governments.
THE NATIONAL BANK ACT OF 1863
With the failure of Congress to renew the charter of the second bank of the
United States the Federal Government operated without a banking instrumOr
1863'
tality under its control until the enactment of the national bank act in ents'
c
That act set up a system of independent national banks rather than one
banks to.
national bank with branches. The question of the power of national unit
establish branches did not again come before the Supreme Court of the
States until 1924, more than a century after the decision of McCulloch v. Msir
C0
land and Osborn v. Bank of the United States when it was presented in the
v.
Louis
St.
Missouri.
(263
U.
640.)
S.
in
Bank
National
of the First
of
In the meantime, however, many cases had come before the Supreme Court
tbe
construe
to
necessary
became
and
it
interpret
which
in
the United States
their
national bank act with reference to the charter powers of national banks in ea
princiP
of
all
in
which
the
legislatures,
fundamental
State
the
to
relationship
(be
enunciated in the McCulloch and the Osborn cases were sustained and follow
to t
It seems appropriate to consider some of these cases before proceeding
First National Bank in St. Louis v. Missouri.
PRIOGI V. PENNSYLVANIA

(16

PETERS, 539, 617-19)

The Supreme Court of the United States in discussing the respective dome°
of Federal and State legislation, said:
that tl
"If this be so, then it would seem upon just principles of construction,
legislation of Congress, if constitutional, must supersede all State legislation 1109
the same subject; and by necessary implication prohibit it. For, if Congre°
actuallti
have a constitutional power to regulate a particular subject, and they do
SO
regulate it in a given manner, and in a certain form, it can not be, that theto tbe
legislatures have a right to interfere, and as it were, by way of compliment
they dee f
legislation of Congress, to prescribe additional regulations, and what
legislation oA
auxiliary provisions for the same purpose. In such a case, the
not inter
i
Congress, in what it does prescribe, manifestly indicates, that it does
matter. ;be
to
act
legislation
upon
the
subject
further
any
be
shall
there
that
w
silence as to what it does dot do, is an expressive of that its intention is, as
'
court
direct provisions made by it. This doctrine was fully recognized by this bel
expressly
21-2),
1,
it
where
was
Wheat,
(5
Moore
v.
Houston
of
in the case
the°
that where Congress have exercised a power over a particular subject given
PI
the
to
for
add
State
to
legislation
competent
not
is
it
Constitution,
the
by the
visions of Congress upon that subject; for that the will of Congress upon
it
what
by
has
as
not
it
what
declared,
by
established
clearly
as
is
whole subject
has expressed."

BRANCH, CHAIN, AND GROUP BANKING
the
Kein
the

1

,* of
(led
law
ive
tiaa
oef
ese
ref
toe

ity
00.
rol
to
Ahd

iee
of
he
jr

he

I'

265

RelERS

AND MECHANICS' NATIONAL BANK V. DEARING (91 U. S. 29, 1875)
a_This was a case before the Supreme Court which construed the national bank
.et with reference to the authority of the State governments and involved the
-Pplication of the usury law of the State of New 'York. The court said:
'The constitutionality of the act of 1864 is not questioned. It rests on the
Same
• •
principle as the act creating the second bank of the United States. The
-2
(i tung of Secretary Hamilton and of this court in McCulloch v. Maryland
w heat. 316), and in Osborn v. Bk. (9 Wheat. 738), therefore applies.
'tll.ttional banks organized under the act are instruments designed to be used toThe
aid
Government in the administration of an important branch of the public
w'cryice. They are means appropriate to that end. Of the degree of the necessity
I!!eh existed for creating them. Congress is the sole judge.
h. Being such means, brought into existence for this purpose, and intended to
ti se employed, the States can exercise no control over them nor in anywise affect
eir operation,
be Operation, except in so far as Congress may see proper to permit. Anything
this is 'an abuse', because it is the usurpation of power which a single
te can not give. Against the national will 'the States have no power, by
:4Zation or
otherwise, to retard, impede, burthen or in any manner control the
ration of the constitutional laws enacted by,Congress to carry into execution
p.rT,Powers vested in the General Government. (Osborn v. Bk., supra;
„,kjliarleston, 2 Pet. 466; Brown v. Maryland, 12 Wheat. 419; Dobbins v. Weston
Erie Co.,
'
15 Pet. 435.
n_ "The power to create carries with it the power to preserve. The latter
is a
'0e?Ilary from the former.
The principle, announced in the authorities cited, is indispensable to the
n'ueleney, the independence, and, indeed, to the beneficial existence of the General
s'!everziment; otherwise it would be liable, in the discharge of its most
important
ts, to be annoyed and thwarted by the will or caprice of every State
in the
t:i00. Infinite confusion would follow. The Government would be reduced
luott Pitiable condition of weakness. The form might remain, but the vital essence
uld have departed. In the complex system of polity which obtains in this
etIttntry, the powers of government may be divided into four classes:
"Those which belong exclusively to the States;
,"rhose which belong exclusively to the National Government;
;Those which may be exercised concurrently and independently by both;
And those which may be exercised by the States, but only with the consent,
Aliress or implied, of Congress.
th'
:
e \Vhenever the will of the Nation intervenes exclusively in Ulla class of cases,
authority of the State retires and lies in abeyance until a proper occasion for
exercise shall recur. (Gilman v. Philadelphia, 3 Wall. 713, 18 L. ed. 96;
,,Earte McNiel, 13 Wall. 240, 20 L. ed. 625.)
1'he power of the States to tax the existing national banks lies within the
"4tegory last mentioned.
, 'It must always be borne in mind that the Constitution of the United
+,
(!ucl the laws which shall be made in pursuance thereof,' are 'the supremeStates,
law of
r land' (Const., art. 6), and that this law is as much a part of the law of each
4,,...
‘ate, and as binding upon its authorities and people, as its own local constitution
g"-I laws."
CASEY V. GALLI (94 U. S. 673, 1877)

r

t,This case held that Congress had the power to authorize a State chartered bank
hu convert into a national bank without any assent or permission by the State
"Pen the ground that no authority from the State was necessary.
(161 U. S. 275, 1896)
The court in denying the validity of a statute of the State of New York
fixing
tteferences in cases of insolvency, in so far as it applied to national banks, through
'
41; Justice White, said:
I National banks are instrumentalities of the Federal Government,
created
00
fr a public purpose, and as such necessarily subject to the paramount
authority
d„the United States. It follows that an attempt by a State to define their
4,14wes or control the conduct of their affairs is absolutely void, wherever such
eueenpted exercise of authority expressly conflicts with the laws of the United
titates, and either frustrates the purpose of the national legislation, or impairs
e efficiency of these agencies of the Federal Government to discharge the
duties
ac)r the performance of which they were created. These principles are axiomatic,
nd are sanctioned by the repeated adjudications of this court."
DAVIS V. ELMIRE SAVINGS BANK

266

BRANCH, CHAIN, AND GROUP BANKING
EASTON V. IOWA (188 U. S. 220, 1903)

In this case the president of a national bank was sentenced under a criminal
statute of the State penalizing the receipt of deposits with knowledge of the
insolvency of the bank.
In taking issue with the Supreme Court of the State, Mr. Justice Shires. ni
delivering the opinion of the court, said:
"We think that this view of the subject is not based on a correct concept19li
of the Federal legislation creating and regulating national banks. That leg's"
lation has in view the erection of a system extending throughout the countrY!
and independent, so far as powers conferred are concerned, of State legislation_
which, if permitted to be applicable, might impose limitations and restrictionl
as various and as numerous as the States. Having due regard to the nationats
character and purposes of that system, we can not concur in the suggesiinne
that national banks, in respect to the powers conferred upon them, are to b
viewed as solely organized and operated for private gain. The principles en1.
elated in McCullough v. Maryland (4 Wheat. 425, 4 L. ed. 606) and in Osborn
Bank of United States (9 Wheat. 738, 6 L. ed. 204), though expressed in rope°
to banks incorporated directly by acts of Congress, are yet applicable to tile
later and present system of national banks."
*
"Such being the nature of these national institutions, it must be obvious that
their operations can not be limited or controlled by State legislation, and the,
Supreme Court of Iowa was in error when it held that national banks are organiz
and their business prosecuted for private gain, and that there is no reason w10.
the officers of such banks should be exempt from the penalties prescribed for fratidlilent banking."
FIRST NATIONAL BANK V. FELLOWS (244 U. S. 416, 1917)
'
In this case the State of Michigan contested the power of Congress to enact
the provisions of the Federal reserve act conferring trust powers upon nationa
banks. The Supreme Court of the United States (opinion delivered by Mr'
Chief Justice White) reversed the Supreme Court of Michigan and upheld th,e
powers of Congress citing with approval the principles enunciated in McCulloue
,
v. Maryland and Osborn v. Bank of the United States. Referring to the basic
principles of constitutional law laid down in the above two cases, the cour
further said: "The doctrines thus announced have been reiterated in a nitiltitu(1,,
of judicial decisions, and have been undeviatingly applied in legislative an'
enforced in administrative action."
FIRST NATIONAL BANK OF SAN JOSE V. STATE OF CALIFORNIA ET AL. (262 U. S'
366, 370)
In this case the Supreme Court declared invalid, so far as national banks Wel
concerned, a State law providing for the escheat to the State of California
bank deposits remaining unclaimed for more than 20 years, and in commenting
upon attempted interference with national banks by State legislation, said:
"This court has often pointed out the necessity for protecting Federal agenciea
against interference by State legislation. The approved principle of obsta prinel•
piis should be adhered to. (McCulloch v. Maryland, 4 Wheat, 316; Osborn i'•
United States Bank, 9 Wheat. 738; Farmers' and Mechanics' National Bank l'•
Davis r;
Dearing, supra; California v. Central Pacific R. R. Co., 127 U. S. 1; National
Elmire Savings Bank, supra; Easton v. Iowa, supra; Covington v. First
Bank, 198 U. S. 100; Farmers and Mechanics Savings Bank v. Minnesota, 232,
U. S. 516; Choctaw, Oklahoma and Gulf R. R. Co. v. Harrison, 235 U. S. 292,
Bank of California v. Richardson, 248 U. S. 476."
BARNES NATIONAL BANK V. DUNCAN (265 U. S. 17, 1924)
In this case the State of Missouri attempted to enforce against a national banlio
the State law regulating the exercise of trust powers. The Supreme Court of the
United States reversed the State Supreme Court upon the authority of the Fe1100
case and others above cited. Mr. Justice Holmes in delivering the opinion of the
court reiterated the principle that the constitutional power of Congress was VI
be tested by the right to create the bank and the authority to attach to it tha,!
which was relevant in the judgment of Congress to make the business of the bani'
successful and that this excluded the power of the State in such cases.

BRANCH, CHAIN, AND GROUP BANKING
131
t he
ii

267

FIRST NATIONAL BANK IN Sr. LOUIS V. MISSOURI (263 U. S. 640, 1924)
— This case involved primarily the question of the power of national banks to
rftablish branches under the authority of the national bank act and rests upon a
1
...ate of facts different from that of McCulloch v. Maryland in which the
question
;)1 branches for national banks was first considered by the Supreme Court.
N_ The First National Bank, upon the advice of its own counsel,
proceeded
to
establish and
conduct a branch bank in the city of St. Louis upon the theory that
Whereas the Federal statutes
did not expressly authorize national banks to establish branches, such banks nevertheless possessed the incidental charter
power
S
° I to do. No permission from the comptroller was obtained for the establishment
the branch, There was upon the statute books of the State a law prohibiting
establishment of branch banks in that State. The Attorney General of
MisouriL
on behalf of the State took the position, first that the national bank
its charter powers under the national bank act when it established the
erench and second that there being no permissive Federal statute, the State was
to enforce against the national bank its own law against
he following propositions are quoted from the brief of the Attorney branches.
i'ree
General of
he State which
he filed before the Supreme Court of the United States:
(1) "Branch banking by a national bank in a State is conduct in excess of any
aauthority from the Nation."
(2) "Acts of a national bank in a State which are in excess of any authority
"3111 the Nation, and irc contravention of State law, can be stopped by the State."
,, (3)"An unauthorized, unlawful act of a national bank in a State should stand
'Pon the same footing as the unauthorized, unlawful act of any other corporation."
(4) "A national agency is no more free from responsibility to the state for un;awful acts done in the State beyond the scope of its powers and authority than
a State agent."
n (3)"The same conduct may be an offense against both State and national
'everelgnty, and may be restrained by both Nation and State."
8 It was upon these grounds that the action was brought by the State in the
otflp,reme court of the State in the nature of quo warranto. The formal allegation
t the State was to the effect, first that the bank was not authorized by Congress
„? establish a branch and second, that in establishing the branch it violated a
statute of the State expressly prohibiting the establishment of branch banks.
n At the request of the Comptroller of the Currency the Attorney General of the
11ited States intervened in this case, not however for the purpose of upholding
t"!le right of the national bank to establish the branch but to contest the jurisdic.
1°rl of the State to inquire into the question whether Congress had authorized
"national bank to establish a branch.
k t was shown before the court that the office of the Comptroller of the
)
‘1,1ed for years construed the national bank act as denying the right ofCurrency
national
,a,aks to establish branches. This opinion was supported by an opinion of the
'
1,aorney General, May 11, 1911, which was cited with approval in the opinion
the court in this case. The principal argument of counsel on both sides before
"court, and the bulk of the opinion of the court, is devoted to the question of
Whether Congress had authorized national banks to establish branches.
The
ourt reached the conclusion that there was no doubt, especially in view of the
'llg-continued construction of the national bank act by the Comptroller of the
Urrency,that Congress had not conferred upon national banks the charter power
be establish branches.
In view therefore of this condition precedent the court held that the State was
rePetent to enforce its own law against the national bank. The question
erefore of the constitutional power of Congress to permit national banks to
tablish branches was not involved in this case. The case is in harmony with
tr Previous decisions of the court hereinabove considered. Had there been upon
he Federal statute books an amendment to the national bank
act permitting
',._ational banks to establish branches the Supreme Court of the United States
ould have undoubtedly held the State law invalid as applied to national banks.
alle question asked by,the court of the State law, "Does it conflict with the laws
T' the United States?' would have been necessarily answered in the affirmative.
4 the
absence of such an amendment the question was answered in the negative.
„ Congress inserted in the so-called McFadden-Pepper Act of February 25, 1927,
clause in its branch banking section, that branches of national banks would be
Permitted only in those States which permitted the State banks to establish

r3xceeded

r

6

O

268

BRANCH, CHAIN, AND GROUP BANKING

branches. This clause was a concession to the States not as a matter of constitutional necessity but rather as a matter of legislative policy.
In view of the above consideration there appears to be no doubt of the constitutional power of Congress to permit the national banks to establish branches in
any State of the Union, irrespective of the laws of the State. If Congress determines that the national banks could better serve as instrumentalities of the Federal Government through the establishment of branches it would not be within
the jurisdiction of a State to prohibit or restrict the purpose of the National Legislature to this effect.
F. G. AWALT,
Deputy Comptroller and Counsel.

Mr. WINGO. You said you knew of no power by which we could
prevent and control the State standards of banking. Is that true, do
you think, in its entirety?
Mr. POLE. I said I did not know of anything that Congress could
do to control a State bank, except
Mr. WING°. I am talking about a charter to the State bank, not
talking about controlling the actual operation of the bank after it
gets the charter, but about the powers of the bank secured from a
charter given by the State—in other words, under the State banking
laws. You say you do not know of any power we have to affect that?
Mr. POLE. I know of none. Of course, I am not a lawyer.
Mr. WINGO. Let us speculate just a little bit and draw on expeiience, too, Let me cite to you the fact that we drove out of existence
the State bank issues by the exercise of a Federal power, the taxing
power.
Before I go into these illustrations I want it distinctly understood
that by enumerating the possibilities I do not by my questions indicate my personal opinion on or approval of the use of any of these
methods, but, in talking about possibilities, we will take the question
of the commerce clause of the Constitution.
Mr. POLE. I thought you were talking about existing law.
Mr. WINGO. No;I am talking about the power to enact a law and
that the effect of it would be to drive out of existence every State
bank that did not come up to a standard that Congress fixed.
Mr. POLE. I would not question that in any way.
Mr. Wiricio. As an illustration, we could use the taxing power to
stop chain banking or group banking; we could use the interstate
commerce clause; we could use the barring of the mails; we could provide that no national bank or Federal reserve bank should clear or
have any relations with a bank that did not come up to a specific
standard, and if we did those things would we not ultimately force
the different State banks up to a standard that was comparable to
the ideal standard that we have fixed in the national bank act?
Mr. POLE. There is no question in my mind that Congress could
eliminate the State banks.
Mr. WINGO. Is it not a question of the power of Congress by several
means to check what we all recognize and what you denominate as
the evils of chain and group banking? But your idea is that the
ideal way to check these evils is to adopt what some other people
regard as another evil, branch banking?
MT. POLE. Yes.
Mr. WINGO. If you are a chain banker or group banker, and you
were given the alternative what reason or what motive or what
philosophy would there appear to you that would lead you to say,

BRANCH, CHAIN, AND GROUP BANKING

269

"I had better change my chain and my group into a branch banking
system?"
stiMr. POLE. Greater mobility of resources and ease and economy of
sin
terOperation.
edMr. WINGO. What do you mean by "greater mobility of resources?"
hin
. Mr. POLE. That the transfer of funds from one section of the area
in which I was operating my branch system to another would be
far easier under the branch banking system than it would under
the
Other systems which you speak of.
, Mr. WING°. I can not comprehend that statement, because I
Id
nave an idea that the transfer of funds would either come by telegraph
do
or by mail.
Mr. POLE. Under the group plan, each bank is an independent
dd
unit, and it has its own investments, so that if it wished to transfer
funds from one point to another, it would be under the necessity of
ot
selling some of its assets or transferring them through a holding comit
Pally to some other bank which had funds.
a
Mr. WING°. Not necessarily; it could transfer a deposit, could it
Erg
not, without doing that?
t?
Mr. POLE. It could not transfer its deposits.
Mr. WING°. What is to prevent a chain bank from making a
ritransfer of its deposits in the same identical instance that a branch
ce
bank could? Suppose that here is a chain bank that has a deposit
!n New York City with a correspondent, and it is changed over night
into a branch banking system. Is there any difference in the mechanics of transferring those funds in one case than in the other?
Mr. POLE. We must be talking about different things.
38
Mr. WiNco. That is the reason .I am asking you to elucidate.
1r1
Mr. POLE. If you were to deposit your funds in a bank which was
P. Member of a group, it would not be within the province of the holding company which held the stock of that member of the group to
transfer your deposit to another member of its group where funds
Might be needed for loaning purposes.
Mr. WiNao. Well, they are doing it everyday. Even if the laws
of Arkansas prohibit branch banking, they do permit chFlins, and
funds are being transferred from Arkansas to Nashville, Tenn.,
3
under chain banking and under group banking just the same as they
Would have the power to do if you had branch banking.
Mr. POLE. Funds may be transferred, funds which are involved in
the operation of a single unit.
Mr. WING°. That is what we are talking about.
Mr. POLE. But there would be no possibility of transferring the
deposits of one independent bank which might be a member of the
group to another independent bank which might be a member of the
group.
Mr. WING°. You mean the book record, not the deposit.
Mr. POLE. The deposit. .
Mr. Wirmo. Are you talking about the actual money or the actual
credit or the record on the books?
Mr. POLE. I am talking about the actual credit. If a bank itself
Wished to transfer its funds, that still might be a very difficult matter.
Mr. WING°. We will say that there is a holding corporation
in
Nashville, Tenn.; can it not direct one of its chain banks in Arkansas
to transfer my funds that are there to my credit—and there
is no
t U.

270

BRANCH, CHAIN, AND GROUP BANKING

occasion to specify "VVingo deposit"; they say, "from your deposits,
you transfer $10,000 or $20,000"—whatever they wanted—"over to
the depositary in Nashville, Tenn."
Can they not do that now, and do they not do it?
Mr. POLE. Such funds as that may be moved, but they would be
limited to the amount which the bank might deposit or the amount
which the bank might borrow.
Mr. WINGO. That would be true in both instances.
Mr. POLE. With small banks it would be a very small amount,
whereas in the branch banking system funds could be transferred very
freely to any branch of the system.
Mr. WING°. What limitation is there in the national bank act with
reference to such transfers? The limitation you are talking about is
the 10 per cent limitation, and that applies to loans.
Mr. POLE. No; I was not referring to that.
Mr. WINGO. What statute did you have in mind?
Mr. POLE. I was having in mind the statute where a bank could not
keep on deposit, for instance—
Mr. WINGO. I see what you are driving at now.
Mr. STRONG. Are you going to finish soon?
Mr. WINGO. Yes; I have one or two more questions.
Is it not then true, talking about the standards of the State banks,
that we have been engaged for years in this committee and in Congress in constantly framing our laws to meet the competition of State
banks, and has not that been the chief cry and reason for our doing
these things?
Mr. POLE. I think that is a fair statement of the situation.
Mr. WINGO. Was not that the late argument for the McFadden
Act?
Mr. POLE. Yes.
Mr. WINGO. To liberalize the national bank standards, and whehever we pointed out objections to any particular proposal around this
table, instead of discussing the merits of the objection, we were told
that "Well, we have to do that in order to meet the competition of
State banks."
Mr. POLE. That was largely the case in the McFadden bill.
V Mr. WINGO. And the reason for that was that these State banks, as
my friend Mr. Luce would say, had a baser standard, which was lower,
.sting this competition by
and so we have governed our conduct in me
reasons of expediency and not by measuring the standard or what
should be the ideal, have we not?
Mr. POLE. In the McFadden bill there was some liberalization.
Mr. WINGO. I am talking about the major features of it.
Mr. POLE. Of course, the important thing in the McFadden bill
was not so much the liberalization of a bank's privileges as it was with
respect to the extension of branches.
Mr. WiNco. Oh yes; we had the argument made here that we
ought to permit them to deal in securities because State banks were
permitted to do it. I think every major. proposal in the McFadden
Act was bottomed not upon the justification that it was sound banking, but we were trying to meet the competition of State banking
systems.
Can you name a major proposal where that argument was not made?
Mr. POLE. I think that is correct.

BRANCH, CHAIN, AND GROUP BANKING

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271

Mr. Wirsrco. And the point I want to drive home is this, that if
there are evils in these State banking systems which, by reason of an
enforced competition, are weakening the standard of the National
!iystem, would it not be profitable for us, instead of spending our time
In devising schemes of expediency and lowering the national standard
in order to meet this competition, to spend our time in devising
legislation embracing methods by which we could enforce a higher standard
in the State banking laws so as to protect both the State bank patrons
as well as the national bank patrons from the evils of the baser
standard as referred to by Mr. Luce?
POLE. I think we have to consider it from the economic point
Of
— view. The announced legislative policy of the so-called McFadden
bank act of February 25, 1927, was parity between the National and
State systems. The purpose of the bill was to make the charter
Powers of national banks approximately equal in operating advantage
to those of the State banks. Nearly three years of operation under
that act has demonstrated that it has failed of its purpose in this
respect.
The theory of parity between the two systems of banks is, in my
Opinion, economically unsound.
Mr. Wrisrao. Should we not say that we will spend our time in
bottoming everything we do upon building up the system that from
an economic standard is sounder and better than the baser standard
now permitted by the States?
Mr. POLE. I think so, and hence my proposal for an increase of
branch banking powers for national banks without reference to State
laws. I think that the economic change is such that the small bank
can not operate successfully any more. I am, therefore, suggesti
ng
a plan which will enable banking service to be carried to every corntnunity from a metropolitan center.
Mr. WINGO. In other words, your theory is that the changed economic structure is such that in order for banking institutions to render
to the public that service to which it is entitled, necessarily you have
to have larger banking units?
Mr. POLE. That is correct.
Mr. Wpm°. And you think that necessarily then in order to have
larger banking units, you have to choose between three types—group
banking, chain banking, or branch banking—and in your own mind
branch banking possesses fewer of the evils and more of the benefits
than the other two?
Mr. POLE. I think decidedly there is no question in my mind as to
Which is the best of the three, and I am not advocating either chain
banking or group banking as a remedy.
Mr. WING°. That is what I say.
Mr. POLE. I am advocating branch banking.
Mr. WINGO. Your ideal, as I understand it, is the independent unit
banking system, but you say that changed economic conditions have
made us face a condition and not a theory?
Mr. POLE. Yes.
Mr. WINGO. And your belief is—andiyour judgment is entitled to
a great deal of weight—that the only, choice we have now in order
to
do what you think is necessary is between a group banking system
or
a chain banking system or a branch bankingisustem, and you
think
the branch banking system is preferable, both from the
standpoint of

272

BRANCH, CHAIN, AND GROUP BANKING

the service they may render, the superior service, and from the
standpoint of having fewer evils than either of the other two systems?
Mr. POLE. And from the standpoint of successful operation.
Mr. WINGO. That is included.
Now, let us go back to the proposition of the trustee. Is it not a
fact that the courts in New York City now sometimes designate banks
as receivers and trustees, and permit those banks to deposit with
themselves the trust funds and to pay the trust estate, of which it is
receiver, or trustee, only 2 per cent, or whatever the current rate is,
upon deposit balances, and the bank gets the benefit of those funds
and in some instances makes 10 or 12 per cent, or whatever its earning
is upon its deposits, and, addition thereto, draws its fees as trustee
and remuneration as receiver? Is not that an actual practice in New
York City and possibly in other cities and States?
Let us just take one instance, and it is not an isolated one. Do
you not know that the Irving Trust Co. had such an experience?
Was it not appointed receiver, and did not the court permit it to
deposit the trust funds in its own institution and let them use them and
simply account to the trust estate for the current rate of interest on
deposit balances, and, in addition thereto, the same court allowed
them a fee for acting as receiver?
Mr. FORT. If the gentleman will permit, I understand that in New
York there have been some modifications made of the ordinary rules
applicable to trustees, in favor of corporate trustees under the supervision of the banking department as organized.
Mr. WINGO. That is true.. .
Mr. FORT. As against individual trustees.
Mr. WINGO. What I am talking about is this, that regardless of
the fundamental rules, time and experience as well as statutes have
set up certain safeguards governing the use of trustees' funds. I an
not discussing whether they are wise or unwise, whether they should
be permitted to be changed or not; I am talking about what is actually
being done. Is not that very thing being done in New York City?
I am not undertaking to criticize it, to say whether it is justified or
not; I am just asking you if it is not a fact that in actual practice,
such as in the illustration I have used, that that has taken place
place in more than one instance in New York City?
Mr. POLE. I know nothing, of course, of the Irving Trust Co. I
think as a general rule that trust funds do not remain uninvested
for any great length of time.
Mr. WINGO. That, of course, does not answer my question. You
do not know whether any such practice as I have given obtains or
not?
Mr. POLE. No, I do not.
MT. STRONG. Is that all, Mr. Wino?
Mr. WINGO. Can you conceive of.any reason why a trust estate
should not be protected by the same jealous rules when a corporation
is dealing with it as when an individual is dealing with it?
Mr. POLE. None at all.
Mr. STRONG. Mr. Goodwin has a matter that he wants to bring
before the committee.
(Thereupon, 1.15 o'clock p. in., the committee went into executive
session.)

