Senator GLASS. But you have gotten beyond the official action at the Boston meeting.

Mr. HINSCH. All right; I will stop there. Does that answer your question?

Senator GLASS. It does not contravene anything that I have said at all. You read the first resolution of the Boston convention, adopting the report of the banking and currency committee of the American Bankers' Association.

Mr. HINSCH. The currency commission.

Senator GLASS. Yes. Which report characterized the Federal reserve act as socialistic.

Mr. HINSCH. Oh, no.

Senator GLASS. Well, get the report and I will show you that it did. I read it only last night. Now then it also adopts and approves the report of your Chicago conference, does it not, in terms, as you read it?

Mr. HINSCH. Yes, sir.

Senator GLASS. And you proceeded to the point where your Chicago conference recommended certain alterations in the basic, fundamental provisions of the Federal reserve act; is that not true? Mr. HINSCH. Yes, sir.

Senator GLASS. Was a single one of those recommendations embodied in the act?

Mr. HINSCH. I can not tell you.

Senator GLASS. Very well; if it be admitted that not a single one of those recommendations, with a minor exception, was embodied in the Federal reserve act, does not that fact fully justify my statement that your national convention at Boston disapproved the Federal reserve act?

Mr. HINSCHн. It does not.

Senator GLASS. It does not?

Mr. HINSCH. It certainly does not. If I may read it right here. It is a resolution adopted by the convention-

Senator GLASS. Let me say

Mr. HINSCH (reading).

Resolved, That we recommend the President, the Secretary of the Treasury and the Congress for their efforts

Senator GLASS. For their efforts, but condemn them for the specific provisions of the bill.

Mr. HINSCH. For certain specific provisions of the bill, not all of them.

Senator GLASS. But the provisions of the bill that are very fundamental provisions of it; so that here you condemn compulsory membership of the national banks, do you not?

Mr. HINSCH. I think not.

Senator GLASS. Oh, my gracious alive! You ought to read your own report. You assert the rights of the bank to representation upon the Federal Reserve Board as banks, do you not?

Mr. HINSCH, No; I do not think so. I think there is a representation, not as banks.

Senator GLASS. You opposed that provision of the bill that requires the impounding of reserves with the Federal Reserve Banks, do you not?

Mr. HINSCH. All of it. They objected to it at that time, yes, sir. Senator GLASS. I say that, and those are fundamental provisions of the Federal Reserve Act as it is today, are they not?

Mr. HINSCH. They are, some of them are fundamental, not all of them by a jug full.

Senator GLASS. Well, I am perfectly content to have the record stand as it is.

Mr. HINSCH. I am, I assure you.

Senators, I thank you very much for the courtesy of this hearing.

STATEMENT OF MONTFORD JONES, REPRESENTING THE NATIONAL ASSOCIATION OF CREDIT MEN

Mr. JONES. Mr. Chairman, because of the lateness of the hour, I will take just one minute. The National Association of Credit Men, consisting of some 29,000 mercantile credit men in the United States has through its banking and currency committee endorsed this bill and urges its passage. For about two years the banking and currency committee of the association has been studying this resolution because the association is interested in anything that affects banking and credit, and the currency system of the country. Copies of this bill were distributed among members of the committee, and at a meeting in New York City on December 29th the bill was endorsed in principle and the members of the association were urged to request its passage.

Senator GLASS. Was it endorsed in detail?

Mr. JONES. It was endorsed in principle; not all the details were endorsed. There was a difference of opinion in that respect.

Senator GLASS. Would you be willing to say that the National Association of Credit Men is in favor of making one half of the Nation branch banks and excluding the other half from ever becoming branch banks?

Mr. JONES. There is some difference of opinion on that there is over the Hull amendment. Personally I do not approve of it. We regard it, I suppose as everyone else did, as a political compromise and necessity.

Senator GLASS. Upon the supposition that Congress could not be induced to do justice to the national banks of all the States, but only a few of them?

Mr. JONES. It seemed to be necessary to compromise to that extent with the extreme antibranch bankers. The association favors this legislation; it favors the two principal features of this legislation, first, to strengthen the national banking system and to enable the national banks to compete more effectively with the State institutions for about the same reasons that Mr. Hinsch gave. We are also in accord with the principle of the bill in the matter of branch banking. We are opposed to State-wide branch banking. We do approve of branch banks within the home cities, and are willing to leave that to the judgment of those within the communities. If they desire to permit State institutions to have branch banks in the home cities, then the national banks ought to be given the same privilege.

Senator GLASS. In all States where that practice prevails?

