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:)

1, 180 963 935 954 893 674 801 966 6121, 094 1, 565 572 425 525 438 164

41 40 42

42 43 46 45 46 46 47 47

46 46

47 48

Number States
porting..

1 Not shown in annual report.

? From Jan. 1, 1907, to Jan. 1, 1909, 57 State banks, 2 trust companies, 3 savings banks, and 13 private banks were incorporated. Two private banks incorporated.

• Two reissues.

Figures include offices and branches.

Figures for trust companies only.

10 Figures for State banks and trust companies only.

11 Of these 4 were converted from national banks.

12 Of these 1 converted from national bank.

13 Of these 1 converted from national bank.

14 Of these 1 converted from national bank.

15 Figures for State banks and trust companies only.

16 Figures for State banks and trust companies only.

17 Includes figures for preceding year.

18 Includes 8 private banks reorganized as State banks.

19 Includes 6 institutions which do not receive deposits and which were not previously listed as banks. Total capital $84,500.

20 In 1920 there were 2 certificates to commence business listed in the report. One was for an increase in capital and changir.g location and reorganization. The other was for change of title. Both necessitated new charters according to law.

21 In ludes 187 private banks which changed to State banks because of law which became effective May 15, 1903, prohibiting use of word "bank” in titles of institutions not chartered by State.

Doctor WILLIS. Mr. Chairman, a great deal has been said about banks going out of the national system or into the national system, as if banks were hastily shifted from one system to another without very much thought of the subject. Here I have a table showing a number of State banks and trust companies which were converted from national banks in each State of the Union since 1890. The number that were converted-that is, the national banks that were converted-into some form of State organization were in 1913, 3; 1914, 26; 1915, 13; 1916, 29; 1917, 20; 1918, 10; 1919, 34; 1920, 35; 1921, 18; 1922, 23; 1923, 29; 1924, 22; 1925, 23.

That does not show a very rapid tendency of national banks to leave the system and to convert into these various forms of State organizations.

Senator GLASs. It does not show any variation at all.

Doctor WILLIS. I will mark this Table No. 3 and ask that it be inserted in the record..

The CHAIRMAN. Taat table will be incorporated in the record. (The table referred to is here printed in full as follows:)

7.