BRANCH, CHAIN, AND GROUP BANKING
HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,
Friday, March 14, 1930.
The committee met in the committee room, Capitol Building, at
10.30 o'clock a. m., on. Louis T. McFadden (chairman) presiding.
The CHAIRMAN. The committee will come to order.
Mr. Seiberling, you seem to be next on the list this morning to
question the Comptroller.
;

STATEMENT OF HON. JOHN W. POLE—(Resumed)
Mr. SEIBERLING. Mr. Pole, there has been a good deal said about
the Canadian banking system, and I would like to read into the record
a paragraph from an address made by A. B. Barker, of Toronto,
Ontario. It is found in the Journal of the Canadian Bankers' Association for October, 1929, and I read from page 81 as follows:
Many comparisons are made between the banking systems in Canada and the
United States, but there is one feature which is seldom referred to, and that is
the extraordinary difference in the attitude of the general public in each country
toward its own system. In Canada the banks are not popular, and the criticism
of a certain class is very forcibly expressed in Parliament whenever the opportunity occurs. Across the border, however, this does not seem to be the case,
and the average American freely asserts that, in his country, they have the
finest
banking system in the world. Canadians know in their hearts that their own
System is the equal of any, but when opinions are expressed they seem to be
suffeiing from an inferiority complex, and praise that of every country but
their own.

I suppose, Mr. Comptroller, that the unpopularity of the banks is
due to a large extent on account of the service that they render and
the price at which they render it—is that not so?
Mr. POLE. I would not like to be put in the position of admitting
the unpopularity of the Canadian banking system in Canada. That
is the opinion of one writer, but there are other opinions which differ.
Mr. SEIBERLING. You think that their system is popular over there?
Mr. POLE. I would say it is popular, with the possible exception of
western Canada.
Mr. SEIBERLING. They do not get anywhere near as large an
amount on their deposits there as we do in this country; they do not
pay as much interest on deposits as we do here.
Mr. POLE. Of course, the rates of interest which we pay in this
country vary very greatly. In Canada it is much more uniform, and
I think quite reasonable. Certainly the rate at which they
lend
money not only in the cities but in the farthest hamlet is very much
more reasonable and very much more uniform than it is here.
Mr. SEIBERLING. I assume that that is a very admirable feature of
their banking system?
Mr. POLE. It is, indeed.
273

274

BRANCH, CHAIN, AND GROUP BANKING

Mr: SEIBERLING. The failure, however, to pay as much interest on
deposits there is due probably to lack of competition, is it not?
Mr. POLE. I would not say that: I am not prepared to say that
the average amount of interest which is paid on deposit accounts in
Canada is not as great as it is in this country Do you know that to
be true?
Mr. SEIBERLING. I only know what this gentleman says in his
address.
Mr. POLE. I would not accept that article without knowing something more about it.
Mr: SEIBERLING. This article is written on the subject of saving
deposit accounts, and in the paragraph immediately preceding the
one I read, in speaking of United States savings banks and trust
companies, he says:
These institutions operate sayings departments, but they are for real sayings,
and for that reason American banks and trust companies are able to pay higher
rates of interest on savings deposits than Canadian banks.

Mr. POLE. I do not know how authoritative that is.
Mr. SEIBERLING. I do.not, either, except that that is said in his
address published here in the Journal of the Canadian Bankers'
Association.
Mr. POLE. That is undoubtedly his honest opinion.
Mr. SEIBERLING. After my examination of you the other day,
some one said that he thought I was "out on a limb," and I want
to put this statement in the record, that, as far as I am personally
concerned, if we are going to concentrate banking in this country and
put it in the hands of fewer people, then I should favor restrictions
upon the rates which may be charged for money, and that is the
connection between my examination and the bill pending before the
committee.
Now, Mr. Comptroller, you said. the other day that you were in
favor of having banks also underwrite securities—is that correct?
Mr. POLE. Yes, certain classes of securities. The national banks
now have authority to deal in securities of certain types.
Mr. SEIBERLING. They are given the authority to deal in industrial
bonds?
Mr. POLE. Bonds, notes, and debentures are the three types of
securities which the law permits them to deal in.
Mr. AWALT. Under regulation, under our control.
Mr. SEIBERLING. But your statement was that you thought it
was perfectly proper for a large bank to have the right to underwrite
securities, and in these securities would be classed industrial bonds?
Mr. POLE. Bonds, notes, and debentures, under regulation of the
comptroller, under the present law.
Mr. SEIBERLING. Let us assume that an industry owes a large
bank in a large center $10,000,000 on notes runmng for three or four
months and that we have a stringent money market; what is to prevent this bank from calling this loan, and, of course, in a stringent
money market they could not go out and borrow $10,000,000 some
other place, and to say to them "We want a first mortgage on your
property, and we want you to put out a bond issue; we will underwrite
the bonds for you, and we will pay you 90 cents on the dollar, and you
have to give us 8 per cent interest and then you have to redeem these

a

5

BRANCH, CHAIN, AND GROUP BANKING

275

bonds at a fixed price; if you do not want to do that, you pay the
loan.,,
Is there anything to prevent that?
Mr. POLE. If the notes wore due, there would, of course, be nothing
to prevent the bank from requiring their payment under any system
Of banking. As to what further arrangements for financing that
Interest there might be, would be difficult to answer. If the bond
issue were acceptable, the bank might undertake to refinance it.
Under this plan which you just suggested, if the rate of interest were
regulated, I presume that would include bonuses of stock?
Mr. SEIBERLING. Yes, and a lot of things that I have not mentioned in my question; there are a lot of other things I could have put
in, but did not.
Mr. POLE. All of that would, of course, have to be taken into
consideration.
Mr. SEIBERLING. If a bank did not have the right to underwrite
'the bonds, and that profit was going to some other bank, is it not
Possible that they might not call the loan?
Mr. POLE. I should say that would be possible, if the bank wished
to continue the loan and knew that it was good, that it might retain
it in its portfolio.
Mr. SEIBERLING. Where you put all these transactions into the
hands of one institution, is there not great danger that just such
Manipulations as that will be carried on in order to make a profit?
Mr. POLE. Those things might happen, Mr. Seiberling, under any
form of banking, as far as I see. The protection of the public against
Manipulation is, of course, a question of banking ethics as well as
Public opinion, and I am convinced that there will always be plenty
of banking competition in this country which would prevent undue
advantage being taken.
Mr. SEIBERLING. Not on a loan of the size I have mentioned, in a
stringent money market.
Mr. POLE. That is a hypothetical question, which would be very
difficult for me to answer.
Mr. SEIBERLING. Of course, no bank would call a loan if it thought
it was reasonably good in a money market where there was plenty of
Money, and rates were low.
Mr. POLE. Unless under your proposal it might take advantage of
situation to obtain a better underwriting arrangement.
Mr. SEIBERLING. They would not be very apt to do that if the profit
Oil the underwriting was going to somebody else. You have not in
Your experience seen many banks working for a profit for other banks,
have you?
Mr. POLE. Not often.
Mr. SEIBERLING. That is very seldom?
Mr. POLE. Yes; never.
Mr. SEIBERLING. I was glad to hear you say "never," because I
never have.
Now, I want to ask you a few questions along other lines. I have
heard a good deal of criticism of the Federal reserve system in connection with the limitation on loans which can be rediscounted. Have
You heard any criticism of that kind?
Mr. POLE. That is stated in the law.

276

BRANCH, CHAIN, AND GROUP BANKING

Mr. SEIBERLING. I know .it is in the law, but have you heard
criticisms of the law, that it is too restrictive in the particular I
mentioned?
Mr. POLE. I would not say criticism. I have heard the matter
discussed, as to whether perhaps different characters of paper might
be admissible for discount at the Federal reserve banks, such as stock
exchange loans and other classes of secured paper.
Mr. SEIBERLING. How about paper secured by municipal bonds?
Mr. POLE. I think that has also been discussed.
Mr. SEIBERLING. As a matter of fact, the member banks, in.view
of these restrictions, are not getting anywhere near as much service
out of the Federal reserve banks as they could get otherwise—is not
that true?
Mr. POLE. I think not. I think the liberality with which the Federal reserve bank has dealt with its members is quite remarkable.
Mr. SEIBERLING. But they can not go beyond the restrictions fixed
by statute, can they?
Mr. POLE. That is true.
Mr. SEIBERLING. Within those limits, they have taken care of the
situation?
Mr. POLE. Yes.
Mr. SEIBERLING. Here is a large municipal bond house in Ohio that
buys municipal bonds, and they have to carry them in the banks until
they can sell them at, they say, a present rate of 8 per cent. These
bonds only yield about 4% to 5 per cent, and in many cases the rate of
interest is limited by statute. Do you think that if the law could be
amended so that loans with municipal bonds as collateral could be
rediscounted, that would help that situation?
Mr. POLE. That is a difficult question to answer without giving
full consideration to it. As to. whether or not the classes of paper
which might be eligible for rediscount by the Federal reserve banks
should be enlarged is a question which would require a great deal of
thought, and I have not given sufficient thought to it, Mr. Seiberling•
Mr. SEIBERLING. I suppose you will agree with me that municipal
bonds are a security that should.be.classed as nearly comparable with
Government bonds as any security in the country, will you not?
Mr. POLE. Speaking very generally, I should say yes. Of course,
there are numerous instances where they are not comparable in any
respect.
The CHAIRMAN. Will you yield there?
MT. SEIBERLING. Yes.
The CHAIRMAN. I would like to ask Mr. Pole a fundamental question. Do you consider it good practice to permit the rediscount of
loans secured by Government bonds?
Mr. POLE. I would see no objection to that. As a matter of fact,
banks indirectly have that privilege now.
The CHAIRMAN. Do you think that brokers'loans secured by stock
exchange collateral could safely be made subject to rediscount at the
Federal reserve bank?
Mr. POLE. I have not given that sufficient consideration, Mr. Chairman.
The CHAIRMAN. Do you think mortgage loans, when given as
security for notes to banks, could be made eligible for rediscount by
Federal reserve banks?

BRANCH, CHAIN, AND GROUP BANKING
rd

277

Mr. POLE. I have not given that sufficient consideration. It is a
veD- important question.
The CHAIRMAN. You do not care to express an opinion on that?
,er
, Mr. POLE. It requires a great deal of thought, and I would
ht
not
be prepared to answer that question now.
ck
The CHAIRMAN. All right, Mr. Soberling.
Mr. SEIBERLING. When the Federal reserve act was passed, it
was intended to help member banks by rediscounting
acceptances
for merchandise, and so forth, was it not?
Mr. POLE. The Federal reserve banks do purchase acceptances.
ce
, Mr. SEIBERLING. But in view of the fact that many corpora
ot
nave now financed themselves by the sale of stock and have a tions
amount of cash, we do not have acceptances any more to any large
such
extent as we did have, do we?
Mr. POLE. Yes, I think the acceptance method of financing transactions is increasing rather than diminishing.
Mr. SEIBERLING. It certainly is not in my city.
Mr. POLE. We are developing quite a good acceptance market
ROW in New York and elsewhere, which was unknown
before the
Pederal reserve act was passed in this country.
The CHAIRMAN. Will you yield again there?
Lt
Mr.
SEIBERLING. Yes.
il
The CHAIRMAN. Does not a good deal of.the acceptance
business
cover exportation and importation transactions?
)f
Mr. POLE. Quite largely.
re
The CHAIRMAN. During the last year and a half, in your observation as comptroller—and, of course, you have jurisdiction
over the
banks who hold those acceptances?
Mr. POLE. Yes.
The CHAIRMAN. Do you consider that acceptances are always a
very liquid form of paper, or has there been a tendency to consider
them as frozen assets?
, Mr. POLE. There may have been instances where accepta
nces
nave not been paid at maturity, but I know of no instance. They
are probably considered in banking circles as the most
liquid form of
Paper.
The CHAIRMAN. Under recent amendments to the Federal reserve
act, the scope of the service of acceptances has been largely extende
d,
has it not? In other words, it has been extended to cover
goods in
Storage in foreign countries, and in process of manufacture?
Mr. POLE. There have been certain changes in the regulations.
The CHAIRMAN. Does it not cover that particular situation?
Mr. POLE. I believe that, generally speaking, that is correct.
Mr. SEIBERLING. The Federal reserve banks are piling up an
enormous amount of wealth, are they not?
, Mr. POLE. The capital and surplus accounts of Federal
reserve
banks, of course, are growing. Is that what you mean?
Mr. SEIBERLING. Yes.
Mr. POLE. Yes.
Mr. SEIBERLING. Is there any reason in a situation
that kind
Why the law should not be liberalized as to the paper of
that can be
rediscounted?
100136-30—voL 1, PT 3-4

Nor

278

BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. You are going back to that same question again. I
have not given sufficient consideration to any changes in that respect
of the Federal reserve act. It is a very involved question.
Mr. SEIBERLING. I would like very much to have you give consideration to it and, if you reach a conclusion, I would like very much
to have it in the record.
Mr. POLE. It is a matter to which the Federal reserve board
itself is giving consideration to, and I have no doubt that at a later
date probably a member of the board might be able to give a more
definite answer.
Mr. SEIBERLING. You will agree with me that it would help the
business of the country a great deal if the law could be liberalized
without interfering with the functions of the Federal reserve bank,
permitting the rediscount of a wider range of paper?
Mr. POLE. Due to a change in the financing of industry over the
last few years, what is known as commercial paper is decreasing in
volume, but there is usually ample credit to accommodate industry
and agriculture under the present arrangements, and as to whether it
might be found necessary to .enlarge the scope of paper which the
Federal reserve bank should discount is quite open to question.
MT. SEIBERLING. I think that is all.
The CHAIRMAN. Mr. Steagall, have you any further questions to
ask the comptroller?
Mr. STEAGALL. Not right now.
The CHAIRMAN. Judge Brand, have you any further questions?
Mr. BRAND. I want to ask just one or two, Mr. Chairman.
Mr. Pole,in your judgment, what effect on business do the decreasing of the discount rate and the increasing of the discount rate by the
Federal reserve bank have?
Mr. POLE. That would depend very largely on what the condition
of the country was at the time of the rate change. Yesterday the
rate was lowered from 4 to 334 per cent..
Mr. BRAND. What was the reason assigned for that?
Mr. POLE. The effect of that, in my judgment, would be almost
entirely psychological, which would be good.
Mr. BRAND. You say it would have a good effect on business?
Mr. POLE. The psychological effect, I think, would be good.
Mr. BRAND. It is 3% per cent now in the New York Federal Reserve
Bank; that is the rate they reduced it to, on yesterday. Suppose that
thirty days from now, this bank runs it up to 4% or 5 per cent; what
effect would that have?
Mr. POLE. I could not answer that question. That would depend
upon the condition of the country at that time. I could not answer
that question now.
Mr. BRAND. Well, it would have a different effect than decreasing
it, would, would it not?
Mr. POLE. Judge, you are asking me what would happen in thirty'
days time if the discount rate were increased or decreased. I can not
answer that, because I do not know what the necessity for any change
might be in thirty days from now. I would like to answer your
question if I could, but I think it would be difficult for me to venture
any guess on a proposition of that kind.

"RI

BRANCH, CHAIN, AND GROUP BANKING

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18

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ie
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Mr. BRAND. They have reduced it now from 4 per cent to 3% per
cent, as has already been stated. What effect, in your judgment,
Will this reduction have on farm commodities, and on prices generally?
Mr. POLE. I think that the psychological effect of a reduction in the
rediscount rate at this time is decidedly good. As to whether it
Would have any practical effect as far as the bank's loaning rate is
concerned, I can hardly believe that it would have any effect at all.
Mr. BRAND. It would have some effect, would it not, if they put
it back to 0?
Mr. POLE. Banks are borrowing very little now from the Federal
neserve banks.
Mr. BRAND. That is one reason, I suppose, why they reduced it
t° 3% per cent, is it not?
,Mr. POLE. My opinion is that the particular reason for the reduc:ical in the rate at this time would be to perhaps create a little easier
'eeling on the part of the public that money was easy, and that there
Was no particular reason for retrenchment, but that business could go
.Iiead with the reasonable assurance that money would continue to
be cheap and plentiful.
Mr. SEIBERLING. Mr, Brand, if you will get the United States
UailY for this morning, you will see that it gives the reason why the
rate is down.
Mr. BRAND. I have not had a chance to z‘ad to-day's issue of this
aper, but at the same time I want to get Mr. Pole's opinion about it.
had'intended to ask this the other day, without knowing, of course,
that it was going to be reduced from 4 per cent to 3% per cent yestergaY, but others prolonged their questions, so that I did not have the
oPp_ortunity.
Now, Mr. Pole, it would make a decided difference in the prices of
farm
commodities and in the prices of all other things that people
k_
have to buy if they should run it up say thirty days from now to
1% or 5 per cent?
Mr. POLE. I think there is not much question of that, Judge.
Mr. BRAND. Mr. Pole, do you think that any such power as that
Ought to be lodged in the hands of seven men?
Mr. POLE. I think there should be no change in the number of men
la which such power is lodged.
Mr. BRAND. In any given number of men, or a reasonable number?
Mr. POLE. I have not given any thought to the question, as to
,WIlether or not the membership of the Federal Reserve Board should
ee reduced or increased.
The CHAIRMAN. Will the gentleman yield there?
BY your answer, I am infeiTing that the Federal Reserve Board
"es the discount rate—is that correct?
Mr. POLE. The Federal Reserve Board approves or disapproves
11°Z.change in the discount rate.
The CHAIRMAN. Do they ever initiate, or have they ever initiated,
a rate?
Mr. POLE. That would be a question that you would have to inquire
°f the Board.
The CHAIRMAN. But you are a member of the Federal Reserve
toard?

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BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. I have been a member since I have been Comptroller
of the Currency.
The CHAIRMAN. During your term of office as a member of the
Federal Reserve Board, have they ever initiated a change in the
discount rate?
Mr. POLE. Not to my knowledge.
The CHAIRMAN. Referring to Judge Brand's question about the
lowering of the discount rate to 334 per cent, that is the lowest rate
since the summer of 1927, is it not?
Mr. POLE. I believe so.
The CHAIRMAN. What effect did the lowering of the discount
rate have in the summer of 1927?
Mr. POLE. It had a stimulating effect.
The CHAIRMAN. Stimulating to what extent?
Mr. POLE. I was not a member of the Federal Reserve Board
then.
The CHAIRMAN. No; but you have an observation.
MT. POLE. A marked extent.
The CHAIRMAN. Is it not a fact that it did stimulate commoditY
prices about 3 per cent?
Mr. POLE. It did stimulate commodity prices, but to what extent
I would not be prepared to say.
The CHAIRMAN. It stimulated speculative activities too, did it
not?
MT. POLE. I think BO.
The CHAIRMAN. And it resulted in the export of a large amount
of gold, did it not?
Mr. POLE. There was a considerable amount of gold exported
about that time, but as to whether or not that was the reason for it,
I could not say.
The CHAIRMAN. Well, inasmuch as the rate is now lowered to 3$
per cent, do you think that similar results will come about?
Mr. POLE. It might have that tendency.
The CHAIRMAN. DO you think it might encourage speculation?
Mr. POLE. That was embraced in your question. I say, it might
have that tendency.
The CHAIRMAN. All right.
Mr. STEAGALL. Just in that connection, with your permission, Mr.
Brand
Mr. BRAND. Yes.
Mr. STEAGALL. It was the avowed purpose of the Federal Reserve
Board, and was made known to the public some months back, that
the rate should be fixed with reference to its effect upon speculation,
was it not?
Mr. POLE. I know of no such statement on the part of the board.
Mr. STEAGALL. Maybe I have not expressed myself clearly in
technical way.
Mr. POLE. It is possible that such a statement might have been
made, but I say that if it was made I am not familiar with it.
Mr. STEAGALL. Well, in any event, the board did issue a warning'
the avowed purpose of which was to notify the public that the rates
would be adjusted in order to affect the situation unless the necessiti
for it was removed. That happened, did it not?

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281

Mr. POLE. The act passed clearly indicates that Federal reserve
-credit is not intended to be employed in speculative transactions.
;he
Mr. STEAGALL. I understand that, and I am not raising any question
:be
about that. The inquiry up to the point where I came into the distussion was with respect to the effect of the change or the various
changes in rates and as to what purpose was contemplated by those
changes, and, as I understand the situation, this change that was
ite
recently made was not accompanied by any public statement from
the Federal Reserve Board—is that right?
Mr. POLE. As far as I know.
Mr. STEAGALL. But heretofore the board has issued statements to
the public respecting changes in rates and the purpose sought to be
accomplished by those changes—is not that true?
Mr. POLE. There have been statements made by the Federal
ircl
Reserve Board, but my recollection is vague as to the particular
language of them. Those statements of course could be supplied for
the record if you desire them.
Mr. STEAGALL. Mr. Pole, I believe you said in answer to a question
Lty
by Mr. McFadden that the Federal Reserve Board did not initiate
rates. As a practical matter, is not this true, that no Federal reserve
bank acts in a matter of that sort without a full consultation and
understandin
g with the Federal Reserve Board? That is the way
it
those changes are made, is it not?
Mr. POLE. I think that is not a fact.
Mr. STEAGALL. Do you think in practice that the Atlanta bank
lIii
Would ever change its rate to the extent of the change recently made
in New York without first taking up the matter for discussion with
,ed
the board here?
it,
Mr. POLE. Yes.
Mr. STEAGALL. They do that?
Mr. POLE. Yes.
Mr. STEAGALL. I had this thought,that the mere technical expresalon describing what the board does with respect to the initiation of a
rate was a sort of a technical differentiation that meant little in
11$
Practice. It was my idea that in a matter of that importance, the
district bank would bring the Federal Reserve Board into conference
t!‘h that such action would not be said necessarily to have been initiated
fr.
by the Federal Reserve Board, nor, on the other hand, would it have
.been done independently of them, but that, as a practical proposition,
Lt Would be in the nature of joint action.
ve
,
Mr. POLE. As a practical proposition, Mr. Steagall, it is sometimes
at
by certain banks discussed prior to any change on the part
of such
bank, but not generally so.
,Mr. STEAGALL. What is the practice of the Federal Reserve Board
.d.
With reference to changes proposed by the different Federal reserve
banks?
Mr. BRAND. You mean as to the rate of discount?
so
Mr. STEAGALL. In the matter of fixing the rates of discount?
Mr. POLE. Whenever there is a rate change proposed, the board
discusses
the question very thoroughly and approves or disapproves it.
es
Mr.
STEAGALL.
Have there been instances where the Federal
ty Reserve Board disapproved
such rates?
Mr. POLE. Yes.
Mr. STEAGALL. How many instances of that kind?