Mr. JONES. Yes, sir. It is applying to the national banks the State law, you might say, is about the same way as we have in the

case of the application of the usury law to national banks and section 17 of this bill, regarding the rate of interest on deposits.

Senator GLASS. I am glad to know that the National Association of Credit Men, of which I am an honorary member, has not fallen from grace, as has been represented.

Mr. JONES. The indorsement of the association is in the principle. We are very anxious that this legislation be passed, and as the declaration says, the committee believes that this offers the most reasonable and probable solution of this problem, in the possible enactment into law.

We are committed to strengthening the national banking system and to the fundamental provisions of the Act as far as branch banking is concerned; 'disapproval of state-wide branch banking and the approval of home city banking.

Time does not permit me to give the committee the reasons which actuated the committee in making these endorsements.

I might say that personally I have interest in any banking institution except as depositor. I am very much interested as a citizen in anything that has to do with the regulation of the banking business in the United States, and I am personally in accord with the actions of the National Association of Credit Men, which I think you will agree, Senator, has always taken a rather liberal and constructive attitude towards matters of public policy.

Senator GLASS. It has undoubtedly.

Hon. FRANK B. MONDELL. Mr. Chairman, I would appreciate it very much if I could have the privilege of placing in the record of the hearings a brief statement, particularly with regard to section 9.

The ACTING CHAIRMAN (Senator GLASS). The committee will be glad to have you do so.

(The paper subsequently submitted by Mr. Mondell is as follows.)

(H. R. 2)

[Before the Committee on Banking and Currency, Senate of the United States] STATEMENT OF HON. FRANK W. MONDELL OF WYOMING AND WASHINGTON, D. C. Mr. Chairman, beyond all question H. R. 2, the McFadden banking bill, has the support of the great body of the banking interests of the United States, and the importance of the early passage of the bill has been emphasized by government officials charged with responsibility under our national banking system, by bankers and business men, and students of finance and financial institutions. The impressive majority on behalf of the bill in its passage through the House of Representatives is an index of the support which the measure has throughout the country.

It is true there has been some criticism of certain features of the bill. This

is not to be wondered at. On the contrary, considering the grounds for honest difference of opinion with regard to certain details of the legislation, the very limited opposition, compared with the overwhelming volume of support, affords a striking tribute to the painstaking care with which the problems presented have been studied, and the skill and intelligence with which the bill has been drawn and perfected with a view of adequately and wisely meeting the needs of the situation.

A careful consideration of the arguments presented during the consideration of the measure in the House and in this hearing before your committee develops the important and interesting fact that such limited opposition as there is to the measure relates in the main to section 9, and that this opposition is very largely from a single locality and interest. It is true that during his lengthy and interesting discussion of the measure, Professor Willis, on the basis of a wide and extended examination of certain features of the banking situation,

suggested possible objections to a number of the provisions of the bill from the viewpoint of a theoretical analysis of some of the conditions which were studied. and investigated under his direction. But the committee has in mind, I am sure, the very important fact that at the conclusion of his two days of testimony, the only definite suggestion of change or modification he presented was in the form of a substitute bill which, as I recall, he merely presented for the consideration of the committee without giving the measure thus presented his personal approval, endorsement or definite recommendation as a substitute for the McFadden bill.

Mr. Drum in his extended statement before the committee also voiced some doubts as to the demonstrated wisdom of certain features and details of the legislation, but like Professor Willis, bis expression and view with regard to features of the legislation, other than section 9, was in the nature of a reservation of favorable judgment upon, rather than pronounced and definite_opposition to, the various features of the legislation which he discussed. Mr. Drum also suggested, as did Professor Willis, the possible advisability of giving consideration at this time to certain features of the national banking situation which are not covered or affected by the McFadden bill. But in the main, his discussion, like that of Professor Willis, was largely theoretical rather than advisory as to these features of the situation, affected by or, remaining outside the purview of the legislation, and it finally centered upon opposition to section 9.

BRANCH BANKING WITHIN THE NATIONAL BANKING SYSTEM

The real and definite opposition to the McFadden bill thus presented by a small but earnest and interested group therefore revolves almost wholly about the provisions of section 9.

The important provisions of section 9 to which objection is urged are those which make it unlawful to bring into the Federal reserve system after the passage of the pending act any applying bank which may have established branches outside of the corporate limits of the municipality in which the parent bank is located except on the condition that such applying bank relinquish all of its extramunicipal branches, and which make it unlawful for any member bank of the Federal reserve system to establish a branch beyond the corporate limits of the municipality in which the bank is located. These provisions definitely set the seal of disapproval and of prohibition on the extension of State wide branch banking in the Federal reserve system.

