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The Relation of . State Banks and Trust Companies TO THE FEDERAL RESERVE ACT https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Address delivered before the Alabama Bankers’ Convention AT DECATUR, ALABAMA On Ma^ 12th, 1914 By BRECKINRIDGE JONES " Pfesident'1 “ :': ■ Mississippi Valley Trust Company St. Louis ' ” '“ * THE RELATION OF STATE BANKS AND TRUST COMPANIES TO THE FEDERAL RESERVE ACT. It is safe to hazard the opinion that we all are glad that a new currency bill has been passed; the evils of the old system, or want of system, were urged so often and so long. The new act is not perfect. No such gen eral reform measure is. But it represents a great for ward step. It is the best that could be attained at this time. Its merits command our cordial support. Whether we are in or out of it, as patriotic citizens we should co-operate in making it a success. State Institutions Have Urged Currency Reform. The Aldrich Bill, as originally submitted, made no provision for State institutions becoming members. Later, at the urgent demand of State banks and trust companies, the bill was so amended as to provide for admitting them. The Glass-Owen bill, from the start, recognized this demand. Hand in hand with national banks, the State banks and trust companies have worked for currency re form. Now as the new law goes into operation, out of many thousands of State banks and trust companies, up to April 18 last, only about eighty-one have made applica tion for membership. This is doubtless due to the fact that there is no time limit fixed within which State banks and trust companies must act. Many institutions have felt that the conservative course was not definitely to decide until the districts had been made, the Reserve https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis —2— Board had been chosen, the organization had been per fected, a definition had been given to commercial paper, a construction given to the section of the act which covers the collection of checks, and a definite policy had been defined by the Reserve Board in the rules and regulations to be made by it. It is interesting therefore to consider the new Act from the standpoint of State institutions. This may be especially interesting in Alabama, where you have some 233 State banks with aggregate resources of over 42 million dollars. Whatever Criticism is Made is Friendly. In this discussion there is no occasion to go into the general features of the Bill. I am viewing it from a single standpoint. Because I do not set out its manifold merits—and they deserve our plaudits—and do find some things to criticise, please do not consider as un friendly my effort to try to explain in a way why so many State institutions have not come in, and how they may be induced to come in. Under the Federal Reserve Act national banks must become members of the Federal Reserve Bank of the District in which they are located. If they do not be come members, they must liquidate as national banks. State banks and trust companies do not have the prob lem solved for them, but can exercise their discretion. It is, therefore, important that they consider the matter carefully and get clearly before them all of the advan tages and disadvantages of membership. Two Ways for State Institutions to Become Members. The act provides two ways by which State banks and trust companies may become members: First: Section 8 of the Act provides for the conver sion of such banks and trust companies into national banks, when not in contravention of State law, and then https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis —3— for their admittance to membership in the Federal Re serve Bank. Under regulation No. 3, issued by the Or ganization Committee on February 20th, 1914, such trust companies as desire to come into the system through conversion into national institutions, and de sire to continue to act as trustee, executor, administra tor or registrar of stocks and bonds, can apply to the Federal Reserve Board for permission to engage in such business, and this permission can be granted under paragraph “K” of Section ITof the act, which gives the Federal Reserve Board the power “To grant by special permit to national banks applying therefor, when not in contravention of State or local law, the right to act as trustee, executor, or registrar of stocks and bonds, under such rules and regulations as the said Board may pre scribe.” It has been pointed out repeatedly and it seems that this section recognizes that national banks did not have this power under the old law. (See “The Trust Com pany—A Necessity,” read before Trust Company Sec tion at Denver, September, 1908). It will be a question entirely with the States, whether they will permit national banks to have these powers. The Act just passed in New York prohibits national banks from acting in the various trust relations, and New Jersey prohibits them from acting as registrars. Recently Maryland refused to give national banks these powers. It is evident that no trust company would be come a national bank, relying on preserving its trustee business under this grant of power by the Federal Re serve Board. The Trust Company will prefer to retain its present charter with the privileges and limitations with which it is familiar, buttressed by decisions of the State courts. Second: Under Section 9 of the Act, State banks and trust companies are allowed to become members and retain. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis —4— their State charters, exercising all the rights under them which are not specifically limited in the Federal Reserve Act, but subject to rules and regulations prescribed by the Federal Reserve Board. This gives the Board a wide discretion in regard to the activities of State banks and trust companies, the law specifying only the follow ing things which must be contained in the by-laws es tablished by the Federal Reserve Board for the general government of such a bank or trust company: By-Laws for State Institutions. . . . . ! . A. State institutions must comply with the re serve and capital requirements and submit to the examination and regulations prescribed by the Or ganization Committee and by the Federal Reserve Board. B. No applying bank shall be admitted to mem bership unless it has a paid up, unimpaired capital sufficient to entitle it to become a national banking institution under the provisions of the National Banking Act. ■ C. Such bank must also conform to the provision of law imposed on national banks respecting the limitation of liability which may be incurred by any person, firm or corporation to said banks. This limitation is contained in Section 5200, Revised Statutes of the United States, and limits the total liabilities to any bank of any person, or of any com pany, corporation or firm for money borrowed to an amount not to exceed one-tenth part of the amount of the capital stock and unimpaired surplus of such association. D. Such bank must also comply with the prohibition laid on national banks against making pur chase of, or loans on its own stock, and also the re strictions in regard to withdrawal or impairment of capital, or the payment of unearned dividends. E. Such banks and the officers, agents and em ployes thereof must also be subject to the provisions of, and to the penalties prescribed by certain Sec- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis —5— tions of the Revised Statutes of the United States in regard to national banks. These provisions refer to the taking of unlawful interest, falsely certifying checks, embezzlement, reports to the comptroller, etc. There is nothing in these specific limitations to which such an institution would object, with the possible ex ception of the limitation of liability to any one person. This would not be objected to by the large institutions with large capital and surplus, but throughout the coun try there are some small banks and trust companies which have been in the habit of lending to one person more than 10% of their capital and surplus secured by first mortgage on real estate. It would seem that this limitation would apply to a real estate loan just as well as it applies to a collateral loan. Under the State char ters, banks of some States have been able to exceed this 10% liability to quite an extent. However, unless so prescribed in their State laws, the limitations set out in the Act for national banks do not apply to State banks and trust companies which become members. National banks in Central Reserve Cities cannot make loans on real estate. Other national banks may make such loans secured by improved or unimproved farm land situated within its Federal Reserve District, but no such loan shall be made for a longer time than five years nor for an amount exceeding 50% of the actual value of the property offered as security, and such loan shall not exceed 25% of its capital and surplus, or one-third of its time deposits. There is, of course, the chance that the rules and regulations of the Federal Reserve Board may place all banks lending on real estate under the same restrictions. Just here it may be well to bear in mind that as the restrictions as to loans on real estate, as to amount of outstanding acceptances, etc., represent what Congress https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis —6— considered the safe rules for a bank, the Reserve Board in the exercise of its broad power to make rules and regulations for State banks that become members may put these same restrictions in the regulations it promul gates. Rules and Regulations May Apply Only to Administra tive Matters. It may be that when Congress provided for admitting State institutions, and specially set out various restric tive sections of the National Bank Act that should ap ply to State banks becoming members, it did not mean by giving the right to make rules and regulations to allow the Reserve Board the right to make restrictions, other than those mentioned, apply to State member banks, but meant by rules and regulations—administra tive matters necessary and fit—to make effective the things set out in the Act. It will be interesting to fol low the rulings. State Banks or Trust Companies Must File Copies of Charters. In the regulations and by-laws contained in Regula tion No. 3 of February 20, 1914, covering State banks and trust companies, it is provided “State banks and trust companies shall also file with their applications for membership copies of their charter with amend ments, and a digest thereof, showing the powers (granted by such charter and amendments) classified to indicate: (a) those powers which such banks and trust companies have exercised and desire to continue to exercise; (b) those powers which, while granted, have not been ex ercised, and which such banks and trust companies will not desire nor attempt to exercise as members of the Federal Reserve System.” The Federal Reserve Board, or pending its organization, the Organization Committee, will either require a special examination by the Comp- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis —1— troller’s Department, or they can accept an examina tion by a State examiner, or they can appoint a special examiner to make a report. In these by-laws it is also stated that “the condition of the applying bank or trust company, and the general nature of its business will be considered by the Committee in each case in determin ing whether such banks shall be admitted to member ship.” It would seem from the above that the Organization Committee in passing on whether or not a State bank or trust company should