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BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. I am not prepared to answer that.
Mr. STEAGALL. What occurred when that situation arose?
Mr. POLE. When the Federal Reserve Board disapproves a rate?
the rate remains unchanged.
Mr. STEAGALL. Have there been instances where a rate was put in
effect, and announced by a district bank, and then for lack of approval
of the Federal Reserve Board, that rate would be withdrawn or
changed?
Mr. POLE. There may have been such instances, Mr. Congressman.
Mr. STEAGALL. What would you think of legislation to fix a uniform rediscount rate?
In the first place, let me ask you this question: What would you
think of requiring a uniform rediscount rate for all the banks, the
12 banks?
Mr. POLE. That is entirely too large a question to answer off-hand.
Mr. STEAGALL. Each bank has access to the loaning facilities of all
the other banks, has it not?
Mr. POLE. Yes.
Mr. STEAGALL. It is one great system under one control, as far 0
the Government is concerned?
Mr. POLE. Yes.
Mr. STEAGALL. That leads to the other question: What would you
think of fixing the rediscount rate by law?
Mr. POLE. I have not given consideration to that question and
could not answer it off-hand. It is far too important.
Mr. BRAND. As I understood you, Mr. Pole, none of the 12
Federal reserve banks on its own responsibility decreases the discount
rate without first consulting the Federal Reserve Board?
Mr. POLE. You misunderstood me. I said that the rates were
initiated by the banks themselves and were subject to the approval
or disapproval of the board.
Mr. BRAND. Suppose that the board disapproves a proposed increase or decrease; is that final and binding on the proposing bank?
Mr. POLE. The board has the right to approve or disapprove.
Mr. BRAND. Have you ever known of the.Federal Reserve Board
disapproving any rate, either a decrease or increase in the discount
rate, proposed by the New York Federal Reserve Bank?
Mr. POLE. Yes.
Mr. BRAND. Was it a decrease or increase?
MT. POLE. Both.
Mr. BRAND. I am surprised to hear that.
Now, Mr. Steagall, of Alabama, Mr. Chairman, has asked two questions that I intended to propound, so I will finish very briefly.
Mr. Pole, does not the Federal Reserve Board recognize that thel
have full authority under the Federal reserve act to suggest to all
Federal reserve bank an increase or decrease in the discount rate?
Mr. POLE. I do not know what the opinion of the board is on thni
subject.
Mr. BRAND. Have they, in any given instance, suggested to any.0f
the banks, within your knowledge, a decrease or increase in the chscount rate?
Mr. POLE. If they have, I am not aware of it.
Mr. BRAND. I am going to ask you another broad question. De
YOU not think that the Federal Reserve Board feel that they have the

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authority, under the provisions of the Federal reserve
to increase
or decrese the discount rate so as to effect the pricesact,
of farm cornroodities and the prices of every other thing people purchase?
Mr. POLE. I could not speak for the board, Mr. Brand.
Mr. STEAGALL. Your question was whether, under the provisions
of the law, they contend that they have that authority?
Mr. BRAND. Yes.
Mr. POLE. It is a question of interpretation. I would not be
authorized to speak for the board on that subject.
Mr. BRAND. Mr. Pole, let me get down to a more practical and
Personal proposition.
As I understand, in one of the counties of the State of Georgia, and
I know it is so of one or two counties in the State of Alabama
, and I
know it is so of one of the counties in Mr. Stevenson's district, every
bank in the county has failed. Take the State of Georgia; it has
repealed the law which authorized the. establishment of branch
banks. That county has no banking facilities, on account of three
banks having failed in the last 60 days.
Now, what system of banking would you advise the people of
a
county as that to adopt, where they can have no branch bank such
under
the law—would you advise either the chain or the
group banking
_ proposition?
, Mr. POLE. Between chain and group banking, I prefer group
(making.
Mr. BRAND. Then, under the law of Georgia, it permitting no
branch banking at present, the Atlanta banks, for instance, could
establish a bank down in that county where there are now no banks,
could they?
Mr. POLE. An independent bank, the stock of which might
owned by certain persons who were interested m the Atlanta bank. be
Mr. BRAND. It would have to be an independent bank, but it
would be within the classification of group banking?
Mr. POLE. The majority of the stock perhaps might be controlled by
the holding company in Atlanta.
Mr. BRAND. As our law exists at present, there is no opportunity
or those people to establish a branch bank in that particul
ar county,
Is there, under the McFadden bill or any other bill?
Mr. POLE. No, assuming that your Georgia law does not permit the
or anization of a State system of branches.
Mr. BRAND. They have repealed that la. w.
Do you not think, and is it not your opinion,
i
that it lies within the
Power of the Federal Reserve Board, by adopting a policy of deflation
or inflation, absolutely to control the price of farm
commodities,
thereby having the effect to increase or decrease the same?
„ Mr. POLE. I think action might be taken by the Federal Reserve
Board which would affect the prices of commodities.
, Mr. BRAND. Like cotton, for instance, and wheat and corn.
It
has done it in the past, has it not?
Mr. POLE. I think the prices of commodities, as I said before,
have been affected by the rate changes.
Mr. BRAND. Does not the board so construe its Federal Reserve
Act as to give its
board the authority—if the.board wishes to exercise it—to adopt such a policy as to run the prices of farm commodi
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BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. As I stated before, Judge, assuming that you have reference to the increase or decrease in the discount rate, those changes
are initiated by the Federal reserve banks themselves and not by the
Federal Reserve Board.
Mr. BRAND. I was talking about the effect that it would have.
uppose that the Federal reserve banks get together and decide that
they are going to deflate the prices of all farm commodities, and their
action is approved by the Federal Reserve Board—and you say that
they generally approve what they ask.
Mr. POLE. I did not say that.
Mr. BRAND. I thought you said that they generally approved.
Mr. POLE. Not at all. I said quite the contrary. I said they did
not always approve.
Mr. BRAND. I said generally.
Mr. POLE. I would not go so far as to say that.
Mr. BRAND. Suppose that the 12 Federal reserve banks did decide
that the prices of wheat and cotton are too high, and that their action
were approved by the Federal Reserve Board; could they not effect
a substantial decrease in the prices of cotton, wheat and corn?
Mr. POLE. I could not answer that question, Judge.
Mr. SEIBERLING. May I ask just one question there?
Mr. BRAND. Yes.
Mr. SEIBERLING. Mr. Comptroller, is it not a matter of quite
current knowledge that the deflation following the war, which resulted in the big collapse in 1921, was caused by the Federal reserve
banks extending credit so as to keep Liberty bonds at par that had
been sold to the public?
Mr. POLE. There are some who entertain such an opinion as that.
Mr. SEIBERLING. You do not know whether that is a fact or not?
Mr. POLE. As to what their reasons might have been for a low
rate of rediscount, I would not precisely be able to say.
Mr. SEIBERLING. When they found that they could not keep Liberty bonds at par—and they went down, I think, to 85, was it not?
Mr. POLE. I think it was.
Mr. SEIBERLING. Then they contracted the credit, because they
could not go any further.
Mr. POLE. Credit was contracted, but as to whether it was because they could not go further or not is debatable.
Mr. SEIBERLING. The object of liberalizing credits was not accomplished, and they had to reverse the thing.
Mr. BRAND. I had not finished my question, Mr. Polo, in connection with the increasing and decreasing of the discount rate. I
asked the question if the board did not feel that they had authority
to adopt a policy, in connection with the banks, which would have
the effect of decreasing or increasing the price of farm commodities,
if they saw fit to adopt such a policy?
Mr. POLE. You are asking me, Judge, to represent the opinion of
the board, and I can not do that.
Mr. BRAND. Do they not claim that they have that authority?
Mr. POLE. I do not know what the board does claim, Judge.
Mr. BRAND. I do not mean to ask an unfair question.
Mr. POLE. I know you do not.
Mr. BRAND. That is all I care to ask.
The CHAIRMAN. Mr. Goldsborough?

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Before you start, Mr. Goldsborough, I would like to finish with
Mr. Pole for this period. Later on, of course, we will have to have
Mr. Pole back again, but I am trying to arrange to finish with him
to-day. I do not want to hurry you unduly, Mr. Goldsborough, but
We still have Mr. Busby and Mr. Dunbar, and if you can arrange it
so that we can finish with Mr. Pole to-day, I think we should do so.
Mr. POLE. It is very kind of you, Mr. Chairman; I should appreciate it very much.
The CHAIRMAN. The Comptroller has been very liberal in giving us
his time, and he has also given us very material information.
Mr. GOLDSBOROUGH. Mr. Pole, getting back to what seems to be
a little closer to the subject that we are here to discuss, I understood
You to say a few minutes ago that you favored group banking over
Chain banking. Did I understand you correctly?
Mr. POLE. Of the two, I should prefer group banking.
Mr. GOLDSBOROUGH. You do not think that either type of banking
la sound or good, do you?
Mr. POLE. I would not undertake to say that, Mr. Goldsborough.
Mr. GOLDSBOROUGH. Do you favor chain banking?
Mr. POLE. I do not.
Mr. GOLDSBOROUGH. Do you favor group banking?
Mr. POLE. As an ultimate system, I do not.
Mr. GOLDSBOROUGH. How do you distinguish between an ultimate
System and the system that is existing at this time?
Mr. POLE. Under the present law, branch banking is not possible.
Group banking is possible under the present law, and I know of very
?zany instances where groups have been formed which have resulted
in great benefits to the communities in which they are operating, so
that there is much good in group banking. I also know of individual
Chains of banks which are operating successfully and are well and
carefully managed; but, speaking of them as systems of banking, I
niuch prefer the branch banking idea.
Mr. GOLDSBOROUGH. I understand, but do you care to say whether
or not you approve of chain and group banking? You answered
before, but then you appeared to have modified your statement.
Do you care to make a direct statement as to whether you do or do
not approve of group banking or chain banking as being sound in
theory?
Mr. POLE. I do not approve of chain banking.
do not approve
Of.group banking as a system of banking which is best
adapted to
this country.
Mr. GOLDSBOROUGH. NOW, would you favor legislation which
Would make chain banking impossible if it were possible to formulate
kich legislation, as chain banking is now conducted?
Mr. POLE. Yes.
Mr. GoLnsnorioucii. Would you favor legi,;lation, if such were
Possible, which would do away with group banking, as now conducted?
, Mr. POLE. That involves the que8tion as to what legislation would
pc offered to take the place of group banking, I think. If you ask
tile the question whether group banking should be aboiished, and
undertake to unscramble those groups which have already been
formed, I would not be in favor of that, but I would be in favor of

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BRANCH, CHAIN, AND GROUP BANKING

regulating those groups by the extension of supervisory powers on
the part of the comptroller. But as to legislation which might affect
the future expansion of group banking, I think that I should be in
favor of limiting that and regulating it.
Mr. GOLDSBOROUGH. You would not be in favor of stopping it
for the future and making it impossible either to increase the size
of the present groups or form other groups in the future?
Mr. POLE. I think that that would correct itself automatically, if
banks were given the privilege of extending, through the method of
operation of branches.
Mr. GOLDSBOROUGH. Of course I know your view on branch banking and if you would rather not answer my question, sir, it is perfectly satisfactory to me. I would rather have you say you do not
prefer to answer than seem to evade it.
Mr. POLE. It is a pretty involved question; you are asking me what
I would rather do—
Mr. GOLDSBOROUGH. My question was not involved. Read the
question.
(The reporter read the question.)
Mr. GOLDSBOROUGH. That question certainly is not involved, as
far as I can tell.
Mr. POLE. It would depend upon what you have to offer in place
of group banking. If such legislation as you speak of proposed to
give something in place of group banking, I would say yes to your
question. If it offered nothing at all by way of substitute legislation,
my answer would be no.
Mr. GOLDSBOROUGH. Your answer is, as I understand it, this, that
if you can not have branch banking, you prefer group banking to
the unit banking?
Mr. POLE. Yes, sir.
Mr. GOLDSBOROUGH. I think, in your various—
Mr. POLE. May I add something there?
Mr. GOLDSBOROUGH. Yes.
Mr. POLE. Under proper regulation.
Mr. GOLDSBOROUGH. I may be confusing what you have said with
what others have said, and I am not sure that you made the statement that I am now about to refer to.
In the various addresses you delivered this summer, or in your
report to the Federal Reserve Board, I believe you stated, did yoll
not, one reason for the extension of the right to establish branches
of banks, was the fact that these groups were being formed that you
you did not approve of? I may be wrong about that. That is only
my recollection. I know that has been said a great many times.
Mr. POLE. I have made objections to the group banking system,
Mr. Goldsborough, in my addresses, my particular reasons being that
it is difficult to supervise groups of banks by reason of the fact that
many groups are composed of national banks, of member banks,
and of nonmember State banks, some of which we have jurisdiction
over and some of which we have not, and for other reasons, and.I
think I have usually said as an ultimate system, I was very much in
favor of branch banking as against group banking.
Mr. GOLDSBOROUGH. Your idea is, I suspect, that if it were permitted further to extend branches in accordance with the plans which

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You have suggested, that that would tend to abolish or do away
With group banking, automatically?
Mr. POLE. I feel quite sure that the groups themselves, at least
in a large number of cases, would prefer to operate under the branch
System rather than the group system and I think that that would
automatically change from one to the other.
Mr. GOLDSBOROUGH. Now,the State of California has had extensive
systems of branch banking for quite some years, has it not?
Mr. POLE. Yes.
Mr. GOLDSBOROUGH. The group banking began, I think, not more
than two years ago. Is not that right? I do not mean in California;
I mean anywhere, as far as we know it?
Mr. POLE. I think that is correct, including California.
Mr. GOLDSBOROUGH. Including California?
Mr. POLE. Yes, sir.
Mr. GOLDSBOROUGH. Now, is it not a fact that in California there
has been a great extension of group banking, as in other parts of the
United States?
Mr. POLE. I should say by no means.
Mr. GOLDSBOROUGH. Well, I did not anticipate that answer, but
the December number of the Federal Reserve Bulletin states what I
am saying to you now.
Mr. POLE. Oh, does it? I am perfectly willing to accept your
statement for it. I was not aware that group banking had developed
in California to the same degree that it had in other States.
Mr. GOLDSBOROUGH. I did not bring the Bulletin with me. I did
not anticipate that answer.
Mr. POLE. I am surprised when you make that statement but no
doubt your information is correct.
Mr. GOLDSBOROUGH. Of course, if my premises are not correct, it
is not worth while to discuss it further—that is, if my premises do not
agree with yours.
Mr. POLE. That is a question of fact.
Mr. GOLDSBOROUGH. Of fact; yes.
Mr. POLE. Decidedly so.
, Mr. GOLDSBOROUGH. Assuming that is the fact, certainly branch
Winking in California did not interfere with the development of
group banking in California?
Mr. POLE. Well, Mr. Goldsborough, branch banking is not perraitted any more in California than it is in any other State.
Mr. GOLDSBOROUGH. But it has been extended so much further
than any other States
Mr. POLE. Not since the passage of the McFadden Act. These
sYstems were inaugurated and in operation prior to that time.
Mr. GOLDSBOROUGH. Yes.
Mr. POLE. No branches have been created outside of the cities
since that time.
Mr. GOLDSBOROUGH. They have state-wide branch banking there
too?
Mr. POLE. Neither can a large bank or any other bank operate a
SYstern of branches unless it wishes to remain outside of the
Federal
Reserve System.
Mr. GOLDSBOROUGH. Well, the point I was emphasizing or trying to
emphasize, was that branch banking had not stopped group banking.

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BRANCH, CHAIN, AND GROUP BANKING

Where branch banking has been in existence in a very practical way,
it has not interfered with group banking, where you indicate your
branch banking system would probably do away with a system that
you probably disapprove of.
Mr. POLE. There is no branch banking now.
MT. GOLDSBOROUGH. In California?
Mr. POLE. They can not extend their branch banking systems and
remain in the Federal Reserve System.
MT. GOLDSBOROUGH. I am thoroughly aware of it. But they do
have branch banking and have it all over the State and it has not
stopped group banking.
Mr. POLE. It would stop group banking, in my opinion, if those
groups were permitted to operate under a branch system. But it ig
because there is no right for a bank to operate branches that the
group systems are developing.
Mr. GOLDSBOROUGH. Then, as you said a few moments ago, the
group system is a lesser evil than the unit system?
Mr. POLE. I said that a group system was preferable to the chain
system.
Mr. GOLDSBOROUGH. You said it was preferable to the unit system,
also?
Mr. POLE. Yes; I would agree with that.
Mr. BRAND. What do you mean by "unit system"?
Mr. GOLDSBOROUGH. Independent banks.
The CHAIRMAN. Will you yield for a question?
Mr. GOLDSBOROUGH. If you can defer your question, I would
appreciate it, because I thinkI have something going now.
The CHAIRMAN. I think this is in line with your questions.
Mr. POLE. I want to ask, in line with the questions that have been
put and answered, in regard to chain and group banking: You have
recommended that branch banking. be extended to trade areas and
stop there. I think that is correct, is it not?
Mr. POLE. Yes; except that I— .
The CHAIRMAN. You have also said that you would like to prohibit the control of those main banks in trade areas by another grouP
or bank; for instance, like—
Mr. POLE. A consolidation of a large group so as to form a banking
monopoly.
The CHAIRMAN. Yes.
Mr. POLE. I have.
The CHAIRMAN. If you stop there, group banking and chain banking will continue as it is now operated under State law, will it not?
Mr. POLE. It might do so.
The CHAIRMAN. Then, under your plan, you would not stop grouP
and chain banking in the United States?
Mr. POLE. There might still be chains and groups formed after the
passage of such branch banking legislation as I have suggested.
The CHAIRMAN. It is all proceeding under State law now,and 1?0
national law could forbid the continuance of State group and chalo
banking, could it?
Mr. POLE. The fact that the Federal reserve system might, as
condition of membership, impose such conditions as would make
impracticable, might stop it.
The CHAIRMAN. Is that your suggestion for controlling it?

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Mr. POLE. I made no suggestions for controlling that, Mr. Chairman.
The CHAIRMAN. Do you care to make a suggestion?
Mr. POLE. Not at this time.
The CHAIRMAN. Well, inasmuch as you have asked for an extension
of branch banking to trade areas and you have expressed your unqualified opposition to group and chain banking .
Mr. GOLDSBOROUGH. Not to-day, but previously, as I understand
it. To-day he defends group banking over unit banking, as hinderStood his answer.
The CHAIRMAN. I think it would be helpful to the committee if
You will tell the committee just how you propose to stop group and
chain banking under your plan of extending branch banking in trade
areas.
Mr. POLE. My plan is this: If banks are given the right to operate
branch systems, the advantages. would be such as to automatically
convert these groups and chains into branches for the most part.
Mr. GOLDSBOROUGH. Mr. Pole, the arguments which have been
made by you, I think, as well as other?, in favor of branch banking,.
have been that it is necessary to do it in order to enable the national
bank system to compete with State banking systems which do permit
branch banking. That is a fact, is it not?
Mr. POLE. That is a factor. .
Mr. GOLDSBOROUGH. You distinguish between a fact and a factor?
Mr. POLE. Yes.
Mr. GOLDSBOROUGH. I see. Now,yr.Pole, suppose it were practicable for Congress to pass legislation which would entirely stop
branch banking within the States. Would you still then recommend
an extension of branch banking by the Federal Government?
Mr. POLE. Yes.
Mr. GOLDSBOROUGH. Suppose it were possible for Congress to pass
legislation which would stop chain and group banking right where it is
Within the States—State banks—would you then think it proper for
Congress to pass legislation which would stop further group or chain
banking among national banks?
Mr. POLE. Not without offering something in its place.
Mr. GOLDSBOROUGH. Do you not think in communities where
banks have failed on such a scale as to indicate there was something
radically wrong, that the community had failed first before the bank
had failed?
Mr. POLE. Under the present system that might be correct.
Mr. GOLDSBOROUGH. Is it not a fact, Mr. role, that this condition
of failures, which you have testified to, and which has been made a
Matter of comment in numerous articles by yourself and others during
the last six or eight months, is.almost entirely directly attributable
to the after-war conditions in this country? .
Mr. POLE. No. The number of banks which have failed includes
a large number of banks which have been organized since the war.
Mr. GOLDSBOROUGH. Well, I do not know about the percentages.
Mr. POLE. It is at least 10 per cent.
MT. GOLDSBOROUGH. HOW IS that?
, Mr. POLE. At least 10 per cent of failures have been of banks which
have been organized since the period referred to.

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BRANCH, CHAIN, AND GROUP BANKING

Mr. GOLDSBOROUGH. I will change the question. Is not substantially all of the 90 per cent of banks which were in existence prior to
the war and which have failed since the war, have not these failures
been the result of after-war conditions?
Mr. POLE. I should say not.
Mr. GOLDSBOROUGH. Do you not believe it is true to a very great
extent?
Mr. POLE. To an extent, Mr. Goldsborough.
Mr. GOLDSBOROUGH. Have you any idea to what extent?
Mr. POLE. Well, to a considerable extent.
Mr. GOLDSBOROUGH. Do you think it is fair, in attempting to
conduct a judicial—I am not referring to these hearings here—in
attempting to argue this matter judicially, do you think it fair to
lay the great accent which has been laid on the failure of small banks
since the war in the last nine years, as any real evidence of the breaking down of the unit system?
Mr. POLE. I do, indeed.
MT. GOLDSBOROUGH. You have just said that you thought afterwar conditions were very largely the cause of these failures. You
could not tell to what extent. If you can not tell to what extent,
but you think to a large extent, how are you in a position to say?
Mr. POLE. I think failures have been accentuated to a considerable
extent by the economic conditions in the agricultural sections of the
country, but I do not think that is the basic reason.
Mr. GOLDSBOROUGH. Mr. Pole, is it not a fact that banks have
been gradually failing and trying to hold on and one would be a little
stronger than another and then first one would fail and then another/
almost all due entirely to after the war deflation? Banks filled
with frozen paper, bad mortgages, etc., have been just hanging on and
gradually, first one then another, would fail as time went by. We
countrymen have understood that to be the condition.
Mr. POLE. I agree that that has had its effect.
Mr. GOLDSBOROUGH. Now,if that is the cause, if that is the reason,
it does not constitute an argument against the unit system. If a
man has got a pimple on his hand and it may be caused from fifty
different diseases, no doctor would say, arbitrarily, it was because
of some disease he was interested in, you know.
Now, Mr. Pole, I have made rather careful inquiry from the
Bureau of Investigation of the Federal Reserve Board and I may be
mistaken—I will not undertake to tie them into this because they
may say I am wrong and they might not have meant exactly what
I thought was in their minds—but I am strongly of the opinion that
they think that a substantial number of these failures which have
happened in the last nine years, are directly caused by the after-war
deflation.
Mr. GOLDSBOROUGH. Do you think it is possible—practically possible—for a bank of $25,000 capital to make a success?
Mr. POLE. There are such banks that can be made successful and
are successful to-day.
Mr. GOLDSBOROUGH. Do you think it is possible for a bank with a
less capital than $25,000 to succeed?
Mr. POLE. There are undoubtedly banks with less than 823,000
capital succeeding.

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Mr. GOLDSBOROUGH. A mere illustration is never convincing, but
in 1909, I was the attorney in the set-up of banks in my own community with a capital stock of $12,000. They both have been wonderfully successful.
I sent for the last statements of each bank, but I have had only one
answer so far. This institution has been in extence in a little place of
300 inhabitants for nearly 21 years now. It has absolutely around it
nothing but a rural community and is surrounded, within a radius
of 7 or 8 miles, by large banks in county seats—comparatively
large banks. That bank paid a dividend of 6 per cent from its
inception. Since 1918 it has paid a dividend of 20 per cent. It has
always paid 4 per cent on savings deposits. It has about $4 in the
savings deposits to every $1 it has in commercial deposits, and its
stock is now worth 8 for 1. Its capital stock is $12,000; surplus
S73,000 and undivided profits, $7,928.80, according to this last
statement. Its deposits are $780,000 plus. It pays its cashier
83,200 a year. That is the Hillsboro, Queen Anne, Bank of Hillsboro,
Md.
The other bank I have in mind is the Goldsborough Bank of Goldsborough, Md., a village of about 150 inhabitants. It has done nearly
as well.
Do you think that the banking business is like any other business?
If you are a good banker, you bank makes money and if you are not
a good banker your bank does not make money? Do you not think
that is the real crux of the situation?
Mr. POLE. I think that is a very important phase of it and much
more important, perhaps, than the question of economic conditions
to which you refer.
I assumed these banks to which you refer were not affected by the
economic conditions?
Mr. GoLnssoRouGH. Yes sir; after the war they were loaded up,
f)ut came out all right.
Mr. POLE. By reason of good management?
Mr. GOLDBBOROUGH. By reason of good management; yes. The
,section, the eastern shore of Maryland, is just as distinctly rural as
1°Nva. I am satisfied of that.
Mr. POLE. My point is that the reason for the bank failures in
communities is not entirely—I think you used the word—due to
economic conditions because these banks, as you say, were just as
aubject to them as other banks in rural communities. It survived and
Other banks failed.
Mr. GOLDSBOROUGH. Mr. Pole, with the good roads we have now
and telephones, radio and frequent bank meetings and the very,
very close touch that the country banks are in now with the metroPolltan banks, do you not think that country bank management is
iniproving very, very rapidly, especially in the last 10 years, just
as the country doctor or country lawyer and other professional men
are radually reaching the average level?
fr.
. POLE. We have in our office so very, very many evidences of
Poor bank management, Mr. Goldsborough, that it is doubtful, in
r11Y mind, as to whether the better element among the bankers is
nding a resting place among the small country banks. I doubt very
rinich whether the management of country banks, speaking generally,

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BRANCH, CHAIN, AND GROUP BANKING

has improved, perhaps in proportion to the other branches of business
and professions.
The CHAIRMAN. Will you yield a moment?
Mr. GOLDSBOROUGH. Just one other question, if you can reserve
that.
I have an article that I cut out of some paper yesterday. I think
it is the Marylander and Herald, probably one of our local papers.
It is in the pot metal type and evidently taken from some city paper.

ef
it

A survey of State banking departments by the State bank division, Amerian
Bankers Association, discloses a distinct tendency the last five years to take
bank supervision out of politics, to increase the discretionary powers of banic
commissioners, to lengthen their terms of office, to supply them with adeqte
forces of qualified examiners and to relieve banking departments of duties foreign
to banking, says a recent statement.

