The CHAIRMAN. Of course, it is a tremendous disadvantage to have to put all the banks in a strait-jacket for the purpose of relieving conditions that are casual or occasional. Doctor WILLIS. As it is in California, you will find a branch bank working side by side with the local bank, and the local bank handles the business best suited to its resources and the branch bank handles the staple crop, such as farming, and the effect of this process is merely to take off business that otherwise would go to the correspondent bank in the city. Returning now to the general trend of my discussion The CHAIRMAN. Doctor, would you prefer to speak without any interruption? Doctor WILLIS. No, sir; I shall be very glad to discuss any point that occurs to you. In the first place, so much has been said about the relative proportion of State and national banks. It seemed to me worth while to make as careful a tabulation as I could of the active State and national banks from the year 1900 down to the year 1925, and that showing indicates a very steady growth. Out of a total number of banks at the close of that period there were 19,722 State banks and 8,016 national banks. At the beginning of the period we had 7,816 State banks and 3,942 all-national banks; the total State and national banks were 11,758 with resources of $9,771,642,023. It shows a very steady growth from that condition to the final situation. At the end of the period, 19,722 State banks and 8,016 national banks, or an aggregate of 27,738 active banks of all classes, with combined assets of $52,131,012,325. Now, that showed an increase during the period of 11,428 State banks, or an increase of assets of $23,938,996,995, and an increase in national panks of 4,074 during the period with a growth in resources of $18,420,373,307, with a total increase in all banks of 15,502, with total resources of $42,359,370,302. (See Table I.) To sum up, one sees there was an increase in State banks of about three times as many as national banks. Senator GLASS. Doctor, is not that relative larger increase of State banks over national banks due to the fact that the economies accomplished in national banks is very much higher than that of State banks? Doctor WILLIS. I should think so. I will come to that in a moment. It shows an increase in resources of State banks as compared with national banks of about 25 per cent; that is to say, the State banks increased in resources about 25 per cent over the national banks. This table is compiled on the basis of the best figures we could get, and I would like to have it inserted in the record. The CHAIRMAN. It will be incorporated in the record. Doctor WILLIS. Now, there is another point that is of extraordinary interest The CHAIRMAN (interposing). Pardon me. You are referring to the table which you have marked "1"? Doctor WILLIS. Yes, sir. (The table referred to is here printed in full, as follows:) Active banks at beginning of period Active banks at end of period period Active banks, increase during period TABLE 1.-Increase in number and resources of national and State banks, 1900 to 1925 1 1 Data on number and resources of State banks are given as of the year 1900 wherever it was possible to obtain accurate data. so far. In these the data are given as of the earliest date available. 18 In many States, however, the data do not go back -150 66, 305, 630 TABLE 1.-Increase in number and resources of national and State banks, 1900 to 1925-Continued Line num ber 178, 449, 244 302, 584, 678 76, 466, 793 469, 349, 846 211, 126, 469 479, 338, 324 21, 632, 343 359, 370, 30 Doctor WILLIS. Now, this table showing the growth of banks ought not to be taken simply crude as it stands but it ought to be studied very carefully from the standpoint of a business cycle, the development of panics and disturbances from time to time, in order to see what bearing this has on our system of organizing banks. When we look at it in that way we find this fact, which is surprising at the start but which is not surprising when you come to think of it very carefully, that before any breakdown or failure we have had a tremendous growth of very small banks, that is to say, an enormous increase of hastily created banks. The Comptroller in his annual report-I quote from memorycalls attention to the fact that among failures that occurred in the national system in recent years, and particularly last year, were due to the fact that there was no business for them. He does not say why these banks were ever allowed to come into existence, there is no reason for them, but the fact is that the chartering of banks is one of the phases of our banking system that has received little attention, and that is just as true of State as National banks. It is no criticism in the comparison of the national and State systems. Senator EDGE. That is obvious, is it not, when by your table there are three times as many State banks, and it is generally known without discussion that the credit of the national bank is greater than that of the State bank? Doctor WILLIS. Yes. Now the number of State banks, trust companies and stock savings banks authorized to commence business in each State of the Union has been carefully developed here. It shows a great increase in the number that were chartered just before each period of bank failures. The number that were chartered in 1919 and 1920 were 1,094 and 1,565, respectively, and then it tapered off down to 164 in 1925. The point I make is that we have been in the habit of letting a lot of weak banks come into existence without careful consideration, and then telling them to go ahead. Under section 5200, equivalent legislation which existed, allowed them to loan pretty much as they saw fit. Mr. Chairman, this table I think is also worth filing for the record. I will mark it No. 2. (The table referred to is here printed in full as follows:) |