be allowed to become a mem ber of the Federal Reserve Bank, will take into con sideration the powers it is at present exercising. If any of those powers, in their judgment, are not proper, they will doubtless make as a condition precedent to member ship, that the bank enter into an agreement not to do those particular things. Even after the bank is in, the Federal Reserve Board from time to time may change the by-laws. In fact it seems that the business of State banks and trust companies that become members of a Federal Reserve Bank will be subject to quick change by by-law regulation made by the Federal Reserve Board, while changes affecting national banks will have to be made by act of Congress. Advantages of Membership to State Banks or Trust Companies. Of what advantage will membership in the Federal Re serve Bank be to a State Bank or Trust Company? Those that seem unquestionable are as follows: First: A member State institution may have the confi dence of the public in a greater degree, based on the fact that it is subject not only to State supervision, but to super vision and examination by the national government. It may be considered by the people as part of the fiscal system of the government, and as such may have increased prestige. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis —8— Second: A member State institution may be able to turn its discountable paper (through the discount features of the Act), into cash, and in times of stress may have behind it the entire power of the Federal Reserve System. If any question were raised as to whether or not a State bank or trust company would have in its portfolio the kinds of paper necessary in order to take advantage of the rediscounting facilities, it can be answered that, if sufficient commercial paper is not taken in the ordinary course of business, they will always be able to invest a certain portion of their funds in commercial paper in the open market. The very fact that paper can be rediscounted will create an open market for it. Third: A member State institution will also have at its disposal the facilities of the Federal Reserve Bank, covering the collection of checks. It would seem that every bank and trust company which receives deposits and has checks drawn upon it, if it wishes to continue doing such business, will find it to its advantage to be a member of the Federal Reserve Bank of its district, due to the facilities of collec tion offered by the Federal Reserve Bank. Collection of Checks. Under the law, a member bank may deposit checks with a Federal Reserve Bank at par. Such being the case, that member bank is going to take the checks deposited by its customer at par and not charge exchange as is usually done. The Reserve Bank having received the checks at par will then send the checks to the various banks upon which they are drawn, and under what seems the most reasonable in terpretation of the language of the Act, the bank on which the checks are drawn can charge its depositor who was the drawer of the check, with the actual expense of collection. In other words, it seems the purpose of the Federal Reserve Act to make the drawer of the check pay whatever expense. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis —9— there is, for his privilege of using the local check for pay ment of out-of-town items. The drawer of the check will be very much in the position of one who buys a money order. A man why buys a money order has to pay a small amount for the privilege of using such a convenient mode of remit tance. It seems reasonable to believe that the expenses of collect ing items will be handled by the Federal Reserve Bank very much in the same manner as expenses of circulation are han dled at present by the national banks. A record of this ex pense is kept at Washington and it is pro-rated between the different national banks. It is quite possible that the Fed eral Bank of the District will keep a record of the expenses of collections and pro-rate it between its member banks, and with this as a basis, a member bank can calculate its charges against the maker of checks drawn on it. It is thought by some that for a time the regional bank will absorb this charge and thereby force the outside banks in. -~ However, while a member bank may have the right to charge its depositor who has drawn a check, the actual ex pense incurred by him for using this form of remittance, still as a practical thing this will doubtless never be done. If there be a member bank and a non-member bank in the same town and the depositor in the member bank is made to pay a charge on his checks with which he pays bills out-of-town, he will say that the non-member bank does not make such a charge and will remove his account to the non-member bank. As this seems an inevitable result, the member bank is not going to run the risk of losing its customer on ac count of a small charge, but will absorb it itself. On the other hand a man in St. Louis, say, receives a check drawn on a bank in Alabama. If he deposits it in a non-member bank in St. Louis, that non-member bank will doubtless charge him exchange, whereas should he deposit it in a St. Louis bank member of the Federal Reserve As sociation, because that bank can deposit with the Federal Re- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — 10 — serve Bank at par, it will make no charge to its depositor. This will mean that the St. Louis customer will make his deposits with a St. Louis member bank, unless the St. Louis non-member bank ceases to charge him exchange. The result of this condition would seem to be that non member banks will have to absorb all expenses of collection if they expect to compete with member banks, and this will be a grievous burden. Reserves. In the bill as it passed the House, there seemed not to be any express