Then the statement continued, and finally this is said:
The office of bank commissioner is now operated as an independent department
of State government in 34 States.

Do you not think that the management of country national ban'5
ti
is comparable to the management of country State banks?
Mr. POLE. Y09.
Mr. GOLDSBOROUGH. And do you not think that the management
of country State banks is being greatly assisted by the increasinglY
efficient State bank departments?
Mr. POLE. No doubt the State banking departments do render 0
great deal of assistance to the executives of the banks in the matter
of management.
Mr. GOLDSBOROUGH: Now, Mr. Chairman, I beg your pardon. I
wanted to finish that line.
The CHAIRMAN. Have you finished with the witness?
Mr. GOLDSBOROUGH. Oh, no.
I gather from what you stated the other day, that you though;
mergers in the central reserve cities of New York and Chicago hau
proceeded far enough. Did I interpret what you said correctly?
Mr. POLE. I do not recall having made such a statement as that,
ti
Mr. Goldsborough.
Mr. GOLDSBOROUGH. Well, my recollection is quite distinct, btIP,
of course, I may be wrong. Mr. Busby thinks you stated you are In
favor of larger banks.
Mr. BUSBY. My recollection is that in a very short answer
stated that you were not in favor of larger banks than now existed 1-0
centers like New York and Chicago.
Mr. AWALT. He did not say that.
Mr. BUSBY. Then, the answer is, he did not say that.
Mr. POLE. Let me answer my own questions.
(Discussion off the record.)
Mr. GOLDSBOROUGH. I will put my question another way. MY
recollection of the statute is that the Comptroller of the Currency WO
to approve mergers.
Mr. POLE. Consolidation.
Mr. GOLDSBOROUGH. That is the same thing, as far as I know.
Mr. POLE. Practically so. I might qualify it by saying that the 13
Comptroller of the Currency approves consolidations; but a bank,
0
has the right to purchase the assets and assume the liabilities '

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another bank, without approval of the comptroller, which is, in
effect, a merger without the approval of the comptroller.
Mr. GOLDSBOROUGH. Mr. Pole, last summer .the Guaranty Trust
Po. and the National Bank of Commerce consolidated, did they not,
In New York?
Mr. POLE. Yes.
Mr. GOLDSBOROUGH. Was that consolidation approved by the
Comptroller of the Currency?
Mr. POLE. No, sir; it was a consolidation under State charter, the
national bank going into liquidation. The comptroller's approval
waS not necessary.
Mr. GOLDSBOROUGH. NOW, Mr. Pole, suppose the National City
'lank and some other large institution in New York wanted to consolidate—really wanted to do it and made up their minds to do it, and
set the machinery to work with the vast influence they have, to get
the consent of any Comptroller of the Currency?
Mr. POLE. Yes.
Mr. GOLDSBOROUGH. The only thing he could do would be to grant
the permission?
Mr. POLE. Not at all.
Mr. GOLDSBOROUGH. The only practical thing to do?
Mr. POLE. Not at all.
Mr. GOLDSBOROUGH. I am not referring to you, you understand.
Mr. POLE. I understand.
Mr. GOLDSBOROUGH. You never were subject to that ordeal, were
You, of trying to resist a situation of that kind?
Mr. POLE. Of that magnitude, no; but of considerable magnitude,
Yes.
Mr. GOLDSBOROUGH. It is not pleasant, is it?
Mr. POLE. By no means, but it is done.
Mr. GOLDSBOROUGH. It is done up to a certain point and then
resistance breaks down inevitably.
What I am trying to get at is this: Of course, your theory is that
under this trade area plan of yours, there would be sufficient competition always to protect the rural communities from autocratic credit
domination.
Mr. POLE. That is my feeling.
Mr. GOLDSBOROUGH. IS it not a fact that as groups get larger and
get further away from smaller groups, they inevitably get closer and
Closer in their manner of approaching things and in their point of
view and in their selfish interests? There is pretty near consolidation
!here at the top. Now, two, three, four, five, or six very large
Institutions in a city who, together, dominate the credit situation,
gradually find it to their interest not to fight each other but to
cooperate in their policies, and so, even though they do not consolidate, is there not a tendency for them so to cooperate in matters of
Policy with those who are nearly as strong as they are, so as practi9allY to do away with any real competition? That is my experience
in other walks of life.
, Mr. POLE. With regard to banks, I would not see why there would
oe any more reason for diminishing competition than there is now.
anking competition is rife in the cities. Just because they were
Permitted to put out small branches in that direction or this direction,
de you think that would make competition any less keen? With
100136-30—voL 1, PT 3-5

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BRANCH, CHAIN, AND GROUP BANKING

enlarged opportunities for banks, would competition be any less
keen? I should think not. I think it would be accentuated.
Mr. GOLDSBOROUGH. You do not think gradually and more gradually they would find that it was to their interest to merge to stop
competition?
Mr. POLE. I think there might be a certain amount of merging
going on, as there is to-day, but I do not think the time would ever
come when the banking business of the country would be consolidated
in a very few hands. Banking is a business, and if properly conducted
is a profitable business and a necessary business, and I see no reason
why competition should not be keen.
Mr. GOLDSBOROUGH. Now, Mr: Pole, in this country at this time,
we are going through a
.n epoch which is, by a great many, viewed with
great alarm. There is a tendency to consolidate in every industq
and in every walk of life. Of course, it is very evident in public
utilities and chain stores and in mail-order houses, and three thing's
that are right on the surface and that we all see. But it is so in everY
other business. It is so in the professions;for instance, take the legal
profession as an illustration. A man buys an automobile and he
insures it. If he has an accident he is represented by the insurance
company. The insurance company, in turn, has a law firm in some
city which represents it, so that the country lawyer is gradually
eliminated.
The same thing exists among the doctors; in other words, what I
am driving at is this tendency has gotten into the final place it would
drift to and that is the learned professions. Now, it is a tendencY•
It may be that 25 or 30 years from now, we will all sleep in the
country and all work in the city, because there will not be any other
place to work and that our farming will be done by great corporations
who own thousands and thousands of acres of land and that work
the farms by machinery. This may be inevitable and it may not be
possible to stop it no matter how much we. may deplore it.
As I see it, any monopoly of credit will accelerate that situation
more than anything else, because. credit controls everything else
economic in the community and is it not the province of statesman'
ship, if it has any, to rather restrain that tendency than accelerate it,
until, of course, it becomes clearly demonstrated that you are in an
actual economic cycle?
pi Is there any reason why we, as legislators, should sit here tied
deliberately formulate a plan to accelerate that condition unless we
think it is a good one? It certainly can not be that the people in th.e
country are suffering for want of banks. I will guarantee we can sit
here from now to the first of July, Mr. Pole, and you will not find
single country banker here asking that his bank be transformed into
a branch banking system or any community coming here and asking
for a branch banking system.
That is my question. Do you think it is the part of legislator,
who have the public interest at heart and who are bond to visualize
the future, in so far as they can, to accelerate a condition of that
kind or to restrain it in so far as it can be done?
Mr. POLE. I do not think it is the part of legislators to participate
in such acceleration, but under my suggestion.of a branch banlang
system, the question of decentralization of credit is a very importan$
part of it. I think you will find in very many sections of the countr1

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to-day, that the presidents and executive officials of.independent bank
are importuning the large group bankers to admit them into their
SNUBS. That is my information from those people who are in that
business. That, of course, is a matter than can be easily demonstrated, during the hearings as they develop.
Mr. GOLDSBOROUGH. That is all, Mr. Chairman.
The CHAIRMAN. MT. Dunbar.
Mr. DUNBAR. You stated a few moments ago, decentralization of
credit is a very important object to be attained by branch banking.
Is that right?
Mr. POLE. Yes.
Mr. DUNBAR. The other day I made the statement that the arguinent was used by proponents of the Federal reserve system in favor
of the passage of the bill, that decentralization of banking credits
would be diverted from New York and I understood you to state
that the Federal reserve banking system had. decentralized credit
from New York, but that the credits had grown in other communities,
giving the impression that centralization of banking credits was
effective in New York.
Now, I get my
Mr. POLE. I am not agreeing to that.
Mr. DUNBAR. I know you are not.
Mr. POLE. I am not agreeing to that being a correct statement of
What I said.
Mr. DUNBAR. Pardon me. What did you say?
Mr. POLE. I said that while undoubtedly there had been a large
Increase in deposits in New York, I was not prepared to say they
Were out of proportion to the increase of deposits in other parts of the
country.
Mr. DUNBAR. That is what I understood you to say and perhaps
1 did not make my observation and thoughts clear.
. Mr. Carter Glass, who was the author of the Federal reserve act,
In a speech made the statement that the operations of the Federal
reserve system had centralized credit in New York City, and I talked
to him yesterday. He said that it was absolutely true that the operations of the Federal reserve system had increased, to a very, very
great extent, the centralization of credit in New York City. You do
not agree with him?
Mr. POLE. I agree with him, but I do not know whether it has
nicreased out of all proportion to the increase in other sections of the
country. There is no doubt but that it has.increased in New York.
Mr. DUNBAR. His idea was that it had disproportionately increased
and to all intents and purposes, had increased beyond the intention
of the proponents of the bill.
Mr. POLE. I am not prepared to say.
Mr. DUNBAR. Have you any record of the statements of the credits
of banks in New York City before the passage of the Federal reserve
act, together with other cities? Of course, now, they have very
greatly increased, but have you those statistics from which we could
Obtain an idea of the proportionate increase in the respective cities?
Mr. POLE. Yes.
MT. DUNBAR. Will you publish them in your remarks?
Mr. POLE. There will be no objection to publishing them.

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BRANCH, CHAIN, AND GROUP BANKING

(The figures referred to are in course of preparation and will be
furnished later.)
Mr. DUNBAR. You said that the capital and surplus of the Federal
Reserve System had very largely increased
1
Mr. POLE. Yes, Sir.
Mr. DUNBAR. The amount of the franchise tax paid to the Federal
Government last year by the Federal reserve-system banks, was
$2,900,000. How is the amount arrived at that they shall pay the
Federal Government?
Mr. POLE. After paying a 6 per cent dividend to their shareholder's.
The Federal banks are permitted to increase their surplus and their
earnings until it equals the subscribed capital, after which 10 per
cent of the earnings go to surplus, and the balance goes to the Goverfl.
ment as a franchise tax.
Mr. DUNBAR. After the war, the amount of money paid to the
Federal Government, instead of being $2,900,000 was $60,000,000 a
year, or twenty times more than now paid by the Federal reserve
banks. Was that because their earnings were so much greater at
that time in proportion to their capital stock?
Mr. POLE. Obviously, I would say so.
Mr. DUNBAR. Then, the Federal reserve banks are not making as
much money now as they did nine years ago?
Mr. POLE. I think some of them are and some are making less.
Mr. DUNBAR. Not in the aggregate, because in the aggregate that
i
paid last year to the Federal Government $2,900,000, instead 01
$60,000,000 annually some 9 or 10 years ago.
Mr. POLE. Those complete figures on the earnings of the Federal
reserve banks have been furnished the record, Mr. Dunbar.
Mr. DUNBAR. I know, but I would like to know some reason for
the fact
Mr. BUSBY. May I suggest this, that the building program of the
Federal reserire banks has taken $160,000,000 out of the earnings
for the last year or two?
ci
Mr. DUNBAR. Would that affect the amount of the franchise ta%
b
paid by the Federal reserve banks?
'
33
Mr. POLE. Yes, sir.
Si
Mr. DUNBAR. And the suggestion was made the other day that
the amount of the franchise tax paid to the Federal Government might
be used to reimburse depositors in the national banks which have
failed. Would the $2,900,000 pay the losses—be sufficient to pal
the depositors in national banks which have failed and which did not
pay their depositors 100 cents on the dollar?
Mr. POLE. It will be impossible to tell that because banks which
Ot
have failed last year have only started on their liquidation and it
will depend on how they liquidate. I think that $2,900,000 would
not be nearly enough to pay that.
Mr. DUNBAR. Another question: The Federal reserve bank has,
reduced its discount rate to 3% per cent. What is the amount 01
discount of the Bank of England to-day?
Mr. POLE. Four per cent.
Mr. DUNBAR. The reduction of the Federal Reserve rate to 3)i
per cent, if it is less than the rate charged by the Bank of England-does that cause an outflow of gold from the United States to England?

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Mr. POLE. it might make some little difference.
Mr. DUNBAR. It might make some little difference?
Mr. POLE. Yes, sir.
Mr. DUNBAR. Then, that outflow of gold from the United States
to England would reduce the available credit of our banks?
Mr. POLE. Well, the gold reserve would have to be very materially
reduced before the Federal reserve banks would feel the effect of that.
Mr. DUNBAR. I note in financial newspapers that great importance
is paid to the outflow of gold from the United States on our business
and credit systems.
Mr. POLE. Yes, sir.
Mr. DUNBAR. So that if there is any outflow due to the 334 per cent
rate, notwithstanding our business men can
. obtain money at a less
amount, it would pretty near balance the situation?
,Mr. POLE. I do not think, under the present circumstances, there
Will be very much outflow of gold. The Federal reserve banks
themselves are probably almost at their high point as to gold reserve,
so that the difference would not affect, in a practical way, the amount
of credit which could be extended by the Federal reserve system.
Mr. DUNBAR. Dining the last year, the Federal reserve banks
were criticised for raising the rates for the purpose of preventing
sPeculation. I do not say they did so, and you would not care to
commit yourself on that subject anyway. But was not a large amount
of the speculation due to the fact that last year the corporations of
the country loaned their surplus for the purpose of speculation?
Mr. POLE. That was a very important factor.
Mr. DUNBAR. The Federal Reserve Bank officials were apprehensive all along that the debacle of speculation would result just as it
did, were they not?
Mr. POLE. I can not speak for the Federal Reserve Bank officials.
Mr. DuNnAn. But you believed that?
Mr. POLE. I think that may be correct.
Mr. DUNBAR. Now, another question. You have heard a great
deal,
about the unit bank and about its being driven out of business
by branch banking. Branch banking would .drive the unit banking
sYstem out of existence, according to my notion, the same as chain
stores to-day are driving out the individual stores in our respective
towns.
Mr. POLE. You are making that statement?
Mr. DUNBAR. I am making that statement. Does it agree with
your idea?
MT. POLE. No.
Mr. DUNBAR. You do not believe that branch banking would drive
out the unit banks?
Mr. POLE. It has not done so where branch banks are in operation.
Mr. DuNBA.n. How could a branth bank go into a community with
several banks of $100,000 capital and have available to loan in that
community $200,000 to a corporation or an individual instead of
$20,000 and not drive those other banks out? Would not that be a
natural sequence?
Mr. POLE. Well, you are assuming a great many things there, Mr.
"unbar. In the first place, if the banking facilities in the particular
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BRANCH, CHAIN, AND GROUP BANKING

for the branch bank to go in there, with its branches, unless it purchased one of the going banks.
Mr. DUNBAR. I know it could not go in there without the consent
of the Comptroller, and also unless it could be shown that the branch
bank was needed.
Mr. POLE. That is my answer, substantially.
Mr. DUNBAR. Yes, but it is my opinion that branch banking would
go into all these communities. They would find some reason for
being established and these unit banks would be eliminated and caused
to cease to exist—the local unit banks which we have. Now, you do
not believe that?
Mr. POLE. Not necessarily. A great many unit banks will tell you
they do not want any better competition than a branch of a city bank.
Mr. DUNBAR. That is all, Mr. Chairman.
The CHAIRMAN. Have you any questions, Mr. Busby? We have
just five minutes left.
(Discussion off the record.)
The CHAIRMAN. The committee will stand adjourned until Tuesdal
morning at 10.30 o'clock a. m.
(Whereuppn, at 12.55 o'clock p. m., the committee adjourned until
Tuesday, March 18, 1930, at 10.30 o'clock a. m.)

ak

f ranch, Chain, and Group Banking

HEARINGS
BEFORE THE

COMMITTEE ON BANKING AND CURRENCY
HOUSE OF REPRESENTATIVES
SEVENTY-FIRST CONGRESS
SECOND SESSION
UNDER

H. Res. 141
AUTHORIZING THE BANKING AND CURRENCY COMMITTEE
TO STUDY AND INVESTIGATE GROUP, CHAIN
•
AND BRANCH BANKING

MARCH 18, 19, AND 21, 1930

VOLUME 1
Part 4

UNITED STATES
100136

GOVERNME'NT PRINTING OFFICE
WASHINGTON: 1930

COMM MITTEE ON BANKING AND CURRENCY
LOUIS T. McFADDEN,Pennsylvania, Chairman
OTIS WINGO, Arkansas.
JAMES G. STRONG, Kansas.
HENRY B. STEAGALL, Alabama.
ROBERT LUCE, Massachusetts.
CHARLES II. BRAND,Georgia.
E. HART FENN, Connecticut.
W. F. STEVENSON, South Carolina.
GUY E. CAMPBELL, Pennsylvania.
T. ALAN GOLDSBOROUOIT, Maryland.
CARROLL L. REEDY, Maine,
ANNING S. PRALL, New York.
JOSEPH L. HOOFER, Michigan.
JEFF BUSBY, Mississippi.
GODFREY G. GOODWIN, Minnesota.
F. DICKINSON LETTS, Iowa.
FRANKLIN W. FORT, New Jersey.
BENJAMIN M. GOLDER, Pennsylvania.
FRANCIS SEIBERLING, Ohio.
MRS. RUTII PRATT, New York.
JAMES W. DUNBAR, Indiana.
PHILIP (I. TROMPSON, Clerk
II

-, •
4

CONTENTS
Page
•11°10, Ron. John W. Comptroller of the Currency, questioning of

299
410

°ung, Hon. Roy A., governor, Federal Reserve Board
III

BRANCH, CHAIN, AND GROUP BANKING
TUESDAY, MARCH 18, 1930
HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,
Washington, D. C
The committee met in the committee room,Capitol, at 10.30 o'clock
L ,m., Hon. Louis T. McFadden (chairman) presiding.
-the CHAIRMAN. Now, MT. Busby, if you will take the witness.
STATEMENT OF HON. JOHN W. POLE--Resumed
Mr. BUSBY. Mr. Pole, I want to ask you a few questions which
InEtY be general in their nature, before we get down to the discussion
of banking and finance.
IN
speaking of the national banks, the State banks, the holding
ePm.panies, and of branch, chain, and group banking, and other
sannar entities which have considerable proportions in the banking
World, I take it that we are all agreed that no major part of this
StYstem could be ignored or left out of consideration when it comes
%qui operations in the field of finance. IS that your view?
Iskv!r. POLE. My view is that every major point which might affect
eitun, group, or branch banking should be given consideration.
,`vir. BUSBY. Suppose that any one part of this group—and this is
aLnYpothetical question—or any one part of a financial organization
Sliould be discriminated against or should fail in whole or in part,
"'lid not that in a sense affect all the other parts?
Mr. POLE. It might do so.
"jr. Busuv. Is there not a sympathetic response in the financial
world to any sort of a failure of a financial unit or an institution
which is as far reaching as any of these I have mentioned?
,Mr. POLE. Undoubtedly its effect might be felt.
Mr. BUSBY. Is it not true in the commercial and investment world?
Mr. POLE. I think that might be said to be true.
„ Mr. BUSBY. Now, coming particularly to the subject of bank fail"res, You have stated that by far the greatest number of bank failures
Were among small banks.
Mr. POLE. Yes.
Mr. BUSBY. Do you not also think that the greatest number of
sank failures have been confined to certain territories in the United
ta,tes, where a period of undue inflation has been experienced?
Ti
POLE. Failures of banks have been scattered all over the
'i ,11
,
1ted States. The record shows that in the agricultural districts
been most prevalent.
BUSBY. Is not the bank in the agricultural district of necessity
r
_equired to make loans on collateral that is more hazardous than the
52111ateral furnished on loans in the metropolitan centers?
299

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BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. Loans in the agricultural sections are not quite so well
fortified as they might be in the.industrial sections.
Mr. BUSBY. Is not the stability of the collateral often dependent
on weather conditions, crop conditions, and future developments?
Mr. POLE. Those are all factors.
Mr. BUSBY. Where a crop is mortgaged that has not been planted,
that is a very important factor, isn't it?
Mr. POLE. Quite.
Mr. BUSBY. Frequently the banks in the agricultural sections take
as security mortgages on crops that have not been planted—is not
that true?
Mr. POLE. I think that is the custom in some parts of the country.
Mr. BUSBY. What is your view with regard to that custom, as to
whether that type of security ought to be accepted by banks?
Mr. POLE. I would not say that that type of security is generally
taken, but I think usually the loans are made on crops which have
been planted, but the proceeds of those loans in such cases are used
gradually as the time goes on and the crop approaches maturity.
Mr. BUSBY. IS it not a fact that there is one system of banking
which applies to the metropolitan centers, and another system of
banking and security which has to be used in the country districts
and small towns?
Mr. POLE. Yes.
Mr. BUSBY. The two systems are not altogether alike, especially
from the standpoint of the type of security that may be offered by the
borrower, are they?
Mr. POLE. That is generally correct.
Mr. BUSBY. Now, with further regard to bank failures, referring
to the hearings on page 4, I find that four States along the Atlantic
coast—North Carolina, South Carolina, Georgia, and Florida—with
a population, based on the 1920 census, of 7% per cent of the population of the country, have had 729 bank failures, or 15% per cent of the
bank failures of the country.
I also call your attention to another.rather well-defined section
of our country, Minnesota,Iowa, Missouri, Oklahoma, North Dakota,
South Dakota, Nebraska, Kansas, and Montana, nine additional
States in the central Northwest, a purely agricultural section, which
nine States had a total of 2,768 bank failures in the period from 1920
to 1929. That territory represents 14% per cent of the population
and represents 56% per cent of the bank failures during the period of
time I have mentioned.
Taking the two areas together, I find that the 13 States mentioned
with 22 per cent of the population of the country, have had 71.6
per cent of the bank failures of the country, while the other 35 States,
with 78 per cent of the population of the country, have had only 24.4
per cent of the bank failures from 1920 to 1929.
If you have given any thought to the situation in these two particular areas, do you not seep these bank failures something besides
the fact that they were individual banks and not in a chain or branch
system?
Mr. POLE. Yes, I see quite a difference.
terriMr. BUSBY. IS it not a matter of common knowledge that the
menin
the
have
I
Florida,
States
of
tory about Florida and north

1111•11111=1.___
a
BRANCH, CHAIN, AND GROUP BANKING

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ic

)11
I.,
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311
20
in
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301

tioned on the Atlantic coast, has experienced a considerable period of
inflation in land values during the last nine years?
Mr. POLE. Yes.
Mr. BUSBY. Much of the security offered and taken by the banks
in that territory was based on lands in that section, was it not?
Mr. POLE. Quite largely so.
Mr. BUSBY. And do you not think that it was the inflation of value
Of lands and real property, and then a collapse of those values, that
Primarily caused the failures of the banks in the section we are now
discussing?
Mr. POLE. That had a lot to do with it.
rt 44 ':0,4P41
Mr. BUSBY. Now, going to the other territory in the central NorthWest, the nine States mentioned a moment ago, is it not a fact that
,
during the postwar period, land values in that section grew to a proportion far beyond that which had existed at any time prior to that
Period?
Mr. POLE. I think so.
Mr. BUSBY. That is an agricultural section, is it not?
Mr. POLE. Yes.
Mr. BUSBY. The basis for the business and commerce of that section is very largely agricultural, is it not?
Mr. POLE. Quite largely so.
Mr.BUSBY. Stock raising enters into consideration to a considerable
extent in that territory, does it not?
Mr. POLE. It does.
L Mr. BUSBY. Considering the fact that the nine States mentioned in
central Northwest section of the United States, with a population
of 14% per cent, had 56% per cent of the bank failures during the nine
Years mentioned, do you not see that the inflation of values in that
section, and then the inflation coming to an end, was the direct cause
of the failures there?
Mr. POLE. Certainly it was a very important factor. However,
we must bear in mind that all banks were not affected. There were
large number of banks in those sections which you referred to which
"ve gone through this period of deflation and are still operating and
?Perating successfully, and the large banks have been practically free
'Tom failures, and they were faced with the same economic condition.
Mr. BUSBY. Can you tell the committee why they were able to go
t.lyough this situation and why the great number of the banks which
aid fad went under; in a general way?
•Mr. POLE. In a general way, the large banks were operated more
!cientifically; the loans were more carefully made, their judgment was
netter, they saw further ahead and, with regard to the smaller banks,
he same reasons might apply, which might be summed up very
largely in the question of management. A small bank might be
ter/fled more or less of a fair-weather bank, because if it is faced with
successive crop failures the support in the way of capital structure
anU savings is not sufficient to enable it to take care of its losses,
whereas the larger banks, of course, are much more able to do so.
_ Mr. BUSBY. The people in that section of the country, being largely
1.1gaged in agriculture and stock raising, will of necessity have that
kind of property, including
their lands, to offer as security for credits,
will they not?
Mr. POLE. Yes.