CITY BRANCHES

It is rather unfortunate that someone has not invented a term distinguishing the branches of a bank within the municipality of its location from outside or extra-municipal branches. Using the same term to describe two totally different and dissimilar classes of institutions leads to comfusion and controversy. Branch banks within the municipality of the parent bank do not in any basic or important sense partake of the character of state-wide branch banks. They are in the main and almost wholly merely offices established for the convenience of the customers of the bank and rendered necessary by the increasing congestion in cities and by the advisability of avoiding so far as possible the transfer of currency a considerable distance for payroll purposes. They are among the new instrumentalities of business, necessitated by increasing congestion in business districts and the wide and extensive use of the automobile. These branches are under the eye and the direct supervision and control of the officers of the parent bank. They meet the needs of the parent banks' customers. They have none of the features of long distance absentee monopolistic control which characterize the State-wide branch banking system. They are in effect offices of service and convenience rather than branches.

STATE-WIDE BRANCHES

When we get beyond the municipal branches established for local service and convenience and have to do with branches covering wide areas and extending to the limits of a State, and even beyond, we meet the real problems of branch banking and it should be remembered that the question presented is not one of branch banking per se or branch banking considered as a system in and of itself, but rather a question of branch banking within the Federal zeserve system. There may be grounds for a considerable difference of opinion with regard to branch banking as a system of and by itself. Branch banking systems exist

widely throughout the world. Such a system covers our neighbor, the Dominion of Canada. Such a system is in full swing and operation in Great Britain and elsewhere. But after very careful consideration of the entire problem, the Congress set up and established, under the national banking laws, and later under the Federal reserve system, a system of independent single unit banks whose reserves were to be held and controlled by institutions having an official character and a public rather than an individual or monopolistic control.

REPORT ON FEDERAL RESERVE ACT

Hon. Carter Glass, then a Representative in Congress from the State of Virginia, now a Senator from that State and member of this committee, in presenting to the first session of the Sixty-third Congress on September 9, 1913, his report as chairman of the Banking and Currency Committee of the House, on H. R. 7837, providing for the establishment of the Federal reserve system, reviewing the situation and conditions which led to the establishment of the system, called attention to the work of the Monetary Commission, the wide variety of suggestions that had been made for the improvement and reform of the banking and currency system of the United States, and outlined the reasons which led his committee to reject the multitude of other plans which had been suggested, and adopt the plan which became the Federal reserve system.

On page 18 of his very interesting report to which I have referred, Mr. Glass stated that the characteristic features of the plan proposed were "local control of banking, local application of resources to necessities, combined with Federal supervision, and limited by Federal authority to compel the joint application of bank resources to the relief of dangerous or stringent conditions in any locality,' and after discussing the evils of individual or group control of reserves, he stated on page 20 that the only way to correct these evils was "to provide for the holding of reserves by duly qualified institutions which shall act primarily in the public interest and whose motives and conduct shall be so absolutely well-known and above suspicion as to inspire unquestioning confidence on the part of the community. To accomplish this purpose, the Federal Reserve banks were established.

On pages 12 and 13 of the report the subject of branch banking was discussed under the caption "Branch banking system" as follows:

"BRANCH BANKING SYSTEM

"Many bills have been introduced into Congress from time to time for the establishment of branches of existing national banks, and the system has so widespread and respectable a support as to make it apparent from the outset that this aspect of banking theory and practice should be considered. The eminent success of the Canadian banking system and of others similar to it enforces upon the most indifferent student of the subject the significance of branch banking as a means of recuring cooperation and the junction of resources in support of any weak element in a banking system that may have been subjected to attack at a given moment. It is clear that Canada, for example, with her 27 banks and thousands of branch banks, represents a distinctly different type of banking from that which is exemplified by the national banking system with its 7,473 independent banks, none of which possesses a single branch formed under the national banking act. The question was thus clearly to be considered whether the bestowal of the branch power would in fact meet the difficulties of the present situation in the United States. Careful study of the applicability of the Canadian banking system to American conditions convinced the committee that an adaptation of it would not be feasible to-day. The successful introduction of the branch system would almost necessarily have meant the abandonment of the idea of free banking. While it would not necessarily have been requisite to abandon free banking in theory in order to introduce the Canadian principle it would have been practically true that the power of establishing branch banks, if widely exercised by large national institutions, would have entailed the contracting of the number of independent banks in the United States and a corresponding limitation of the perfect freedom of competition which exists to-day. Certainly it would not have been possible to introduce the principles of the Canadian system into American banking without a very extensive and vital modification of banking legislation and conditions in the United States. That the country was prepared for so profound a modification, not to say transformation, of the basic ideas upon which the national banking system has been devel