provision as to where the reserves of a member bank were to be kept during the thirty-six months period after the passage of the Act, except as regarded certain portions to be kept with the Regional Banks. But there was a provision that the reserve require ments of National banks should apply to State banks and trust companies becoming members. Many thought that this related merely to the amounts. But during the hearings before the Senate Committee it was developed that the restriction would apply as well to places, with the result that if a State bank or trust com pany in a reserve or central reserve city were to become a member, and thereby subject itself to the examinations and regulations of the Comptroller and Reserve Board, and so be equally as safe a place for reserves, such mem ber State bank or trust company would, nevertheless, have to lose all the reserves it had from other member State banks and trust companies. This would be very hurtful to some of the large State banks and trust companies in reserve and central reserve cities, and cause the breaking of valuable relations with their city correspondents on the part of many country State banks and trust companies if they should become mem bers. The restriction would cause an unnecessary https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — 11 — shifting of reserves, and such shifting was sought to be avoided. The Senate Committee promptly said no such result was desired or intended, and the bill as it passed the Senate provided that any member (whether State or national), in a reserve or central reserve city, during this thirty-six months period, might be a reserve agent for any other member. It was understood that if this restriction as to the places where reserves were kept were left in the bill as it passed the House, the tendency would be to cause the large State banks and trust com panies in the reserve and central reserve cities not to become members, and also cause them to use their in fluence to keep their correspondents out of the Federal System. But when the bill got into conference, amid the many changes that were to be made in the after-midnight hours of a prolonged session, the reserve provisions were given (to be re-written) to Representative Bulkley of Cleveland, a member of the House Committee. It was feared that if the bill were left as it came from the Senate, in the matter under consideration, the large city trust companies might offer added inducements and cause reserve balances to shift from national banks to trust companies and accentuate any disturbance the act might create. So Mr. Bulkley, as I am informed, re wrote the reserve provisions, with the purpose of letting national banks be reserve agents for national banks and State members reserve agents for State members. But, in the hurry of the work, he used one wrong word. His change gave a State member the right to keep its re serves with another State member only “if a State bank or trust company is required by the law of its State to keep its reserves either in its own vaults or with another State bank or trust company.” If he had used “permit” instead of “require,” his purpose would have been ac complished. In no State does the law require a State https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — 12 — bank to keep its reserves with another State bank. It usually permits it. This error by the Conference Com mittee was not realized until many days after the passage of the bill. When it was brought to the atten tion of Senator Owen and Mr. Glass, chairmen respec tively of the Senate and House Committees, both readily admitted that the change involved an oversight, and at the request or with the approval of the President, both chairmen agreed that at this session the act should be so amended as to cover this error. A bill has been introduced and recommended for passage by the Senate Committee, looking to that end. That error has cooled the ardor of many State institutions about now entering the new system, and results in their not being in so as to participate in the organization of the Regional Banks. Interest of Officers and Directors. The second paragraph of Section 22 provides that “other than the usual salary or directors’ fees paid to any officer, director or employee of a member bank, and other than a reasonable fee paid by such bank to such officer, director or employee for services rendered to such bank, no officer, director, employee or attorney of a member bank shall be a beneficiary of, or receive, direct ly or indirectly, any fee, commission or other considera tion for or in connection with any transaction of busi ness of the bank. * * * * * Any person violating any provision of this section shall be punished by a fine of not exceeding $5,000.00 or by imprisonment not exceeding one year, or both.” It is said the proper construction of this language has caused more controversy than any other sentence in the Act. Some of those connected with the administration of the Act contend that the mischief sought to be remedied was the somewhat prevalent habit on the part of some directors of national banks of getting personal commissions for lend- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — 13 — ing the funds of the bank. For example, to avoid the re striction against a national bank making a loan on real es tate, a bank director or officer would say, in effect, to a farmer: “The bank cannot make you a loan on your farm, but I will make you the loan and take a mortgage on your land, and charge you 8%.” Then the director would put his own note in his bank for the amount at 6%, and not expressly pledge the farmer’s note as collateral, but leave it with the bank “on the side.” The diversity in the means of getting a private profit out of the use of the funds of the bank was as great as the ingenuity