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302

BRANCH, CHAIN, AND GROUP
BANKING

Mr. BUSBY. If they can not get credit on their lands, their agricultural products, and stock-raising activities, what collateral would you
suggest that they could offer to the large banking systems in order to
secure needed credit?
Mr. POLE. The larger banking systems, under my suggestion,
would cover a wider, and do cover a wider, diversification of interests.
As I say, they make loans more carefully and more scientifically.
Mr. BUSBY. Do you mean by "more carefully" that they do not
make the loan unless they can see absolute certainty in its return?
Mr. POLE. I would not go so far as to say with absolute certainty,
but I would say that they do not make them so freely, and it is no
benefit to a borrower to borrow more money than he can pay back.
Banks that are scientifically managed generally realize that if loans
are made too freely, it hurts both the lender and the borrower.
Mr. BRAND. IS it not true that these large banks, especially in the
cities, do not lend their money on lands or on crops?
Mr. POLE. In the cities, they generally would not be offered that
character of security to the same extent.
Mr. BRAND. A farmer who has nothing to offer except his land or
his crop can not go to any big bank and borrow a dollar in my country.
I would like to find some big bank which will lend some money to
farmers on the crop markets; I would like to know where it is located.
Mr. BUSBY. I want to continue with my examination, Judge.
Then, Mr. Pole, as a natural result of the system of what .you
term "careful lending," and what you term a 'far insight" into
the banking situation, the larger banking institutions, or the chain or
branch banking institutions, would take into consideration the
possibility of crop failures and take into consideration the possibility of
the security being deflated and becoming at the time of payment
not what it was when the loan was made—they would take into
consideration all of those things which would tend to reduce the
amount to be loaned on the collateral or security offered by the
borrower, would they not?
Mr. POLE. In making loans every factor is taken into consideration, Mr. Busby.
Mr. BUSBY. Those would be the factors that the banks would have
to take into consideration in the territory I have mentioned, would
they not?
Mr. POLE. Those would be factors, unquestionably.
Mr. BUSBY. Now, you know the system of banking in Canada,
do you not?
Mr. POLE. Yes.
Mr. BUSBY. You know that the Canadian banking system is not
conducted on the basis that the American banking system is conducted, do you not?
Mr. POLE. Yes.
Mr. BUSBY. Instead of taking deeds of trust and mortgages, they
take straight bills of sale for loans made by the banks and the branches
of banks in Canada, do they not?
Mr. POLE. I think that may sometimes be done; I am not sufficiently familiar with those details.
Mr. BUSBY. Do you not know that the banks of Canada deprecate
loans around $500, $600, and $700, and refuse to make loans below
that amount to farmers or to people who need credit in small amounts?

1

BRANCH, CHAIN, AND GROUP BANKING

303

Mr. POLE. No; I do not know that.
Mr. BUSBY. If that is true, that is news to you, is it?
Mr. POLE. I doubt the accuracy of that statement.
Mr. BUSBY. Do you know the minimum of deposits that they will
aee_e_pt in the Canadian banks?
Mr. POLE. I think that varies in different parts of Canada.
Mr. BUSBY. Do you not know that the Canadian banking system
does not deal with the small men at all?
Mr. POLE. No.
Mr. BUSBY. Do you not know that the Canadian system has no
desire, through the numerous branches maintained by the five large
gYetems, to deal with the small borrower or the small depositor?
Mr. POLE. I do not think that is a fact.
Mr. BUSBY. You do not think that is a fact?
Mr. POLE. No.
Mr. BUSBY. Now coming back to the question we started on, I
Want to ask you two or three academic questions.
What is the necessity for a banking system in any country?
Mr. POLE. Obviously there is great necessity for a banking system
Iii order that people may deposit money and make loans and transact
Such other business as is ordinarily transacted through banks.
Mr. BUSBY. The fact is that 90 per cent of the business of the
F•ountry is done on what is called checking or clearance accounts, is
It not, and about 10 per cent is done on credit?
Mr. POLE. In a general way, it might be called credit.
Mr. BUSBY. What is your idea about the expression that "currency
le the life blood of the commerce of the Nation?"
. Mr. POLE. I do not know who coined that phrase. I think possibly
it was intended to cover credit, also.
Mr. BUSBY. Do you think credit can be dissociated in any sense
from banking?
Mr. POLE. No.
Mr. BUSBY. Is it your idea that banking is an objective or means
to an end, the end being commerce and exchange of commodities and
Products and values among the people of the Nation?
Mr. POLE. I think it is a necessary complement to the business of
this or any other country.
, Mr. BUSBY. To be a little more specific, do you think that that is
,toe primary objective to be sought, that is, to create a system of
banking or money dealing by a portion of the people, or should it be
the servant of commerce, and the handmaid of commerce and trade?
Mr. POLE. I think it should be the handmaid of commerce and
trade, but I think it should also be regarded as a definite business
enterprise in which people may invest money and hope to make a
reasonable return on it, the same as in industry.
. Mr. BUSBY. You have stated in the hearings that you were decidedly of the view that the best system of banking in this country
Would be the branch banking system, have you not?
Mr. POLE. Not precisely that statement.
Mr. BUSBY. What is your attitude with regard to that?
Mr. POLE. I said that if it were possible that a unit banking system
Could be made profitable and effective, that I should prefer such a
sYstern, but inasmuch as the system appears to have broken down,
Particularly in the agricultural communities, the best substitute that

.....M1111111111PNB16.

304

BRANCH, CHAIN, AND GROUP BANKING

occurs to me is a branch banking system rather than a group or a
chain banking system.
Mr. BUSBY. You used one expression, that the unit banking system had broken down in the agricultural communities. Have the
banks in either of these communities mentioned by me, the Atlantic
States group and the North Middle West group—or in any other
agricultural community, ever failed until the community failed from
under the bank?
Mr. POLE. Of course, if the community fails, the unit bank must
fail, and frequently if a bank fails it is difficult for the community to
get along.
Mr. BUSBY. If the branch banking system had operated in those
communities and had extended the help and the credit to the people
in those communities that was needed, similar to that extended by
the unit banks, would it not have also failed or at least been materially crippled when the period of deflation came along?
Mr. POLE. The facts are that m some sections of the country there
are no banks left. They have all failed.
Mr. BUSBY. And the facts are that the branch banking system
would not extend the assistance or help to that community that the
individual bank would—is not that true?
Mr. POLE. I would differ with you on that. The experience with
branch banks is frequently that they put into a community a tremendous lot of money where the deposits may be at a very low ebb; in
other words, they put far more funds into the community than the
community provides in the way of deposits.
Mr. BUSBY. I tried to get away from that subject, but that brings
me to this thought, that if they put that greater amount of money
into a community than the deposits secured from that community,
and they will not take the security that the community has, on what
basis do they make the loans or place the money among the people?
Mr. POLE. Of course, they do take the security that the community has.
Mr. BUSBY. What kind of security in the agricultural northwest
would they—the chain banking systern—take in order to put more
money into that conunuruty than they would take out?
Mr. POLE. The same class of security that you mentioned.
Mr. BUSBY. They whittle it down until it does not amount to so
much, do they not?
Mr. POLE. It amounts to more in a great many instances than
the community is able to supply from its own resources.
Mr. BUSBY. Do not despoils run largely in proportion to the
amount of credit extended by the banks in the community in which
the bank operates?
Mr. POLE. Speaking generally, it might be said that they do, but
on these special occasions when a community is hard hit by crop
failures, and when it is necessary for a bank to put money into the
community, that is very frequently done by branch banking systems.
That is one of the theories on which the system works, that money
may be transferred from one place where there is a plethora of funds
to a place where there is a dearth of them.
Mr. BUSBY. There is considerable controversy in the banking
world as to whether or not that statement is a fact.
Mr. POLE. I think there is considerable controversy on every
banking point.

BRANCH, CHAIN, AND GROUP BANKING

305

Mr. BUSBY. I mean, on that one point.
Mr. POLE. I should say on that point among others.
Mr. BUSBY. You have described your position with regard to
branch banks.
Mr. POLE. Yes.
Mr. BUSBY. You stated, on March 6, in your examination, these
words:
I would be glad to see some legislation which would prohibit the operation ot
chain banking.
That is your position on the question of chain banking, is it not?
Mr. POLE. Right.
Mr. BUSBY. Now, we have some very extensive branch banking
Operations in this country in a few States, do we not?
Mr. POLE. There are extensive branch bank systems in operation.
Mr. BUSBY. I have asked you some questions heretofore about
the Bank of Italy, rather for the purpose of using it as an example
of the development of branch banking. I hand you a chart which
shows the locations of the branch banks of the Bank of Italy in the
State. of California. There is hardly a community in that State
that is not covered by a branch bank of the Bank of Italy, is. there?
Mr. POLE. I would not go so far as to say that. There are very
many communities not covered by branches of the Bank of Italy.
Mr. BUSBY. I mean banking communities, or communities of
credit.
Mr. POLE. I understand what you mean.
. Mr. BUSBY. Of course, that would not be the same as a school
district, or anything like that.
Mr. POLE. There are a large number of branches. If you exclude
those branches which might be termed city branches, I should
estimate roughly that you would have 200 points covered by branches
of the Bank of Italy in California.
Mr. BUSBY. How is the business at a branch of the parent bank
conducted with reference to extending credit to applicants for loans?
Mr. POLE. The branch manager, in conjunction with the advisory
committee, is given a certain loaning limit. In the case of very large
leans which have not been passed on, they are taken up with the
bead office.
Mr. BUSBY. I am informed by people who do business with the
branches of the Bank of Italy, members of the House from California,
that no loan is made by the cashier of one of the branches on an
aPphcation for a loan; that he takes your application, with your
financial statement, and tells you that it will be presented to the loan
committee of the central institution the next morning at the meeting
of this committee. Then your application, together with your
financial statement, is presented to the committee on loans by the
cashier or representative of the branch bank the next day, and that is
Passed on entirely in the absence of the applicant for the loan.
Do you know whether or not that is true?
Mr. POLE. I do not think it is true if it comes within the limit.
Mr. BUSBY. Do you have any idea what the limit is?
Mr. POLE. It varies in different places. As a matter of fact, you
Perhaps are speaking of new loans. Now the business of a bank
might be said to be 90 per cent with regular customers, whose lines

BRANCH, CHAIN, AND GROUP BANKING
of credit have been established perhaps for years in that community,
and they are given a regular line of credit. Those loans are usually
reviewed by the executive committee or by the loaning committee
and are fixed quite in advance of the time when the customer may
come to take up his loan, and with respect to the new loans, if they
are of any size they, of course, should be given very careful consideration and, if necessary, referred to the head office.
Mr. BUSBY. I know that is the syteni usually used by the independent individual banks.
Mr. POLE. That is the sytem employed by the Bank of Italy, I
think.
Mr. BUSBY. But the branch-banking system entirely leaves out of
the loan the question of personal responsibility or the fact that the
individual, because of his course of business activity and conduct, is
entitled to credit, and makes the loan solely on the collateral that the
borrower has to offer, nothing else being considered by a body of men
who do not take the man into consideration at all, or very little. Is
that not the case with branch banking?
Mr. POLE. On the contrary, I think that the character element is
perhaps the most important, and it is given consideration.
Mr. BUSBY. How do you reconcile that statement with the fact
that more careful loans, for instance in the central Northwest territory that we were talking about, would be made by the branch banking
system, leaving out of consideration the personal character of the
applicant for the loan?
Mr. POLE. I have never made the statement that the personal
character feature is ever left out of consideration on loans. I think
that is the most important, but there is also connected with that the
borrower's ability to pay which is frequently lost sight of by small
banks.
Mr. BUSBY. I will have to hurry on.
Now the Bank of Italy until recently had 299 branches scattered
over California. Some time ago we went through a period of depression that reflected itself on the stock of the Bank of Italy, when on
the 11th of June, 1928, it opened in the morning at 286 and ran to a
low of 125 on the same date, closing at a somewhat higher figure. At
that time it had the 299 branches. I might say it is my information
that other banking interests in the same field sought to bring about
the depression in the Bank of Italy stock. Now, even though you
have a system with many branches, it is not entirely secured against
the competitive banking activities of other institutions in the same
field, is it?
Mr. POLE. By no means.
Mr. BUSBY. Even though it does not break in the sense that we
speak of the individual country bank, the financial effect of such an
experience in the affairs of a bank is of such broad extent in deflating
the stock that it is similar to a bank failure in that territory, is it not?
Mr. POLE. Not at all.
Mr. BUSBY. Does that not affect the investors in the stocks of that
bank just as effectively as if they had been interested in a bank that
failed and got only a portion of their invested monff back?
Mr. POLE. I see no direct connection there. The stocks of banks
are always going to fluctuate. They have in the past and will in the
future. But the condition of that bank is not affected by the fluctua-

BRANCH, CHAIN, AND GROUP BANKING

307

tion of the stock, and in the case you mentioned there was a large
speculative element in that trading.
Mr. BUSBY. Two or three other banks making a desperate effort
to drive down the Bank of Italy stock while Mr. A. P. Giannini
was in Italy?
Mr. POLE. I do not know as to that. I have never heard that the
banks made any concerted drive against the Bank of Italy. You
,have referred several times to the breaking of the Bank of Italy and
bankruptcy in connection with the Bank of Italy. I think the record
0.11ght to be cleared on that point; and, even at the expense of reiteration, I should say that the Bank of Italy has steadily grown from a
very small institution to a bank of, according to the last statement,
inore than a billion dollars of resources; so that the bank per se has
not been greatly affected by the fluctuations in the stock.. .
Mr. BUSBY. Has it not been difficult to trace the activities of the
B.ank of Italy, to tell whether it has grown or absorbed and com!3ined with other institutions so as to make the showing you speak of
in the last report?
Mr. POLE. I should say not.
Mr. BUSBY. All right. Now, immediately after the period that
I referred to as the break of the Bank of Italy stock, which you exWattled and on which you place another light, the Transamerica
Corporation, a New Jersey corporation, a holding company, was
organized for the purpose of taking over all or as much of the stock
as it could get of the Bank of Italy, its subsidiaries and affiliates,
was it not?
Mr. POLE. I think it is a well-known fact that the Transamerica.
Corporation was formed to take over its various activities.
Mr. BUSBY. It was formed October 11, 1928, after the period I
Mentioned as June 11, 1928?
Mr. POLE. Yes.
Mr. Busily. Now, listed among the corporations a majority whose
stock is owned wholly or largely by the Transamerica Corporation,
are 11 banking, investment, insurance, trust, and other similar types
c'f financial institution covering every business activity in our country,
a.nd two additional institutions in which the Transamerica Corporation holds about 50 per cent of the stock. Now, the holding company,
g.avin— this stock in hand, controls the policies of all of these banks
h
and other institutions, and directs their course in whatever business
activity they are operating, does it not?
Mr. POLE. Theoretically.
Mr. BUSBY. Does not the holding company direct the directors
that do direct the policies of these institutions?
Mr. POLE. Elects them.
Mr. Buswy. Elects them?
Mr. POLE. Yes.
Mr. Bussv. What do you mean by that term?
, Mr. POLE. I mean to say that the directors would undoubtedly
ae elected by the shares which were preponderantly held by the
Transainerica Corporation.
,Mr. BUSBY. Well, the Transamerica Corporation is operated by
aDout 25 men composing the directors of that institution, is it not?
Mr. POLE. I really do not know how many men direct the affairs
of the Transamerica Corporation.

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BRANCH, CHAIN, AND GROUP BANKING

Mr. BUSBY. I think you can get that from Poor's Banking Directory.
Mr. POLE. I think so, too.
Mr. BUSBY. So that takes entirely away the human element of
management, so far as the stockholders and the investors in the
stocks are concerned, the management of these institutions which
embrace some 525 independent units that are managed by the
Transamerica Corporation?
Mr. POLE. Theoretically, if you wish to assume that the directors
and the executive officers of the Bank of Italy are dummies.
Mr. BUSBY. They do not know anything about the several communities in which the 525 units operate, do they?
Mr. POLE. What do you mean by "they"?
Mr. BUSBY. That is, the men that control and direct the policies,
through the Transamerica Corporation, of all of these 525 institutions
that are under it?
Mr. POLE. I am not informed as to what is the extent of the power
of those 25 men who are connected with the Transamerica Corporation.
Mr. BUSBY. The Transamerica Corporation controls national
banks, does it not?
Mr. POLE. I think so.
Mr. Bum% It owns all of the stock in some national banks, does
it not?
Mr. POLE. Yes; practically all.
Mr. BUSBY. It owns all of the stock or practically all of it,, in
some State banks?
Mr. POLE. That is my information.
Mr. BUSBY. Some of the national banks that are owned and controlled by the Transamerica Corporation also have branches in
other territory under the McFadden Act, have they not?
Mr. POLE. Yes.
Mr. BUSBY. And some of the State banks that are owned and
controlled by the Transamerica Corporation also have branches in
the States where branch banking is permitted, do they not?
Mr. POLE. I do not know what the State banks have.
Mr. BUSBY. The fact is that there is such a confusion of interests
in a financial institution as gigantic and extensive as the business
the Transamerica Corporation controls that it is very difficult for
one without a special accountant to go through the situation to understand what the financial relations of the several elements are—is not
that a fact?
Mr. POLE. Of the Transamerica Corporation?
Mr. BUSBY. Yes.
Mr. POLE. Yes; I think that is right.
Mr. BUSBY. Now, the Transamerica Corporation and the Bank of
Italy also own and are interested in a bank in Rome, Italy, are they
not, or do you know about that?
Mr. POLE. I have heard so. Of course, I do not know very much
a bout the Transamerica Corporation's investments.
Mr. BUSBY. You have never examined Poor's Directory on Banks
end Trust Companies, 1929, with reference to the Banca D'America
e D'Italin, in which James A. Bacigalupi and A. P. Giannini, the man
who established the Bank of Italy in the United States, are directors?
You know nothing about that?

BRANCH, CHAIN, AND GROUP BANKING

9

Mr. POLE. I have never examined Poor's report.
Mr. BUSBY. I want to call your attention to another illustration
Mr. Chairman, I will quit any time.
The CHAIRMAN. We were planning to finish with Mr. Pole at
11.30, to hear Governor Young.
Mr. BUSBY. All right. I find, in regard to the National City
Bank of New York, in Poor's Bank Directory, that on December 31,
1928, the bank contained, in addition to a main office in Wall Street,
New York, 30 city branches and, in addition, direct and subsidiary
foreign branches numbering 89 in 23 countries, and plans were being
erfected to enter two additional countries during 1929, and I also
nd that the National City Bank at that time had resources of
$1,847,000,000—and that has been considerably increased since
then—with a capital stock of $110,000,000.
I call attention to that for the purpose of leading up to the other
honght, that this country is becoming a country of big banking
institutions, which leaves out of consideration any place for the
country bank or for any bank that is not a part of a chain, group, or
branch system.
Also, in connection with that, I want to call attention to the
statement of Mr. Thomas W. Lamont with regard to the Bank for
International Settlements, where the big banking interests of all the
countries could come together and settle the financial policy of the
World.
You know about the situation I refer to, do you not?
Mr. POLE. I have heard of the Bank for International Settlements.
Mr. Bussv. Is it not your opinion that the group, chain, and
br.s.nch banking systems are playing directly into the hands of that
kind of a policy of internationalizing the money system of the world?
Mr. POLE. Through the Bank of International Settlements?
Mr. BUSBY. Yes.
Mr. POLE. I am not sufficiently familiar with that, Mr. Busby, to
give you an intelligent reply.
Mr. BUSBY. Well, the Federal reserve system, of which we may
talk.more some other day, would be considerably disparaged if the
holding companies took over the management of banks and placed
them under State charters, and left out of consideration the national
aYstem, would it not?
Mr. POLE. If all the large banks left the Federal reserve system,
it would unquestionably be affected.
Mr. BUSBY. There is no way to place a holding company in the
national banking system, is there?
Mr. POLE. No.
Mr. BUSBY. If the holding companies become the managers of the
banking interests of the country, they will be outside the management
of the Comptroller and the Federal Reserve Board, will they not?
Mr. POLE. Not necessarily. Banks, regardless of where their
stock is held, may be, and must be in the case of national banks,
Members of the Federal Reserve System.
Mr. BUSBY. I will suspend here, Mr. Chairman.
Mr. GOLDSBOROUGH. May I ask Mr. Pole one question? It is not
controversial, and he can answer it.
Mr. Pole, there is about to be effected a merger between the Chase
National Bank and the Equitable Trust Co. and another bank whose
name has slipped my memory.

p

3

309

310

BRANCH, CHAIN, AND GROUP BANKING

Mr. POLE. Interstate.
MT. GOLDSBOROUGH. Yes. Was it necessary to get the consent of
the Comptroller of the Currency to effect that merger?
Mr. POLE. Yes, sir.
Mr. GOLDSBOROUGH. And that consent was granted?
Mr. POLE. That consent will be granted.
The CHAIRMAN. Gov:Roy A. Young,of the Federal Reserve Board,
is present, and I am going to suggest that when Governor Young begins his statement, he be not interrupted until he may so indicate.
Before hearing him, I would like to suggest that when we have
completed with Governor young, perhaps the next persons that should
be heard before the committee are the members of these chains and
groups. It seems to me that, as has been disclosed before the committee, the witnesses who can give us the most valuable detailed information in line with the scope of our hearings are the officers of the
Transamerica group. From my knowledge of the management of
that organization, it would seem to me that the two men we should
have are Mr. A. P. Giannini, who was the originator of the plan and
its president, and Mr. James A. Bacigalupi who, I believe, is director
of the Bank of Italy. It may later develop that there are other men
connected with that group whom it might be desirable for the committee to hear, and I would suggest that representatives of the St.
Paul and Minneapolis group would probably be the next ones that
the committee might profitably hear.
My purpose in bringing that up this morning is to ask the committee
to authorize me to extend invitations to Mr. Giannini and Mr.
Bacigalupi.
Mr. BEEDY. Mr. Chairman, before we proceed to that, these hearings have been very interesting indeed up to the present point,
but the time is passing so rapidly and. we do not seem yet to have
made more than a start. . The Senate is presently to finish with the
tariff and to start its hearings, and we are losing, it seems to me, our
position of vantage that we had:
This thought occurs to me that if we should start in with a man like
Mr. Giannini, he will be here for three or four weeks and we will have
completed an investigation of that particular subject and then it will
be about time to wind up these hearings.
The CHAIRMAN. I do not think that is a correct statement.
Mr. BEEDY. It is an exaggerated statement; I concede that. I
think if we could get some witnesses before the committee who could
,•ive us the basic facts with reference to group, chain and unit banking,
it would not take us into such elaborate detail as Mr. Giannini's
examination would be obliged to. We would then have the broad
foundation laid for the examination of such a witness, whose testimony in the light of the facts then covered might be much curtailed.
The CHAIRMAN. I am interested in this group because there is
included in their organization every form of banking that we are
proposing to study, and inasmuch as that was the big movement in
this country, practically the original movement of this new expanded
idea, it seems to me that there is embodied in a study of that organization the elements that we should have before us.
Mr. BEEDY. Well, perhaps that may be so. I am simply interested
in some method of procedure here that will enable us to get on with
these hearings. I personally have not taken more than perhaps

