Bankers' Wisdom

Last week with 5,443 out of 6,736 Federal Reserve member banks and 7,654 out of 11,435 State banks* recovered from the banking holiday and again doing unrestricted business, the executive council of American Bankers Association assembled in Augusta, Ga., to play golf on Bobby Jones's Augusta National golf course and exchange profundities of hindsight. The A. B. A. Economic Policy Commission took up the task of expressing the refreshed financial wisdom of those members who were still bankers. Col. Leonard Porter Ayres, famed economist-vice president of Cleveland Trust Co. (one of Cleveland's big banks that is open), author of his bank's widely known Bulletin, arrayed his colleague's latest recommendations, suggestions:

Recommendations

1) Liberalization of the Federal Reserve Act to allow admission to the Reserve of State commercial and mutual savings banks, (Based on last week's figures 84% of Federal Reserve member banks but only 67% of State banks had reopened on an unrestricted basis.)

2) Prohibition of bank holiday proclamations by State governors (because of the drain it puts on the banks of neighboring States).

3) Uniform privileges (or restrictions) in regard to branch banking for national and State banks in each State.

4) "Reasonable limitations" to control the sudden shifting of large commercial deposits (which aggravated the spread of the banking crisis).

5) Laws for rigorous regulation of loans by banks to their own officers.

6) Progressive restriction of the postal savings system as the general banking system is strengthened.

7) Deposits of public funds should have no greater security than private deposits, the same status for all.

8) The emergency provisions for member banks borrowing from the Federal Reserve should be made permanent.

Suggestions

1) A Federal commission to> consider limitation of interest rates on all classes of deposits. (Too high interest rates paid by banks in competition with each other has been a recognized cause of bank weakness.)

2) Altering the Federal Reserve Act to make possible increasing the requirements of bank reserves in times of credit inflation.

3) Fixing a statutory percentage of gold coverage not only for reserve notes (as at present) but for reserve notes and bank deposits combined. "This would nullify most of the dangers inherent in the hoarding of currency."

*Figures for 47 states.

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