of the crafty director. In all such cases, the farmers or other customers paid more than they should, or the bank got less than it ought. It was difficult to pre vent the bad, without unduly restricting the good. It was claimed impossible to so word the law as to “hit it if it was a deer and miss it if it was a calf.” So, out of abundance of caution, the above very broad language was used. Some have feared that under this provision an officer or director could not be allowed interest on his balances;— that he could not borrow from his bank;—that, if a broker, he could not make a commission on bonds sold to or for the bank; or be interested in any syndicate for the pur chase of a large issue of bonds, where the bank participated in the purchase; that he could not be a director, or possibly even a stockholder, in a corporation doing business with his bank; that he could not be co-executor or co-trustee with his bank, if it were permitted to act in such relation, etc., etc. It has been contended by others that the general law ap plicable to a director was that applicable to a trustee, and it has always been the law that a trustee legally could not get any unfair profit from the use of funds under his con trol as trustee; and that, in making this provision, Congress had in mind the varied syndicate evils that had been dis closed by the Pujo investigation, and intended at one fell swoop to absolutely divorce banks members of the Federal https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — 14 — System from all of these questionable transactions and prac tically apply the “Caesar’s Wife” standard. When the general liability of the director as a trustee was urged, the answer came “Yes, we know all about the application of that law, but we meant not to permit such things to be left to courts of equity and the like, and the very fact that you say the old law covered such matters demonstrates that Congress meant to go beyond that, and make the broad language have a broad meaning, and not leave the violation merely a civil liability but make it a crime to be punished by fine and imprisonment. It is said that the president of one very prominent national bank in a leading city—and he is a lawyer of distinction— represented to the Organization Committee that he feared the provision in question might be so construed as to force a half dozen of his valuable directors to resign. On the other hand, it is said that the legal adviser of the Organization Committee says that the language in question should not be given any such scare-crow construction; and that, speaking broadly, it will not be construed to prohibit transactions where adequate consideration accrues to the bank and where the transaction is absolutely fair; and that the Reserve Board, when organized, will so definitely con strue this section. However, a director objects : “Yes, but the Reserve Board cannot change the direct words of the Act of Congress, and if the matter should come up for judicial determination the court might not agree with the Reserve Board, and I do not care to hazard my liberty on the issue. I prefer to re sign. You get someone whose business is not so large and active as mine.” There are many entirely legitimate transactions, valuable alike to the borrower, the lender and the community, that would come under the bar of this clause. For example: Application is made to a trust company to lend $500,000 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — 15 — for a certain much needed improvement. The trust com pany is willing to lend only $300,000. The borrower needs $500,000 to turn the deal. In the emergency, some of the directors of the company lend $200,000 on a second deed of trust, borrowing part of the money from the Trust Com pany on additional collateral, leaving the trust company an entirely safe first mortgage for $300,000. Thereby, the borrower is accommodated, the trust company absolutely protected in desirable business, and the community benefited by the improvement. One of the officials at Washington thought this transaction so much in the “twilight zone” as to be dangerous. In the South and West, where money is not so plentiful, and demands for large amounts of money often can be met only by a resourcefulness in adjusting the business to in dividual situations, routine commercial transactions do not meet the case. The writer had the privilege of an interview with Senator Owen over this matter, and explained to him divers transac tions where the Company with which the writer is connected had caused investments to be made in Senator Owen’s State in amounts aggregating eight to ten million dollars. Every transaction had been safe and profitable for the Trust Com pany, of advantage to the borrower, and of value to the community, and yet, under what is feared is the necessary construction of the clause in question, would have been pro hibited thereby. A Suggested Amendment. As a result of that interview, the following amendment was suggested, and the Senator said he would favor its adop tion : Insert after the words under discussion the following: “Provided, however, that this provision shall not be con strued to apply to any officer or director where he did not vote on the transaction and where such transaction is based https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — 16 — on adequate consideration, is expressly authorized and duly recorded on the minutes of the Board of Directors, and re ceives the vote of a majority of the entire Board of Di rectors.” . It is submitted that it would be safe to leave the transac tion to the judgment of a disinterested majority of the entire Board of Directors. That would leave open an op portunity for legitimate business, and yet effectively remedy the mischief. While it seems that no amendments on any controverted