LI

8

BRANCH, CHAIN, AND GROUP BANKING

311

three minutes in examining, and the motion I am about to make is
not a reflection on anybody; it is just an observation and perhaps a
necessity, and I would like to have the viewpoint of the committee
en it.
For that purpose I want to move that hereafter each member of
the committee be limited to 15 minutes in his examination of any
witness. There are 21 members, and that will take up five hours and
a quarter in the cross-examination of each witness. Of course, a good
Many of us will not want to use the 15 minutes and we can yield to
Others; that will be permissible.
Mr. GOLDSBOROUGH. This is probably by far the most economic
uestion that the country is now interested in. Usually it is very
, i• cult to get the public to take hold of a matter of this kind at
1Decause they do not understand it. As Mr. Beedy said, it seems to
?he that up to this time these hearings have been interesting, and very
informative. Personally it does not make any difference to me if it
takes six months or a year for the country to get a thorough underSanding of just what this is all about and just what its future implications are. I do not see any reason why it should be hurried, as long
as we do not waste any time. As far as I can see, up to this time there
has been no time wasted, and I see no reason why a member of the
ceramittee who has an intelligent question to ask should be limited to
any particular time. If in the future we should feel that we have to
ii.lake some different arrangements, it seems to me that it will then be
tulle enough to do it, but certainly as long as the inquiry is being confined to the subject matter and as long as there is no rancor and no
Partisanship of any kind injected into the hearings, as long as they are
urely for the purpose of getting information, it seems to Inc it would
e a great mistake to limit it in any way.
Mr. BEEDY. I want the committee to understand that I did not
!hake that motion with the thought of hurrying these hearings at the
eT xPense of denying ourselves any of the facts that would be helpful.
I thought there would be more of an inclination perhaps on the part
e.f members to carefully prepare their questions and to avoid repetition, and the question is vast in scope unless we adopt some limitations.
The CHAIRMAN. The chairman had it in mind to consider the
Matter which Mr. Beedy has proposed and in which there is much
Inerit. There is no desire on my part, however, to curtail any member of the committee who has questions pertinent to this inquiry
that will bring forth necessary information; but I had in mind that
w
v.heu we had finished with Governor Young—considering Governor
oung as one of the officials here in Washington whom the members
of the committee would want to ask many questions to elicit information along the lines furnished by Mr. Pole, which I think has been
very instructive and has involved no waste of time up to this point—
situation will exist when we begin to hear these outside
'nen, for the information secured from these men will be not only
Yaluable to Mr. Pole but valuable to Governor Young, to the mem°era of the Federal Reserve Board, to the Treasury, and to all the
Members of this committee.

p

100136-30—vm 1 PT4-2

312

BRANCH, CHAIN, AND GROUP BANKING

I had hoped that when we had finished with Governor Young, the
committee might have an executive session to discuss our further
procedure, and I believe all the members of the committee will agree
to that. If we could have an agenda of witnesses representing these
various groups so that specific information could be secured from
them, whether the questions are asked by the chairman or a member
of the committee, I think that would be very helpful.
I am not in disagreement with what Mr. 13eedy is proposing, but I
think if this matter were not raised until after we had finished with
Governor Young, it would be helpful to us in connection with the
further procedure.
Mrs. PRATT. Is it not possible for the members of the committee
to have the minutes of the hearings between the times we are actually
engaged in the hearings? .Is not one of the things that delays us
quite a long time the repetition that we have?
. The CHAIRMAN. Yes.
Mrs. PRATT. And I think if we could see those minutes in between
times, it would be very helpful. I know that as far as I am concerned,
many questions that I had were covered by others, and yet I could
not remember how they were covered and I may have spent a great
deal of time.
The CHAIRMAN. We are endeavoring as far as possible to print the
minutes of each week's hearings immediately after they are closed.
While I am on the subiect, I would like to suggest to the members
of the committee that this printing is being greatly delayed because
of the fact that the members of the committee desire to correct their
questions in the stenographic transcript.before it can be sent to the
printer. The clerk of the committee is delayed in getting these
minutes to the printer because.every member wants to read these
hearings for purposes of correction. So there has been some delay.
Parts 1 and 2, however, are printed and, as soon as corrected, this
last week's hearings will go to the printer this week.
I think it is very essential for the members of the committee to note
carefully the testimony up to this time, in order to enable us properly to question the other witnesses who are coming before the
committee. So I would like to stress that the members of the
committee correct each week, as quickly as possible, the stenographic
notes.
(Discussion off the record.)
Mr. BEEDY. Mr. Chairman, in order that we may clear the situation and get on with the hearing, there is a motion before the Chair,
which I will now withdraw. I think,it is wise to take up the matter
in executive session,.and I think it is well to have the members get
the record and look it over, and then we can adopt some intelligent
procedure.
Mr. LUCE. Mr. Chairman, I move that the members of the committee have three legislative days after the day of the hearing in
which to correct their remarks.
Mr. GOLDSBOROUGH. Of course, Mr. Chairman, we have to have
access to the record in order to do that.

;

i
t

3

9

3

i

e

O
B

S

e
,e
e
C

r,
1r
It
Lt

1^

U

BRANCH, CHAIN, AND GROUP BANKING

313

The CHAIRMAN. The record will be available here in the committee
roor.o. The witness has one copy and there is only one other copy
available, so that it will be available for the members of this comnuttee in this room. This room is very convenient to the House,
and the members will be expected to come here to make their
corrections.
Mr. GOLDSBOROUGH. I second that motion.
(The motion was agreed to.)
The CHAIRMAN. I 'believe, Mr. Pole, you have some additional
data you want to submit for the record in regard to holding companies.
Mr. POLE. I think everything is in the record, Mr. Chairman.
Mr. BEEDY. I was going to ask Mr. Pole if he has any record of
knk failures in groups by congressional districts that he could put
ulto the record.
Mr. POLE. Covering the United States?
Mr. BEEDY. Yes.
Mr. POLE. That could be prepared, Mr. Beedy, and I shall be glad
to supply the record with that.
Mr. BEEDY. Then, I would ask the comptroller to make such a
tabulation of bank failures and put it into the record.
. Mr. POLE. State and national banks covering congressional
districts of the United States?
Mr. BEEDY. Yes.
Mr. POLE. That will be done.
Mr. FORT. Will you make that in 4-year or 10-year periods?
Mr. POLE. Whatever the comparable periods are.
. Mr: LUCE. I think that will be very difficult to carry out literally
111 some of the larger centers embracing several congressional districts.
For instance, in Boston
Mr. POLE. I think, Mr. Luce, the number of failures in Boston is
So small that it will not make any real difference.
. Mr. LucE. Yes; but if there were a failure there, you might have
difficulty in discovering whether it was embraced within the ninth
or the tenth congressional district.
The CHAIRMAN.WaS there printed in the record a list of chain and
group systems?
Mr. POLE. Yes, sir; that has been furnished.
Mr. BEEDY. I should like to change my request so as to make that
tabulation on the basis of metropolitan centers and congressional
districts outside of the metropolitan centers. The reason for the
etlange is that some cities embrace parts of four or five congressional
districts. It will be almost impossible for you to draw the lines of
the districts there.
The CHAIRMAN. That will be inserted in the record at this point.
,(The information requested of Mr. Pole is here printed in full, as
iollOws;)

BRANCH, CHAIN, AND GROUP BANKING

314

Number of bank suspensions, by States, congressional districts, and years, 1921-190
J
Total,
19211929

32

Alabama

1921

1922

1923

1924

1925

1926

1 ____

2

10

5

2

1927

1929

1925

1 ____

11

District No. 1—Mobile____
3

District No. 2
Flomaton
Glenwood
Montgomery
District No. 3
Abbeville
Anton
Eufaula
Newton
Ozark
Samson
Scale
Slocomb

,
1 --------1 1
,

1

1
•9 ---- ---1

1

3

_ _ _ _ _ _ _ _ _ ___ _ _ _ _

1
1
-

4

_ _ _ _ _ __ _ I_ _ _ _ _ _ _

1
1
-

1

•

1

1
,-

District No. 4
Lincoln
Orrville

1
I

District No. 5

-

- - - - - - - - - --

Fivepoints
Marbury
District No. 7
Fort Payne
Odenville
Valley Head
District No. 8
Athens
Florence
Madison
District No. 9
Birmingham
Leeds
District No. 10
Carrollton
Haleyville
Hodges _

-3

------------

9
2

1

-

----

----------------------

1
1

1

-I -

1 _

1
1 1 ____ ____
I-

1
1 ------------------------- ------------ 1
1I—_---1 ----________
____ ____

.
5
1
------------------------------4
,
11
_

2 i

1

,
_

315

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921/929—Continued

Arizona: District No. 1 _

1922

1928

1924

1925

1926

27

6

4

9

3

3

1

1927

1928

1929

1 ____ ____

•
•
•

1 ____ 1 ____________ ________ ____
1 ________ 1 ____________________
2
1
1 ________________________
2
1
1 ____ ____ ____ ____ ____ ____
____ ____

•
•

2
1

•

1

1 ____ 1
1 ____ ____ ____ ____ ____ ____ ____ ____
_
-1 ____ ____ ____ ____ ____ ____ ____ ____

W!ckenburg
Winslow

•

1

1 __-_-_______________________ ____

District No. 1

4
1

1921

Bisbee
Clifton
Duncan
Florence
Jadsden
Jerome
Mayer
metealf
Parker
Patagonia
Peoria
Phoenix
Prescott
Ray
Safford
Saint Johns
Snowflake
Somerton
Tempe
Tombstone
Tucson

Arkansas

5

Total,
19211929

Black Oak
Blytheville
Brookland
Cotton Plant
Earl
Greenway
Harrisburg
Haynes
Helena
Joiner
Jonesboro
Lake City
Lepanto
Marianna
Marion
Marked Tree
Marmaduke
Moro
Nimmons
Osceola
Paragould
Parkin
Peach Orchard
Success
Vanndale
Walcott

____ ____ ____ ____ ____
____ ____ ____ ____ ____ ____
____ ____ ____ ____

•

95

5

32 ____

____
____
____
____
_

4

5

11

8

19

18

14

11

1

2

6

1

8

8

4

2

1 -----------,-------1
11

1
---- ------- ---

- ---____ -___ ___
1

____
_
1

1

1

- ---____

-------___________ ____ ____ ________I 1

-

____ ___

_
_
---

BRANCH, CHAIN, AND GROUP BANKING

316

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1926

1927

2

2

1928

1929

Arkansas—Contd.
District No. 2
Batesville
Biscoe
Black Rock
Bradford
Hazen
Newport
Strawberry
Williford

8

1

1

1

1
1

1
1
1
1

District No. 3

1

Cotter
Lincoln
Lowell_
District No. 4
Ashdown
Dyer
Foreman
Hatfield
Mineral Springs
Mulberry
Scranton
Winthrop
District No. 5
Altus
Belleville
Clarksville
Coal Hill
Dardanella
Lamar
Little Rock
London
Morrillton
Ozark
Viola
District No. 6
Arkansas City
Carlisle
De Witt
Gillett
Lonoke
McGehee
Pine Bluff
Star City
St. Charles
Stuttgart
Watson
Wilmar

1

1

2

1
9
1
2
1
1
1
1
1
1
13

1

1

1

2

3

1
1
1
1
1
1
1--

2

4

1
1
1
2

1
1

1
1
1
1
1

1

1
1

1

2
1
15

1

1
2 -1
1
1
2
2
2
1
1
1
1
1

1

1
1

1
1

1

317

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921—
/929—Continued
Total,
19211929

Arkansas—Contd.
District No. 7
Camden
Columbus
Dermott
El Dorado
Fulton
Gurdon
Hampton
Hope
Louann
Montrose
Norphlet
Okolona
Smackover
Taylor
Thornton

California
District No. 1
Biggs
Colusa
Fort Bragg
4
1

15

1921

1

1922

1

1923

1

1924

1

1925

1926

1927

1928

1 --------8

2

1
1
1 -------------------------------1 ____ 1 ---------------------------1

1-

-----------------------1

31

3

6

2

2

3

5

6 ____

4

4 ____

3 ____

1 ____ ____ ____ ____ ____

2 ____

—-------2 ____ ____ ________ ____ ____ ____

District No. 2
Alturas
Cottonwood

1929

1
1 ____ 1 ________________________ ____
--------------------------------1

1
District No. 3—Sacramento_
1

1
3
_1
1

1

District No. 7
Chowchilla
Clovis
Delano
Dinuba
Eingsburg
Livingston
Merced
Modesto
Riverbank
District No. 11
Bishop
Chino
Corolla
Imperial
National City
Seeley

2
2

4

3

2 ____________________

1

1 ____ ____

10

1
1
8

1 ____________

____ ____ ___
---- ---- ---1- -------------------------------1

2

2 ------------------------2 __
1 ----------------1
1

BRANCH, CHAIN, AND GROUP BANKING

318

Number of bank suspensions, by States, congressional districts, and years, 1921/929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1928

1927

1928

BO
—

Califo rnia—Contd.
1 --------------------------------1
_
1
_ __1
--

Hynes
Los Angeles_
Watts
South Pasad ,na
San Francisc)

89

Color do
District No. 1—Denver

12

District No. 2

39

Akron_
Amherst
Arriba_
Bovina_
Brush_
Burlingt on
Cheyen e Wells
Dailey_
Evans_
Flagler_
Fleming
Fort Co lins
Gilcrest
Goodric l
Greeley_
Grover_
liudson
.lulesbur g
Keensburg
Keota_
Kersey_
Lafayette
Lovelan 1
Matheson
Millikin
New Ra ymer
Orchard Otis_
Simla_
Snyder_
Sterling
Stoneha n
Stratton
Windsor

Aguilar_
Antonit '
Brandon
Bristol_

8

18

9

15

14

7

2

11

4

4

7

4

3

_

5

2

1 -------- -------- 1
2
1 ----------------------------1__-1 __-_--______________________
__-2
---- ---- ---- ------- ---- ---- ---1
1

--__ ____ ____ _ __ _
i

2

-

1

--__ __-_---- -------- ----

1
-1 _--------------1
1
1
_
22

District No. 3

13

4

4

2

4

2
____ __-.

r
1 --------------------1

319

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1926 1927

1928

1929

Colorado—Contd.

5

2

District No. 3—Contd.
Cheraw
Granada
Hasty
Haswell
Jarosa
Lamar
La Veta
Mesita
Monument
Ordway
Pueblo
Rocky Ford
San Acacio
Sheridan Lake
Springfield
Trinidad
District No. 4

____

16

Hayfield
Clifton
Delta
Fruita
Gypsum
Hayden
Maybe11
Montrose
Mount Streeter
Norwood
Nucla
Oak Creek
Pagosa Springs
Rifle..
Telluride
Walden _

1

1

2

----------------------------

3

1

1 ____
1

1 ____

3

-1 ----------------------------

---------------1
1 -------------------------------1

1 ____

1

1 ------------1

District No. 3—New Haven

1 ____

Middletown
'Newport

3

---- ---- ------- ---- ---- ---- ---- -1 ____ 1 ____ ____ ____ ____ ____ ____ ___
1 -------------------------------1

District No. 2—Putnam _ __ -

Delaware:
No. 1

2

-1

2 ____

Connecticut

•••••

1 ----------------1 ____ ____ ____ ____
---------------1
------------------------1 -------_
1
1 ____ 1 ____ ____ ____ ____ ____ ---- ---_
1 --------------------------1
1 -------------------------------1
1 ---- ---- ---- ---- ---1
1 -------------------------------1
1 -------------------------------2 ------------1 ____ 1
2
-------1 ____ 1 ____ ____ ____ ____ ____ ____ ____
1
1

1 ____ ____ ____ ____ ____ ____

District
2 ____________________________

1

1

1 ----------------------------1
1 --------------------------------1

BRANCH, CHAIN, AND GROUP BANKING

320

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued

Florida___
District No. 1__ _
Auburndale
Avon Park
Bartow
Boca Grande
Bowling Green
Brandenton
Bushnell
Clermont
Coleman
Crystal River
Dade City
Dundee
Ellenton
Eustis
Frostproof
Fort Meade
Groveland
Haines City
Inverness
Lake Alfred
Lakeland
Lake Wales
Largo
Moore Haven
Mount Dora
Mulberry
Palmetto
Plant City
Port Tampa City
Punta Gorda
Safety Harbor
Sarasota
Sebring
St. Petersburg
Tampa
Tarpon Springs
Tavares
Trilby
Umatilla
Wauchula
Webster
Winter Haven
Zepyrhills
Zolfo Springs
District No. 2
Bronson
Callahan
Chiefland
Citra
Dunnelton
Gainesville
Hawthorn
Jennings

Total,
19211929

1921

1922

1923

1924

190

5

5

4

69 ____

3

1925

1927

1928

3

43

31

35

63

1

12

4

11

38

1
2

1
2
2
1
1
1

9
1
1

1
1

1
1
1
3
1
2
1
1
1
2
1
2
1
4
1
1
3
2
1
1
2
1
2
1
2
2
1
6
1
1
1
1
3
2
1
1
1
26

1
1

1
1

1
1
1
1

1
1
1
1
1
1

2

1
1
1
1
1

1
2

1
1
1
1
1
2
1
1

1
2

1
6
__-_-_

1
1
1
2
1
1

3

6

1
1
1
1
1
2
1
2

1929

1926

5

4

1
4

1
1
1
1
1
1

1
1

1

BRANCH, CHAIN, AND GROUP BANKING

321

Number of bank suspensions, by States„ congressional districts, and years, 1921/929—Continued
Total,
19211929

I
1921

1922

1923

1924

1925

1928

1927

1928

1 929

—

Florida—Continued.
District No. 2—Continued.
Lake Butler
Lake City
La wtey
Live Oak
Macclenny
Madison
Mayo
McIntosh
Micanopy
Monticello
Ocala
Waldo
White Springs
Williston

1

-1

1

-_=----___—,._,-District No. 3

_

7

Baker
Bonifay
Cottondale
Laurelhill
Marianna
Quincy

1

---------------------------1 ------------------------1 _
—
3

1

1

1

2

1
____ _ __ _

1 ----------------

District No. 4

88

Boca Raton
Boynton
Buena Vista
Cocoa
Coconut Grove
Crescent City
Dania
Daytona Beach
De Land
Delray
Eau Oallie
FellsmereFort Lauderdale
Fort Pierce
Hastings
Homestead
Jacksonville
Jacksonville Beach___ _
Kilsey City
Kissimme
Lake Helen
Lake Worth
Little River
Maitland
Melbourne
Miami
Oakland
Ocoee
Okeechobee
Orlando

3

1

1

—
1 --------222120

2 ----------------------------

1

20

1

-

_

1 --------

-

2

2
2

2

2 -------------------- 1
_ ___ _
2
1
1
- ____

6

1

2
1
1
2

BRANCH, CHAIN, AND GROUP BANKING

322

Number of bank suspensions, by States, congressional districts, and years, 1921—
/929—Continued
Total,
19211929

I
1921

1922

1928

1924

1925

1925

1927

192

1928

Florida—Continued.
District No. 4—Continued.
Ormond
Palatka
Palm Beach
Sanford
Sebastian
South Jacksonville
St. Augustine
St. Cloud
Stuart
Titusville
Vero Beach
West Palm Beach
Winter Garden

1
1

1
1

4 1
-

Georgia
District No. 1
Claxton
Clyo _
Cobbtown
Dover
Girard
Gough
Guyton
Hagan
Ludowici
Metter
Midville
Oliver
Pulaski
Register
Reidsville
Rocky Ford
Sardis
Savannah
Springfield
Waynesboro
Woodcliff
District No. 2
Albany
Baconton
Berlin
Camilla
Climax
Cloquitt
Doerun
Donalsonville
Ellenton
Iron City
Morgan
Moultrie

319
37

56

14

11

2

1

29

31 102

18

1
_
2 1-_ -_-

,
1
1
26 , S2

1' 2
3
6
2 ;
1
---------------------------------11

1
3
1
2

9
1

- _
1

2
1
3
1
------------------------------1-----------1
3

1 -----------------

-1

2 __-- ---- ---- -_
1 ---- ---- ---- - ---- ---- - -- 4
7
1 ____ -___ __
1
_ ____ _ _
2 --------------------2
--------------27

3 ____

2

6

2

8

2

1

3

1
1 ----------------------------1 I-- 1 ____ ____ ____ _
1
-- - - -1
1
___ _
1
1
1 ____ 1
4
2 ---------------------2
2 ------------1 '_ _ _ _
1 ------------------------1
_ 1
1
--i-

-1-

BRANCH, CHAIN, AND GROUP BANKING

323

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
19211929

1921

1922

1923

1924

\

1925

1928

1929

\

Georgia—Continued.
District No. 2—Continued.
Norman Park
Oakfield
Pavo
Poulan
Sylvester
Ty Ty
Whigham

1927

1928

-1
-

1
1
1
1
1
1

1
=SIC

3

District No. 3

,
1

L

1

1

1

1
1

1
1

Americus
Ashburn
Benevolence
Brownwood
Butler
Byromville
Conyers
Cordele
Cuthbert
Leesburg
Lilly
Lumpkin
Oglethorpe
•
Parrott
.
Plains
Preston
Rebecca
Reynolds
Richland
Smithyille
Sycamore
Unadilla
Vienna
Weston

31 4

1
2
1
1
1
1
2
1
3
1
1
1
1
1
1
3
1
----I i
_
1
1
1
1
__
_
1
___
3
1 ,_ -- _
___
1 '_ ___
1 ,____ -- -Ii
1
1
--3, 1
I
H-..
1
1 I_ __
1 ___
I _ ___
1 ------------------- 1
2 I___
1
2 ----------------I
_
1
2 ,_
1

District No. 4
Bowdon
Buena Vista
Carrollton
Chipley
Cussetta
Franklin
Hamilton
Hogansville
Lagrange
Lyerly
Manchester
Moreland
Roopville
Shiloh
Temple
Twin
Villa Rica
Warm Springs
Waverly Hall
Woodbury

13

3

13

2
2
1
2
1
1
1
1
1

__ _
1 _

I

1

1

1
1
1

1

3

2

1

I_ _
i--- _
I____
_ __

1
1

1
1
1
2
2
1
1
2
1
1

1
1

1

1
1

1 I

3

I

BRANCH, CHAIN, AND GROUP BANKING

324

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1928

1927

1928

1929

Georgia—Continued.
District No. 5
Atlanta
Chamblee
Douglasville
East Point
Fairburn
Lithonia
Palmetto
Stone Mountain
District No. 6
Bradley
Brooks
Culloden
Hampton
Jackson
Locust Grove
Macon
McDonough
Milner
Roberta
Shady Dale
Stockbridge
Williamson
Woolsey
Yatesville
District No. 7
Adairsville
Bremen
Calhoun
Cassville
Dallas
Fair Mount
Hiram
Kingston
Marietta
Menla
Plainville
Powder Springs
Ringgold
Rockmart
Smyrna
Summerville
Tallapoosa
District No. 8
Arnoldsville
Athens
Bishop
Bogart
Bowersville
Bowman
Canon
Carlton

14

1
1
1
1
16

1

3

1

7

1

1

1
____ ____ ____ ____ ____ __ _ __------------------------------------------------1
_
---- ---- ____ ____ ____ __-- _---------------------- 1
1 -_
_ ____ ____ ____ ____ ____ __1 ____

5

2

3

3

____ ____ __-1
i
1
____ ____ __118

1

1 --------2
_

12

1 ____

1

1 ____ ____ __-1

____ ____ _------------1
___ ____ ____ ____ ____
1 --------------------1 ____ ___ _--

2
27

2

1

2

5

7

8

1

1 ____ ---- ---1 ___- __-- ---- ---- ---- ---- ---- ---1
1 ---- ---- ---- ---- ---2 --------1

325

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
l,
I Tota
1921I
1

1
1

Georgia—Continued. II
District No. 8—Continued. I
1
Carnesvdle
Colbert
1
Comer
Elberton_
Godfrey
Greensboro
Hartwell
Lavonia
Loganville
Madison
Royston
Social Circle
Washington
White Plains
District No. 9

L

I

1

1

1

Alpharetta
Ball Ground
Blue Ridge
Canton
Clarksville
Cleveland
Commerce
Cornelia
Covington
Crawford
Cumming
Dacula
Dawsonville
Duluth
Eatonton
Flowery Branch
Grayson
Hiawassee
Homer
Lawrenceville
Lexington
Lula
Mansfield-------------Maxeys
McCaysville ----------Newborn
Norcross
Statham
Watkinsville
Winder
Wrens
District No. 10
Augusta
Avers
Bartow
Davidsboro
Gordon
Harrison
Louisville

L

1922 1923

1921

1924

1925

1926

1927

1928

1929

1929

1
1
1
2
1
1
1

1
1
1
2
1
1
1
1

21
1
1
1
1
1
41
1
1
1
1
1
1
1
1
1
1
2
1
1
1
4
1
1
1
1
1
2
1
3
2
1
2
1
1
1
1
2

1
1
1
1

8

3

3

i
5

1
1
4

11

3

1
1
1
1
1
1
1
1
.. 1
1
1
1
1

1
1

2

1
1
1
1
1
1
1

1

1
1

1

1
1

1
1
1

1
1
1
1
I

22

5

1
1
2
1
4
1
1

1

1
2

3

5

1
1

1
1
1

1
1

6

1

326

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1926

1927

1928

1929

Georgia—Contd.
District No. 10—Contd.
Sandersville
Sparta
Stapleton
Tennille
Thomson
Wadley
Warrenton
Warthen
District No. 11
Adel
Alapha
Alma
Ambrose
Blackshear
Douglas
Hahira
Hazlehearst
Milltown
Naylor
Nicholls
Ocilla
Pearson
Valdosta
District No. 12
Abbeville
Adrian
Alamo
Alston
Byron
Cadwell
Chauncey
Chester
Cochran
Danville
Dublin
Eastman
Fort Valley
Glenwood
Hawkinsville
Helena
Jeffersonville
Kite
Lovett
Lumber City
Norristown
Pineview
Rochelle
Rockledge
Scott
Soperton
Stillmore_
Swainsboro
Wrightsville

2
_
_ __ _
2
_ 1
1 --------------------1-- - - 1 ---------------- ---- 1
1
1

-1

I
--

______ ____ ____ ____ __- 1

19

6 __ __

1

2

2 __ _ __ __ _ _ __
1
1
1
1

3 ____

5

1

1
__ __ __ _ _ _ __ _ _ __ _ _ _ _ - - - - -- - - - - - - - - -- - ---

1

2
1

36

1

---_ ---- ____ ____ ____ __ - -

7

3

-1 ,

1

1

4

3 ', 11 ____

5

—
2

- - -- - --- - --2
1

- - - - --- - ---- ---- - - - _

1 ---- ---- - --____ 1
1 --------------------1__—
3

-1

i
---- - --- -- -1 _-__ - -- - - -- - - ______ ____ __-_ ____
-1
1
1
-- -- - - - ---- ---- - - - 1 ---- -- __

1

-1 ____ _ _ _ _ II_ ___ _ _- -

1 --------------------1
1
1
1 ---- ---2
1

1 ____ _

---- ---- ---- -- - - - -- ---- --- - --- - - - --

327

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921—
.1929—Continued
Total,

9

19211929

Hawaii

1921

1 ____

1922

1923

1924

1925

1926

1927 1928 1929

1 ---- ---- ---- ---- ---- ---- ---_____

1

2

Idaho
bistrict No. 1
Bonners Ferry
Caldwell
Cambridge
Coeur d'Alene
Council
Fruitland
Horse Shoe Bend
Jerome
Kamiah_
Kooskia
Leadore
May
Middleton
Midvale
Nampa
New Plymouth
Nezperce
Orolino
Payette
Peck
Salmon
Stites
Weiser
Wilder
District No. 2
American Falls
Ashton
Bellevue
Blackfoot
Bliss
Boise
Bruneau
Buhl
Burley
Carey
Declo
Dubois
Eden
Gooding
Bailey
Hansen_
Heyburn
Homedale
Idaho Falls
Meridian
Montpelier
Mountain Home
Murtaugh

72

23

8

10

7

8

4

7

2

3

27

8

2

3

2

2

3

4 ____

3

____ ---- ____
1
1 ____

1
1

1
1

1

-

1

1 ____________________________

_

1
1

---- ---1 ____ ____ ____ ____ ____ ____ ____ ____

1

1 ____ _______________________
---------------- ---------------- --- 1
1
1 ____________________________ ____
2
45

1

15

6

7

5

6

1

3

2

---- ---- ---- ---- ---- ---2.
1 ____ ____ ________________ ____ ____

1
1
2
4
1 ------------1
1

-

---- --- - ---- ---- ---- ---1

1

_
1 ________ ____ ____ ____ ____ ____ ____

1
1 ____I
100136-30—voL 1 PT4-3

1 ---- ---- -- ---- ---- ---- ----

BRANCH, CHAIN, AND GROUP BANKING

328

Number of bank suspensions, by States, congressional districts, and years, 1921192.9—Continued
Total,
1921- 1 1921 1922 1923 1924 1925 1926 1927 1928 1920
1929 1
---Idaho—Continued.
District No. 2—Continued.
Oakley
Paul
Pocatello
Rexburg
Rigby
Ririe
Rockland
Rupert
Shelley
St. Anthony
Wendell

____ ____ __ -1 ____ ____ ____ _--____ ____
_-3 ____

4

5

2

2

3

112

1

3

13 ,

District No. 6
Chicago
Franklin Park
Oak Park

10

138

Illinois

-

-1

14

8

20

29

Aurora
Downers Grove
Marengo
McHenry

34

1 ---------------4
i

_

District No. 10—Waukegan_
District No. 11

14

-----------4

1
--------

1

District No. 12

2

1
1
—
•

--------------------------------

Genoa _
Oswego
Rutland
Winnebago

1

District No. 13

7

_

--------

1

_
2

1 ------------1 ____

2
-

Davis
Dixon
Fenton
Hanover
Lyndon
Prophetstowu
Stockton
District No. 14
Aledo
Augusta
Bardolph
Biggesville
East Moline
Gladstone
Matherville

-----------------------------1
- - - -- - - - - 1
1
12

___ ____ __-- __ - _ - - ---------------------------- -- - - -- - _ ____ ____ ---- - _- - - - - •
1 ---------

2

2

3

1

2

—
1 _
..-- ---- ------------_

1
2

- ___ ____ ___

329

BRANCH, CHAIN, AND GROUP BANKING
f-

Nuniber of bank suspensions, by States, congressional districts, and years, 19211929—Continued
Total,
19211929

2

Illinois—Continued.
District No. I4—Continued.
Rock Island
•
Sheirard
Stronghurst
Viola
Bietrict
No. 15

4
5
4

2

1
1

Abingdon
Annawan
Astoria
Geneseo
nooppole
Kewanee
Maquon
District No.
17
Arlington
Buda
Cllenoa
Colfax
East Peoria
Fairbury
Guthrie
1
,•9 Roy
Magnolia
McLean
Meadows
Princeville
Toluca

2

District No.
18

2

Gliebanse
Grant Park
Kankakee
Momence
Neoga
District
No. 19
Allenville
Arcola
Blue Mound
Champaign
Cisco
Cowden
Decatur
Deland
Fisher
Poosland
Hindsboro
Lakewood
La Place
Mansfield
Mattoon
Moweaqua

1921

1922

1923

1024

1925

1926

1927

1928

1929

1 ____ ____ ____ ____ __
-1
1
2 --------------------------p
I
I

1 ____________
8
2

1

1

__-- _--1 ____ ____ ____ ____ ____ ____ ____ _I ---I
13 ________

1

1 ____

3

1

3

4 ____

1

---__ _ ____ ____ ____ ____ ____

1 ________________________
---- ---- ---__ ____ ____
1 --------------------1
1 --------------------------------1
1
5 ----------------2 --------1

2

1 ________________________________
1
1
----------------------------1---i
____ ____ ____ ____
25

2 , __

1

3

1

7

5

5

1

--12
1 ------------------------1
1
1
I - --- - ---

---- ----

1
I
I
2
1 ____ 1 ____ ____ ____
1 ------------------------------1

330

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1911".
/929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1926

1925

1927

1
—

,

Illinois—Continued.
District No. 19—Continued.
Rantoul
Sadorus
Shelbyville
Stewardson
Sullivan_
Urbana

1

1
1 ____ ____ ____ ____ ____ ____ ____ _ __ -

District No. 20
Bath
Greenview
Griggsville
Havana
Kilbourne
Jersey ville
New Canton
New Salem

1
1 _
1
1 _
1
I
1

—
- -- - - - - - -•
- - ---- - --- 1 - - - - -- - -- - --- - -- - - - -- -- ----- - --3

District No. 21
Bulpitt
Edinbury
Farmerville
Mt. Auburn
Springfield
Stonington
Taylorville
Tamaroa
Thomasville

1-- - - - --- - - - - --- - - --- -

2 -------------------- ----

1

—

-- - - ---

2

)istrict No. 22
Alhambra
East St. Louis
Troy
Venus
Woodriver

1
—

—
1 __
--- - --- - ---- --- - -- --- ---- - - - 1-

)istrict No. 23
Divide
Hunt
Walnut Hill
Nstrict No. 24
Bible Grove
Dahlgren
Eldorado
Galatea
Harco
New Haven
West End
West Salem
Xenia

1
10

------------------------1_
2
3 i
___
1

I ------------------------1
-- - - - - I1
1
1 ---------------------------_
—

of-

331

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
19211929

Illinois—Continued.
District No. 25
Benton
Logan
Mankanda
Royalton
Sesser

Indiana
District No. 1
Dale
Fort Branch
Newburgh
District No. 2
Bloomfield
Brooklyn
Parmershurg
nYtnera
Jasonville
Merom
Monroe City
Shelburn
Sullivan
Vincennes
SPencer
District No. 3
Corydon
Elizabeth
Huntingburg
District No. 4
Burney
Crothersville
Hope
Letts
Scipio
District No. 5
Bainbridge
Clinton
North Salem
Plainfield
Stilesville
Universal

1921

1922

1923

1924

6

1925

1926

1

1

2

1928

1929

2
1

1
1
1
1

115

1927

1

1
1
1
1

7

7

4

10

7

25

24

3

2

1
1
1

1

1
1

13

1

1

1.

24

5

1
1
1
1
1
1
1
1

1

2
2

_

1

1
1

1

1

4 ____

3

2 ____
1 ____

2
1

1

1
8

1

2

2
2
2

1

1
1

6

1
1
1
1
1

1

1
1
1

1

1

1

2
1

1
1
1

332

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1911'
/929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1926

1927 1929 19

Indiana—Continued.
District No. 6
Gwynneville
Liberty
Richmond
District No. 7
Action
Beech Grove
Indianapolis
District No. 8
Bluffton
Dunkirk
Geneva
Keystone
Liberty Center
Markleville
Petroleum
Portland
Redkey
Tocsin
Uniondale
District No. 9
Arcadia
Attica
Colfax
Darlington
Delphi
Flora
Kirklin
Kokomo
Ladoga
Linnsburg
Noblesville
Rosston
Whitestown
District No. IP
Ambia
Gary
Hobart
Kentland
Kouts
La Fayette
Monon
Monticello
Williamsport
Wolcott

3

1

1
1
1

1
1

1

1
1

1

-

1

2

15

3

9

3

6

1

2

1

1

2
1
1
1
1
1
2

1
1

1

_
1
2

1
1

1
2

2

14

1
1

1
1

1

1
1
1
1
1

1
1

1
1

---

_

11

2 ____

1
1

1 _--1

1
1
1
1
1
1
1

9

1

2

1

1

- - - --

--

4

_

2

2
__.

-1
1

11

333

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 19211929—Continued
Total,
19211929

1921

1922

1923 1924 1925

1926

1927

1928

1929

Indiana—Continued.
District No. 11
Bunker Hill
Galveston
Hartford City
Huntington
La Fontaine
Matthews
Medaryville
Montpelier
Onward
Wabash
Warren
2
_

_1

2

District No. 12
Angola
Churubusco
Columbia City
Corunna
Fort Wayne
Grabill
Hoagland
Huntertown _
Lagrange
M on go
Yoder
District No. 13
Argos
Claypool
Lakeville
Milford
Millersburg
North Liberty
Sidney
South Bend
Tippecanoe

2
1

1
_

Iowa
District No. 1
Batavia
Birmingham
Bonaparte
Brighton
Columbus Junction_ _ _ _
Douds
East Pleasant Plains_ _ _
Farmington
Fort Madison
Keosawqua
Kingston

1

11

1
1
1
1
1
1
1
1
1
1
1

5

2

1

1
1
1
1
1
1

13

1

1

2

6

__

2

1
2
2

1
1
1
1
1
1

1

10

1

1

3

1
1
1
1
1
1
1
2
1

1

1
1
1

528

24

12

35

83

30

1

1

2

6

84 135

1

3

1

1

70

51

34

6

9

1

2

1
1
1
3
1
1
1
1
1

1
1
1

BRANCH, CHAIN, AND GROUP BANKING

334

Number of bank suspensions, by States, congressional districts, and years, 19BI/929—Continued
,
Total,
19211929

1921

1922

1923

1924

1925

1926

1927 1 1928
I

192

-- - —

Iowa—Continued.
District No. 1—Continued.
Letts
Lockridge
Morning Sun
Mount Pleasant
Mount Sterling
Oakville
Riverside
•
Rome
Stockport
Wapello
Washington
West Point
Yarmouth
District No. 2
Bellevue
Charlotte
Conesville
Davenport
Grandmound
Iowa City
Lost Nation
Low Moor
Maquoketa
Marengo
McCausland
North English
North Liberty
Oxford
Parnell
Preston
Sabula
Spragueville_
Swisher
Victor
District No. 3

••••

-1

__-- ---- ---- - --- - - -

1
____ ___
1

•

25

•

1

3

2

2

2

1

__1

1

--

3

2

- - _-.7-----6

3

_
2

i

1
1
1

__

1 --------------------1
1

40

1

2

1

6

11

6

Si 3
i

Aredale
Aurora
Cleves
Dyersville
Eagle Grove
Frederika
Goldfield
Greene
Hazleton
Holy Cross
Hopkinton
Hudson
Jesup
Lamont
Laporte City
Manchester
Masonville

i
1
1

-

---- ---- ---- ---

i

335

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 192119.e9—Continued
Total,
19211929

5

1921

1922

1923

1924

1925

1926

1927

1923

1929

—

Iowa—Co atinued.
District No. 3— -Jontinued.
New Hartfo .d
New Vienna
Owasa
Parkersburg
Peosta
Quasqueton

1
-

Ryan

2

Sheffield..
Shellrock
Sherrill_
StanleySumner..
Tripoli_
Union
Waterloo..
WinthropZwingle_
District No. 4_
AltaVista_
Arlington..
Bassett_
Cartersville
Charles Cit pr
Chester..
Elms,
Fertile
Fredericksb urg
Grafton_
Hawkeye_
Ionia
Lansing_
Manly
Marble Rock
Mason City
Nashua_
New Albin
New Hampton
Oelwein_
Osage
Plymouth_
Quadahl_
Riceville
Rockford_
Rossville_
Strawberry Point
Swaledale..
Thornton_
Ventura_
Waterville
Waukon_

------------------------11
2 ......-----------------

1
48

---- ---- ---- ---_ 1 ____
-------------------------------1
-------------------------------1
----------------

2 ____

1

7

13

13

4

4

4

-------------------------------- -- 1
__
_____________
---------------2
1
- -------1 -------------------------------1
____ ___
1 - - - - - - - - - - 21 -----------------------------1
---- ---1
2
- -----------1 ________________________ 1
1

1 ---------------------------- -- I
1
1
2 ----------------2

__ ____ ____

BRANCH, CHAIN, AND GROUP BANKING

336

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
1921- 1921 1922 1923 1924 1925 1926 1927 1929 1929
1929
Iowa—Continued.
District No. 5

3

Alburnet
Belle Plaine
Central City
Chelsea
Clutier
Dike
Fairfax
Garwin
Haverhill
Legrand
Marshalltown
Newhall
Norway
Oxford Juntion
Rhodes
St. Anthony
Stout
Tama
Toledo
Troy Mills
Vinton
Walker

8

2

2

1 ------------

-----------____ ____

1 --------

21
-------------------------1
____ ____ ____
1 ____ ____ ____ ____ _

1

____ ____ ____ ___.
1
- ---- ---____ _-__ ____ _--6

27

District No. 6

7

3

3

1

____ ---- ---- ---- _--- --_- -___ ____
r..1

Barnes City
Brooklyn
Deep River
Eddyville
Farson
Fremont
Grinnell
Harper
Hartwick
Hedrick _
Kellogg
Keswick
Lovilia
Malcom
Martinsburg
Montezuma
New Sharon
011ie
Searsboro
Sigourney
What Cheer

1

---- ---- --

•••I

--1 1 ----------------------- -- - ----1
1
1 -----------------

•••. , CO

1 ________ ____ __--------C•4

1 ____ __-____
1
1 ---- ---- ---_

---- ---- ---- ---- ____
1 _
Csi

36

District No. 7
Bouton
Cambridge
Collins
Colo
Des Moines
De Soto
Dexter

8

1

2

2

8

6

—
10

5

11

-

1

1

_
7
1

-1

'

-h

1

1

1

7-1

337

BRANCH, CHAIN, AND GROUP BANKING

1-

Number of bank suspensions, by States, congressional districts, and years, 19211929—Continued
al
Total,
19211929

19

1921

1922

1923

1924

1925

1926

1927

1929

1929

le a—Continued.
2

1

District N o. 7—Continued.
Elkh rt_
India aola
Knox dile
Laco La
Liber ;y Center
Linden
Melo ter
Milo
Neva la
Perry
Persh Mg
Pleas intville
Redfi Ad
SheId Oil
St, arys
Story City
Swan
Tracy

District N o. 8

3
1

Afton
Allerton
Arisp !
Athel ;tan
Bartle,tt
Bedford
Brad yville
Clari ,da
Clear ield
Clio_
Cory on
Crest m
Davis City
Decatur
Derby
Garden Grove
'lamb urg
Laroo ni
Leon
Linev ,Ile
Moulton
Osceo La
Pleas ,nton
Sews.],
Shenandoah
Udell •
Wood burn
bistrict N D. 9
Adair
Anita
Atlan ic _
Aubu >on
Avoc
Eagle i,,

____ ____ ____
---- ---________________
__ _-__ ____ ____
____ 1 -----------------------------------------------1
2 ____ ____
----------------3 ____
---- -------------------------------1
----------------1
------------1
-I
---- ---1
1---- ---- ---- ---- ---- ----

1
1
1
2
3
1
1
1
1

33

1 ____

1

9

7

4

6

2 ____ ____ ____

3

2

---- ----

1
1 ----------------1
1
1 --------------------------------1
1 ------------1
1
i
1
2
---- ---- ---1 ------------1
1
1
1
1 ----------------------------1
2 ------------2
1
____ ____
1 ____________ ____
---- ---- ---- ---____ ____ ____ ____
_ ____ ____ ____

1 ________________
1
1
1 ________________
41
1

2

1

10

9

____ ____ ____ ____
4

8

2

2

8

1 ---- ---- ----

1
1 _
_
1 _I
1
-

BRANCH, CHAIN, AND GROUP BANKING

338

Number of bank suspensions, by States, congressional districts, and years, 190"
1929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1926

1927

1928

1929

Iowa—Continued.
District No. 9—Continued.
Bayard
Bridgewater
Carson
Cumberland
Dunlap
Elliott
Glenwood
Griswold
Greenfield
Lewis
Logan
Magnolia
Malvern
Marne
Massena
Menlo
Mondamin
Neola
Panora
Red Oak
River Sioux
Stuart
Trey nor
Walnut
Wiota
District No. 10
Algona
Anion
Armstrong
Ayrehire
Bancroft
Barnum
Beaver
Berkley
Blairsburg
Bode
Boyer
Bradgate
Britt
Buckgrove
Calmar
Chuidon
Clare
Coon Rapids
Cooper
Corwith
Curlew
Cylinder
Dayton
Decorah
Dedham
Denison
Dolliver
Dow City

3

1

1

1

1
1

1
1
1

1

2

1
1
1

-

1
1

-

1
1

1

1

4

1

3

1
1

1
1
6

2
1
1
1
1
2
1
2
1

1

1
1
1

-_

1
1
1
1
1

1
1

2

130
6
1
1
1
3

2

10

--

16

18

1
1
1

49

17

a_

2
1

1

1

11

1
2
1
1
1
1
2
1
1

1
1
1
1

_
-

1

1 ____

1

-_

1

1

1
1
_

--0'

1
1

1
1
1
2 _
4
2
1

--"

1
1
_

1
3

1

1
1

_
-0"

339

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921—
/929—Continued
Total,
19211929

5

1

—
-

Iowa—Continued.
District No. 10—Continued.
Buncombe
Einmettsburg
Estherville
Farlin
Farnhamville
Fenton
Fonda
Forest City
Fort Dodge
Garner
Gilmore City
Graettlinger
Gruver
Havelock
Hayfield
Humboldt
Huntington
Jefferson
Kiron
Hlernrne
Lake Mills
Lakota
Lehigh
Leland
Lidderdale
Lonerock
Luther
Luverne
Mallard
Manilla
Manning
Miller
Napier
Otho
Ottosen
Palmer
Pocahontas
Randall
Renwick
Rinard
Ringsted
RiPPoY
Rodman
Rolfe
Ruthven
Schleswig
Swea City
Thompson
Vail
Webster City
Wesley
West Bend _
Westside
Whittemore
Yetter

1
5
5
1
1
2

1921

1922

1923

1929

192.5

1926

1927

1928

1
1

1
1

1
1

1
1
1
1
1
1
1
1

1
1

2

2
1
5
1
1
2

1
1
1
2
1
1
1
2
1
2

1
1
1
1
1

2
1
2
1
4

1
1
1
2
1

1
1
1

1
1
2

A
1 ____
1
1
1 ____

1

1

1

2
1
1

1
1
- 2
1
1

1

1
1
1

2
1
1

1
1
1
2
1

4
1
2
2

1
2
1

2

1

2
2
2
1

1929

1
1
2
2

1

340

BRANCH, CHAIN, AND GROUP BANKING

'
Number of bank suspensions, by States, congressional districts, and years, 1911
1929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1926

1927

1923

92

10

2

6

11

12

26

13

6

Iowa—Continued.
District No. 11
Alta
Alton
Alvord
Anthon
Arthur
Ashton
Auburn
Babtle Creek
Brunsville
Castana
Cherokee
Danbury
Doon
Early
Everly
Fostoria
George
Greenville
Harris
Hartley
Hawarden
Holstein
Hospers
Idagrove
Inwood
Ireton
Kingsley
Lake Park
Langdon
Larrabee
Lawton
Le Mars
Linn Grove
Little Rock
Lytton
Marathon
Marcus
Matlock
Melvin
Merrill
Milford
Moneta
Montgomery
Nemaha
Odebolt
Onawa
Oto
Paullina
Pierson
Quimby
Rock Rapids
Royal
Sac City
Sanborn
Sheldon

2

2

1
1

1

2
2

2

1
1
1
1
1
1
1
1
1
1
1
1
1

3
3
2
1
1
1
1
1

1
1
1
1
1
1
1

1
1
1
1
1
1
1
2
1
1
1
2
1
2
1
2
1
1
1
3

1
1

-

1
-_

1

_.."
-

1

1
1
1

1

1
1
1
1
1
1

1

2
2

1

1
1
1
1
1

_
---"
---"
_

1
1
1
1
1
1
1

--"

1

1
1

_
_--"
_

1
_

1

1
1
1
1

1
1

_ --"

1
_

1

_
-_

341

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 19211929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1

1

1

1926

1927

1928

Iowa—Continued.
District No 11—Continued.
Sibley
Sioux City
Sioux Rapids
Smithland
Spencer
Spirit Lake
Superior
Sutherland
Terril
Ulmer
Ute
Washta
Webb
Westfield

1
5
1
1
3
1
2
1
2
1
2
1
1
1

Kansas

223

District No. 1

15

Arrington
Cummings
Holton
Lansing
Leavenworth
Linnwood
Oneida
Powhattan
Roseville
Sebetha
Seneca
Tonganoxie
Topeka
Wetmore
District No. 2--------

---Blue Mound ---------Centropolis
Colony
Eudora_
Port Scott
Garnett- - Kansas City
La Cygne
Lane
Lawrence
Le Loup
Moran
Olathe
Osawatomie
Rantoul
Spring Hill
Zarah

1
2

1
1
2
1

1
1
1

20 34 16 19
_—_---_
2
1
1
--

14

_ _

46

36 26
-- -:3
4 1 2

1
1

_ - _26

3

1

3

1
1
1
1
1

1
1
1

2

1
1
1
1
3
1
2
1

1
1
1
1
1

1

1
1

1

_

1929

342

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
1921-

1921

1922

1928

1924

1925

1926

1927

1928

1924

1929
-

Kansas—Continued.
District No. 3
Altamont
Altoona
Angola
Arkansas City
Anna
Bartlett
Chanute
Chautauqua
Cherokee
Cherryvale
Chetopa
Coffeyville
Dennis
Earleton
Elgin
Elk Falls
Farlington
Frontenac
Girard
Hallowell
Havana
Hewins
Kimbal
Labette
Longton
McCune
Moline
Mound Valley
Mulberry
New Albany
°polls
Oswego
Parsons
Pittsburg
Thayef
Valeda
District No. 4
Belvue
Burlingame
Burlington
Burns
Cottonwood Falls
Council Grove
Delavan
Dunlap
Dwight
Emmett
Florence
Gridley
Halls Summit
Hartford
Harveyville
Lebo

,

40

2

4

6

3

13

1 ________________ ____
1 ________________________
1 ________________________
1

10 1
,

1

1
—

1 !__
1 j____ _

1 ____ ____
1 ________ 1
---- ---- ---- --1
1
________ ____
2
1 ___________________
I
1 --------1

1 ____ 1 ______________________ __ _ ____ _
1
1
1 ____________________________ __1
•••

____ __1 ____ __---- --____ ___
1 ____ _--- ---_ ____ ---4

4

5

____

2

5

2 ___
_

-1

1
- ______________________________
---- ---

31

4

______------------------1
1 ---- ---- ---1 ____-------------------------1 ----------------------------1
--------------1

343

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921-1929—Continued
Total,
19211929

ID

1921

1922

1923

1924

1925

1926

1927

1928

1929

Kansas—Continued.
District No. 4—Continued.
Lehigh
Lyndon
Madison
Neosho Rapids
Olivet
0 uenemo
:
Scranton
&very
Vernon
Wamego
Waverly
Westmoreland
District No. 5
Ada
Assaria
Barnes
Clifton
Baddam
Hanover
Hope
Manhattan
Minneapolis
New Cambria
Sahna
Summerfield
Washington
Wells
Winfred
'strict No. 6
Atwood
Beloit
Bird City
Cedar
Covert
Damar
Ellsworth
Esbon
Cove
Kays
Kanona
Kanopolis
Kanorado
Kensington
Rirwin
Lovew ell
Ludell
Marysville
McDonald
Osborne
Otego
Phillipsburg..
10013G-30—V0L 1 PT 4

i

---- ---- ---- ---- ---- ----

17

3

3

1 ____

3

2

3

1

1

- ---- -_-- _------ ---- ---- ---------------1 -------------------------------------------