points can be made at this Session of Congress, we should all have before us the limitation in the law as it now is, and be ready to urge proper amendments, if experi ence shows their need. Amendments to State Laws. In order to get an idea of what changes may have to be made in the laws of the various states to adjust them to the new Federal Reserve Act, it may be interesting to see what New York has just done. In New York a commission to revise the New York State Banking Law was appointed last summer, headed by Mr. Van Tuyl, the Banking Commissioner of the State It was composed of leading bank men, representing the various classess of institutions, and made a most thorough report, revising and harmonizing the various sections of the law and bringing it all down into one act. Among the important things in the act were the following provisions: 1. Authorizing Banks and Trust Companies to Ac cept Drafts for Payment at a Future Date. This power had been exercised heretofore, but no specific authority had been given in the Banking Act. The report covers even a broader range than the Federal Reserve Act. The President of a leading New York Trust Company ex plained to me some few weeks ago that one of the controll ing reasons why his trust company would not enter the new https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — 17 — system was that the limitation of the amount of acceptances that could be out at any time, namely, one-half the accepting bank’s paid-up capital and surplus, was entirely out of line with the necessities of the business of his company. He ex plained that foreign bills for practically half the cotton crop of the United States, amounting annually to about $750,000,000, passed through his institution, and that the business could not be transacted under the limitations of the Federal Reserve Act. As one of the practical results of the Federal Reserve Act will be to popularize acceptances, it will become important for state banks and trust companies to have at least equal powers in this respect with the national banks. The new act in New York gives its banks the right to accept domestic as well as foreign bills. It is believed that soon the Federal Act will be amended to give national banks a like power. 2. Authorizing State Banks and Trust Companies to Become Members of the Federal Reserve System and to Subscribe to the Capital Stock Thereof. In a number of States, attorneys general have decided that their banking laws prohibit membership because of the re striction against holding stocks of other corporations. Such decisions have.been rendered in Kentucky, Michigan, Iowa, Nebraska and other States. In Illinois, Missouri and several other States, decisions have been rendered that such prohibi tion does not prevent State banks and trust companies from subscribing to Reserve Bank stock. In this connection, it may be interesting to know what ruling the Organization Committee or the Federal Reserve Board will make in these matters and whether their opinion will coincide with the opinions rendered by the attorneys generals in the several States. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — 18 — 3. Adjusting State Law to Harmonize with the Fed eral Reserve Act, as to Amount of Reserves to be Car ried. This should be accomplished in all states whether the state banks and trust companies remain out or go in, for until the state laws are changed state banks and trust com panies, even if they become members of the Federal Reserve System, will have to keep the reserves required by State laws. Legislation in Missouri. At a recent meeting of the Bankers Club in St. Louis a committee was appointed to prepare resolutions and present them to the Missouri State Bankers’ Convention next week, calling for the appointment of a commission to revise the banking law of the State and have ready a report for the Legislature when it meets next January. Local Laws Made for Local Needs. Some State institutions wish to remain under the con trol of local laws and be the more readily responsive to the needs of their several communities. The fact that in the United States there are about 18,000 State banks and trust companies, as against, in round numbers, 7,500 national banks, is a demonstration that the rigid rules under which the national banks must all be run, whether in Maine, Texas or California, are not suited to all the needs of a country so large as ours, with such diverse latitudes and longitudes, and that the many interests peculiar to the several States are better protected by having in those States some financial institutions under State control and responsive to local needs. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — 19 — Advantages of the Act Outweigh Its Disadvantages. Taking into consideration the advantages and disad vantages accruing to a State bank or trust company on account of membership in a Federal Reserve Bank, it would seem, certainly for those doing a commercial business, that the advantages far outweigh the disad vantages, and that membership is a desirable thing, especially in view of the fact that Federal Reserve Banks once organized will likely operate in every legiti mate way against non-member banks, and in many re spects put them at a considerable disadvantage. I am sure we will all watch with interest the progress and development under the Federal Reserve Act, ready at all times to advance the interests of the institutions under our care, to co-operate with the communities in which we do business, and, above all, to work hand in hand for the advancement of our beloved country,— the glories of which to paraphrase another stimulate us in unison cordially to exclaim: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis “Our country as it was, Our country as it is, Our country as it will be, Our country forever.”