1
1
1
2
2

1

i
____
-------____ ____ ____

1

____
------------------------------- ---- ---- ---- ---- ----

_

42

1 ____

7

1

3

13

3

13

1

----------------1

2 --------1

____ ____

1

--

1

1
1 -------------------------------1 ____ ____ ____
---------------____
1
-----------1
- ---- ---1 ------- -- - ---_
4

BRANCH, CHAIN, AND GROUP BANKING

344

PNumber of bank suspensions, by States congressional
1929—Continued

districts,
—

Total,
19211929
—

—

1921

1922

1923

1924

1925

1926

1927

1923

191

———

Kansas—Continued.
District No. 6—Continued.
Plainville
Quinter
Randall
Scottville
Smith Center
Stockton'
Tipton
Walker
Webster
Wheeler
Wilson
Voodston
Zurich
District No. 7
Adams
Anthony
Belmont
Belpre
Bloom
Claflin
Cunningham
Elkhart
Englevale
Ford
Garden City
Geneseo
Greensburg
Harper
Horace
Hutchinson _
Kingman
Lake City
Langdon
Lamed
McCracken
Minneola
Partridge
Pawnee Rock
Pierceville
Runnymede
Saxman
Tribune
Wright
Zenda
District No. 8
Andale
Argonia
Belle Plaine
Caldwell
Clearwater
Eldorado
Geuda Springs
Goddard

1

________
____________

I _______---•

1 _
_ 1
1 ----------------------------1
1 _
-------------1
_—
33

2

5

9

2

3

2

2
-- - ---- --'

1 ____
1
3
1
1 __

1 __________________________

1

1 - - -- ---- ---- ---- ---- --1
_________________ ____
1 ____ 1 -------------------1
------------------

1 ____

1

-___ ____ ____ ____ ____ --1 ---- ---- ---- ---- ---- ---- -____ __

-1 ____ _--_ ____ ____ ____ ____ ____ --

1

____ _

--

19

2

1 ____

3

3

3

3

2

1

1

-----______ ____ ____ __
-1 -- - - - -- - - - - - - --- - - -- - --- - -

345

BRANCH, CHAIN, AND GROUP BANKING
I-

Number of bank suspensions, by States, congressional districts, and years, 1921—
/929—Continued
Total,
19211929

29

1921

1922

1923

1924

1925

1927

1926

1928

1929

Kansas—Continued.
District No. 8—Continued.
Groveland
Mulvane
Newton
Peck
Riverdale
Viola
White Water
Wichita

District No. 1

1 -------------------------------1
1
-----------3 _--- -1

3

2

3

6

7

6

7

1
____
1
---- ---- ---- ---- ---- ---1 --------------------------

1
1
1

Calhoun

Henderson
White Plains

,

District No. 3—Morgantown

Elk Horn
Glendale
Hardysville
Hartford...
Horse Cave
Lebanon Junction
Rockport

2
1

District No. 2

District No. 4

7

5

Hickman
Lovelaceville
Moscow
Paducah
Tolu

-

-1

43

Kentucky
2

- --- - - - - - - - - - - -

____

•

7 -___________

2

1

•

4 ---------------------------

-

1 ------------1
1
1 ____________________
________ ____

District No. 7
Stamping Ground
Sulphur
District No. 8
Bryantsville
Casey Creek
Cornishville
Cropper
Junction City
Perryville
Salvisa
Shelbyville
Taylorville
Wilmore

10

2

2

__

1

1

1

2 __

1

1
1
- 1 ____ ____ ____
____ ____1 ____________________
1
_
1 ____ 1 ----------------------------

-

1
-1 -------------------------------1 ------------------------1
1 --------------------------------11

346

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1981—
/929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1926

1927

2 ____

4

1928

1929

Kentucky—Contd.
District No. 9
Boyd_
Brooksville
Greenup
Maysville
Milford
Morehead
Sandy Hook
Sunrise

1 ------------------------

1 --------

____ __-=--_---------4

District No. 10

1 ----------------------------

Blackey
Bond
Hazard
Himlerville
Lothair

1
-------

2 ____ ____ ____ ____

3istriet No. 11

1

1 ____ ____ __—

3

8

Evarts
Fountain Run

34

Louisiana

7

4

4

2

4

2 ___-

)istrict No. 2
_

Edgard
Gretna
Hahnville

1 ---- ---- ---- ---- ---- ----

1 ---- ----

)istrict No. 3
Abbeville
Delcambre
Franklin
Houma
Jeanerette
Lockport

---- ---- ------- ---- ---- ---- ------- ------- ---- ----- ---- ----

)istrict No. 4

4

Cotton Valley
Mooringsport
Plain Dealing
Sibley

---- ---- ---- ---1
---- ---- -

)istrict No. 5
Monroe
Newellton
Oak Grove
Rayville
Shusboro
Water Proof

- ----

6
'

1 ____
1

1

1 ---- ---- ---- ---- ---- ---- ----

1 ---- ---- ---- ---- ---- ---- ---- ----

347

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by Stales, congressional districts, and years, 1921—
1929—Continued
-Total,
19211929

1921

1922

1923

1924

1928

1928

1927

1928

1929

Louisiana—Contd.
District No. 6
Lottie
Morganza
New Roads
White Castle
District No. 7
Crowley
De Ridder
Eunice
Iota
Oakdale
District No. 8
Dodson
Florien
Leesville
Marthaville
Sikes

3 ____ ____
------•
-------6

2 ________

1 ____________

5

2

District No. 1
Elkton
Whitehaven

1

1

1

1 ____ ____ ____ ____ ____ ____
____ _-__ ____ ____ ____ ____
_
1
__ ---_ ____ -___ ____ ____ ____
_
1
1 --------------------1
1 ____

1

District No. 2—Wiscosset__

Maryland

2

____ ____ ____
1
2

Maine

District No. 3—Belfast

1

---- ---- ---- ---- ---_
2

__

11

5

2

1

1 ----------------1 _

--------1

1
_

1
_ 1 ____ ____
_ ____ ____ ____ ____
1 __1 ____ ____ ____ ____ ____ ____ ____ ____

District

No. 2—Union
Bridge
District No. 5—Seat Pleasant
District No. 6
Emmitsburg
Hagerstown
Baltimore

1 ____

1 ____ ____ ____ ____ ____ ____ ____

2
2
1

1 ----------------------------1
---- ---- ---1 ____ ____ ____ ____ ____ ____ ____ ____
---- ---- ---- ----

4

----

Massachusetts

6

District No. 11—Boston
District No. 13—Warren_ - _

5

5 ____

1

BRANCH, CHAIN, AND GROUP BANKING

348

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
1921- 1921 1922 1923 1924 1925 , 1928 1927 1928 MO
1929
Michigan
District No. 2
Britton
Tecumseh
Temperance
District No. 3

66

8

4

3

7

5

Allegan
Dorr
Edwardsburg
Hartford
Jones
Marcellus
Vandalia
District No. 5
Ada
Elinira
Grand Rapids

1

1
1
__ ____ ____ ____ ____ ____ ____ __--

2 ________

7

2

1 ____

1

____________

1

________

_

2

—
1 -------_

1

-1
1
-1 ____ 1 ---------------------------1
,
4
1

--------------------------------

1
2

_-2
1

1
____ __

Detroit
Linden
Otisville

Akron
Almont
Carsonville
Clifford
Decker
Deckerville
Fairgrove
Gilford
Jeddo
Lum
Millington
Melvin
New Baltimore
Otter Lake
Reese
Richville
Shabbona
Silverwood
Watrousville

9

1 ----------------------------2

District No. 6

District No. 7

7

3

Grand Ledge
Tekonsha
District No. 4

23

19

1

1 ____

1

1

-1

12

1
---- ---- ------- ---- ----

1 ____
1

1 ----------------------------

349

BRANCH, CHAIN, AND GROUP BANKING

Ntonber of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
19211929

9

Michigan—Contd.
District No. 8
Belding
Northstar
Oakley
Orleans
Saranac
Trufant

1922 . 1923

2

1

1924

1925

1926

1927

1928

1929

1 ----------------1

6

1

1
1

1 -------------------------------1
------------------------

1

District No. 9

4 ------------11

Manistee
Ravena
Thompsonville
White Cloud

12 --------1

Bay City
East Tawas
Evart
Rale
Midland
Munger
Reed City
Sanford
Tawas City
Tustin
West Branch

2 ____ ____ ____

------------------- ---- ---- ---- ------- ---- ----

1

District No. 10

2 ____

5

1 ____

3

-----------1 -------------------2
_ 1 -----------1
1
1 ---------------- --------------------------1 --------------------------------1
-------------------1
1 --------------------------------1
------------

District No. 11

4 ---- --__ _-__

1

__

1

1 ____

1
1

Alba
Lachine
Mackinaw
Vanderbilt

1

District No.
12

2

Daraga
Iron Mountain

1 ------------------------1 --------

411

Minnesota
District No. 1
Albert Lee
Alden
Austin
Brandon
Brownsvalley
Claremont
Conger
Dexter
Dodge Center

1921

28

14

45

55

50

2 ____

3

4

2

13

92 65
8

3

46

31

1

5
1

1
1

-----------1 --------------------------------1
1 ---- ---- ---_
1
-----------1

BRANCH, CHAIN, AND GROUP BANKING

350

Number of bank suspensions, by States, congressional districts, and years, 19B11929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1926

1927

1928

1

29

Minnesota—Contd.
District No. 1—Continued.
Douglas
Emmons
Glenville
Hartland
Matawan
Minneiska
Oronoco
Owatonna
Plainview
Rochester
Sargeant
Simpson
Spring Valley
Taopi
Weaver
West Concord
District No. 2
Adrian
Alpha
Amboy
Arco
Avoca
Beaver Creek
Belview
Brewster
Butterfield
Chandler
Cobden
Currie
Dovray
East Chain Lakes
Foxlake
Fulda
Good Thunder
Granada
Guckeen
Hatfield
Heron Lake
Hills
Holland
Iona
Jasper
Lake Wilson
Lamberton
Lismore
Luverne
Mapleton
Minnesota Lake
Monterey
New Ulm
North Redwood
Pemberton
Redwood Falls
Ruthton

1

1 ____________________________-

____ -.
--------1
1
1
1

1 ____________________________-

Li
1 --------------------1

66

3

1

4

14

6

14

14

1 _____-______________________

10 ;
1 _

1 ----------------------------1-.
----------------1
_
1 ----------------------------1 _
1 ____________________ 1
1

1
-1

-1
----------

1
1
2
1
2

------------ -1

1

________________

1

• 351

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
19211929

[929

1

- •••

1

Vlinnesota—Contd.
Distric , No. 2—Continued.
Se rles
Slayton
SleePy Eye
St en
St. James
St rden
Triumph
Tr )skey
Ty rer
Ve 'di
Ve'non Center
Wabasso
Walnut Grove
WeIters
WeHs
Wi[rnont
Wi adorn
Wi anebago
VV rthington
District No. 3
Afton
Ca limn Falls
Elko
Pa ibault
Fa rnington
Gibbon
Ha'Tipton
Eardings
Lester Prairie
Morristown
Ne v Germany
No •th Mankato
Pine Island
Sh kopee
St. Peter
Wanamingo
Witisted
District No. 4—St. Paul__ _ _
District No. 6

-

Ale candria
Beeker
Big Lake
Brainerd
Brooten
Cass Lake
Cla -issa
Cle ir Lake
Crosby
Eagle Bend
Eva.nsville
Fair•haven

1921

1922

1923

1924

1925

1926

1927

1928

1929

---

---- --- - -- ____ ____ ____ ____ - _ _ _
1 ------------1
1 ----------------------------1
--__ -__- ---_

2

1 ____ ____ ____ ____ - --_
1 ____ ____ ____ ___
---- ---- --__ --.
1 --------------------1
-_-_ - -__ _ ___ ____ - ---

17

1

1 ____

4

2

2

1

2

4

____ ____ ____ - - - _
I
1
1 --------------------------------1
____ ____ _ -_ _
1
1
____ ____ __ __
_ 1 ____ ____ ____ ____ _ __ _
1 ------------1 ____ ____ ____ ____ _ _ __

1 ------------1 ____ ____ ____ ____
1 ____ 1 ____ ____ ____ ____ _
__
____ ____ ____ ____ _ __ _
1 --------------------------------1
1 --------------------------------1
6 ------------1 ____
52 ____

1

4 ____

1

5

9

1 ____

1

10

3

1

10

11

4

2

1 ____ ____ _ _ __

----------------1
---- - --- -___ ____ ---_
_
---- ---_ ____
_
---- --__ _
---- ---- - - --

352

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921"
1929—Continued
Total,
19211928

1921

1922

1923

1924

1925

1926

1927

1929

1929
—

Minnesota—Contd.
District No. i—Contd.
Genola_
Georgevi[le
Grey Ea Oe
Hackens Lek
Hillman_
Holdingf 3rd
Holmes ity
Ironton_
Jenkins_ •
Little Sa ik
Long Pr irie
Meire G ove
Melrose_
Millervil e
Nelson_
New Mu nich
Osakis_
Park RaiAds
Piers
Pine Riv 31'
Rice
Richmon ci
Royalton
Sauk RajAds
Sebeka_
Solway- _
Spooner_
St. Cloud
St. Josep h
St. Mart n
Verndale
West Un on
District No.
Alberta
Appleton
Ashby_
Atwater_
Balaton_
Beardsle ,
Bellingh m
Benson_
Bird Isla nd
Boyd_
Buffalo ,ake
Chokio_
Clinton
Correll_
Cyrus_
Danvers_
Dassel_
Dawson_
Dumont_
Glenwoo I
Gracevill
'
Grove City
Hawick

____ _
____ ____ ____ _
____ _
1 ________________________
____ ____ _
1
____ _
____--------------------1
1 ---- ---- --__ ___- ---- --__ ____ ____
1 --------------------1
---- ----------------1
1 ____ ____ ____ _
---- ---- ---- 1 ____ ____ ____ ____ ____ ____ ____ ____
65

5

1

3552111

5

1 ____ ____ ____ ____ ____ ____ ____ ____
2
1 ________________
------------1
2 _______-________________
_
1 _________________--- --1 _______-_________------- 1 ----1
1 ----------------------------1 -------------------------1
1
1 -----------------------------1
1
1
1
1 ----------------------------1...
2 ----------------11

9
1

353

BRANCH, CHAIN, AND GROUP BANKING

U-

Number of bank suspensions, by States, congressional districts, and years, 19211929—Continued
Total,
19211929

922

1921

1922

1923

1924

1925

1928

1927

1928

192.

Minnesota—Contd.

1

District No. 7—Contd.
Herman
Hoffman
Holloway
Kandiyohi
Litchfield
Louisburg
kynd
Marietta
Montevideo
Morris
Morton
Murdock
New London
Odessa
Olivia
Ortonville
Renville
Spicer
Swift Falls
Tintah
Villard
Watson
'Willmar
District No. 8

1
9
1

Biwabik
Brookston
Cloquet
Cromwell
Deer River
Duluth
Grand Rapids
Meadowlands
Moose Lake
Mountain Iron
Northome
Ranier
Virginia

District

No. 9

Ada
Alvarado
Argyle
Badger
Bagley
Barnesville
Bejou
Bronson
Callaway
Clearbrook
Climax
Comstock
Crookston
Dale
Deer Creek
Detroit

1
2
1
1
3

1
1
1
1
1
1

5
1
2
1
1
1

9

2
2

1
1
1
1
2
1
1
14

1
1
2
1
1
1
1
1
1
1
1
1
1
115

_
_
1
1 ____

1

2

1

4

2

2

1

1
1
2
1

1
1

4

16

14

17

2
3
2

22i16

19

7

1
1
1

1
1
2
1
1
1
1
1
1
3
1
1
3

1
1
1
1

1
1

1

354

BRANCH, CHAIN, AN 1) GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 1921—
/929—Continued
Total,
19211929

1921

1922 1928 1924

1925 1928 1927

1928

1929

Minnesota—Contd.
District No. 9—Contd.
Dilworth
Donaldson
East Grand Forks
Eldred
Elizabeth
Erskine
Felton
Fergus Falls
Fertile
Fisher
Frazee
Gatzke
Georgetown
Glyndon
Gonvick
Goodridge
Greenbush
Grygla
Hallock
Halstad
Hawley
Hazel
Hendrum
Hitterdal
Holt
Kalstad
Kennedy
Lake Park
Lancaster
Lawndale
Leonard
Mahnomen
Mavie
Mentor
Middle River
Moorehead
Newfolden
New York Mills
Nielsville
Novithcote
Oklee
Orleans
Oslo
Parkers Prairie
Pelican Rapids
Perley
Plummer
Red Lake Falls
Richville
Roseau
Rosewood
Rothsay
Stephen
St. Hilaire
Standquist
Strathcona
St. Vincent
Tabor

1
.
1 ----------------------------1

1 -_-----------_________________ _

'

1 _____-_-_- -1 ----------------1
1 ________ ____ _--______--_ ____ -___
2 ____ _--- ---- 1 ____ 1 ____ ____ ___
1 ---- ---- ---1
2 ----------------1
3 --------1

---- --1 ____ ____ __-

1 ----------------1
3 --------1
1 ____ ____ ___
2
1
1
1
1
2
1

------------------1 ____ 1 ---- ---- --______---_________---------- 1 ___
--------1
1
____---- ---_-___-------- ---- -----------1
--------1
____ _—

1
3
1
1
1
1

---- ---- ---- ---- ---- ---- ----------1
' 1 ____ ____ __
1
------------1
--------1

1 -------------------------1 ---- --1 ---- ---- ---- ----------

355

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by Stales, congressional districts, and years, 1921—
I929—Continued
Total,

19211929

1921

1922

1923 1924

1925

1
1
1
1

1

1928

1927

1928

1929

Minnesota—Contd.
District No. 9—Contd.
Tenney
Thief River Falls
Trail
Twin Valley
men
Warren
Warroad
Waubun
Wolverton
District No. 10
Anoka
Bock
Braham
Buffalo
Cokato
Delano
French Lake
Hanover
Hinckley
Lindstrom
Long Siding
Maple Lake
Markville
Milaca
Minneapolis
Monticello
Montrose
North Branch
Ogilvie
Pease
Princeton
Rockcreek
Rockford
Rush City
South Haven
St. Bonifacius
Sturgeon Lake
Sunrise
Wahkon
Waverly
Willow River

Mississippi

1
1

2
2

1
2

1

1

1
1

1

48

1

6

8

6

8

8

6

1

1
1
1
1

1
1
1

2

1
1

1
_

1
3

3
1

1
1
1
1

1
1
1

1
1
1

2
1

5

1

1

1
1

District No. 2

1
1

1

1
2
1

2

1
1

1

1
1
1
2
1

34

2

1
1

1.

2
2
1
12

3

1

1

District No. 1—Baldwin___

Coldwater
Cortland
Crenshaw
Enid
Sumner

1

1
2

1

5

10

__

2

2

1

1

5

5

3
1
1

1 ____

1

1 ____

1

1

4

356

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by Slates, congressional districts, and years,
1929—Continued
Total,
19211929

1921

1922

17

4

4

2
2

1
1

1923

1924

1925

1926

1

4

1927

1928

1929

Mississippi—Contd.
District No. 3
Boyle
Clarksdale
Drew
Friar Point
Greenville
Gunnison
Indianola
Lambert
Merigold
Mound Bayon
Rosedale
Shaw
Tunica
District No. 4

1
1
1

1

1
1
1
1
1

2

1

1
1

2
1
1
2

6

1

2

--

1
1
1

1

District No. 6—Oak Vale___

Centreville
Crystal Springs

-

1

Ackerman
Grenada
Houston
Okolona
Zama

District No. 7

1

-

2

1
1

1

District No.8—Pelahatchee_

Missouri
District No. 1
Alexandria
Arbela
Baring
Callao
Canton.
Clarrence
College Mound
Gorin
Granger
Hunnewell
Kahoka
Kirksville
La Belle
Lancaster
Lewistown
Macon
Maywood
Memphis

296

17

11

33

2

I

20
3

43
4

45
3

58
4

48

31

23

4

8

4

1
1

1
1

1
1
2

1

1
1

2
2
1
2
3

1
1
1
_

2

_

357

BRANCH, CHAIN, AND GROUP BANKING

'1-

Number of bank suspensions, by States, congressional districts, and years, 1921—
1929—Continued
Total,
19211929

29

1

Missouri—Contd.
'strict No. 1—Continued.
Mendota
Novinger
Powersville
Unionville
Williamstown
Willmathsville
Worthington
Wyaconda
bistrict No.
2

4

1923

1
1
1
1
1
1
1
1
28

2
2
1
2
1
1
1
2

1
1
1
1

2
2
1

34

,

2
1
2
1
2
1
1
1
1
2
3
1
1
1
3
1
1
1
1

1924

1925

1928

1927

1928

1929

1
1
1

1
1

1
1
3

1

4

8

4

6

1

1

1
1
1
1
1
2
1
1
1
1
1
1
2
1

1
1

1
1

District No. 3
Allendale
Altamont
Bethany
Cainesville
Clarksdale
)
I arlington
Lxcelsior Springs
Gallatin
Grant City
Jameson
Jamesport
King City
Lawson
L_owndes
Ailaysville
Melbourne
Mercer
Mount Moriali
Pattonsburg

1922

1
1
1
1
1

Bedford
Brookfield
Browning
Bucklin
Chillicothe
Chula
Green Castle
Green City
Hale
Hickory
Huntsville
Meadville
Milan
Moberly
Newtown
North Salem
Paris
Stoutsville
Sturges
Tina
Wakenda
Wheeling

!3

1921

1
2

3

5

7

1

9

1

1
1
2
1
1
1
1
1
1
2

1

2
1
1

1
2

1
1
1
1

358

BRANCH, CHAIN, AND GROUP BANKING

Number of bank suspensions, by States, congressional districts, and years, 101"
/929—Continued
Total,
19211929

1921

1922

1923

1924

1925

1926

1927

1928

log

Missouri—Contd.
District No. 3—Contd.
Princeton
Richmond
Stanberry
Weatherby
Winston
Worth
District No. 4
Burlington Junction..
Cosby
Dearborn
Fairfax
Farley
Fortescue
Hopkins
Maryville
Nodaway
Parkville
Parnell
Rea
Rushville
Savannah
St. Joseph
Whitesville
District No. 5
Fairmount
Grain Valley
Greenwood
Herculaneum
Independence
Kansas City
Mount Washington_ _ _ _
District No. 6
Adrian
Amsterdam
Arcola
Caplinger Mills
Clinton
Eldorado Springs
Greenfield
Harrisonville
Jerico Springs
La Due
Leeton
Merwin
Montrose
West Line

1
1
2
1
1
1

1
2
1
1
1

22

1
1
2
1
1
1
1
1
1
1
1
1
1

2

2

1

1 _

1

4

2

1

1

-

1

---

1

1
1 - --1

----"
--_ -•••
-

1

_

1 _
1
3
4

16

3

1
1
1
1
1

5

_

2
1
1

_

1

---

1

10
1

---

16

1

2
1
2
1
1
1
1
1

9

1

3
4
1

1
1
1
1
1
1

--_
- -"

-

-- -

4

2

2

1

1
3
4

1

3

4

1

_
_

1

--

1
-

- 1 ---------i

1
1 ---1
1
----1----

1

-

No, --.."101111IMMINEF-

359

BRANCH, CHAIN, AND GROUP BANKING

921-

Number of bank suspensions, by States, congressional districts, and years, 192119,e9—Continued
Total,
19211929

I929

1921

1922

1923

Iissouri—Contd.
District
N0.7

2

1

-."
....•

1925

1926

1927

1928

4

4

5

3

2

Arr nv Rock
Battlefield
./
Bro Dkline Station
Concordia
Payette
Pra iklin
:liesville
Nel on
Ne r Franklin
Rep ublic
Sed ilia
Slator
§pringfield
WellEington
Wh !atland
bistrict

1

1924

o.8

Ann Oa
Aux ,asse
plan d
Bow ing Green
Pole r
Fraiikford
Fult m
Marling
Credie
Mid lletown
New Bloomfield
New Florence
Teb etts
Thoi ipson

biatriet To. 10—Allentown_

1

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- -- - - - - - -- -- - --- - -- -

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16

Bag'len
Blackwater
Boo lville
Cen :ertown
Clif on City
Etterville
Jeff rson City
Mc ;irk
Met1
Otterville
San Iyhook
Syracuse
Tipton
Ulm In
Versailles
wooldridge
bistrict
co.9

1929

1
1
1
1
1

1

1

2 ____

4

3

4

1

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------------------------1____ ____
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1

1
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1 ------------1
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18

1

1

1

1 ____

3

2

4

1

5

1

-

1