AMERICAN BANKING

Taranaki Daily News, 11 March 1933, Page 7

AMERICAN BANKING

SOME TENDENCIES DISCUSSED. TWO SYSTEMS COMPARED.

Some comments on the banking system of the United States were made by Mr. W. A. Wessell, an official,, of the General Motors Corp., on his arrival at Wellington on Monday by the Maunganui from San Francisco, On a business visit. Mr. Wessell said that it seemed to him inevitable that owing to the great size of the United States, banking in the past required to proceed on lines directly contrary to those in England and Canada, that was, on a system of purely local banks, with no branches. Now, he said, it appeared that branch banking had a number of important advantages over the other system, and he understood that legislation had been introduced to permit what was commonly known in England as “branch-banking.” Mr. Phillips said that in the past each town required its local bank or banks, with its local directorate and managers, who were best fitted to know the needs of the particular community. There were in the United States two distinct classes of banks, (a) State banks under a State Charter, and (b) what were called national or federal, banks, operating under Federal control.

The State banks were more or > less limited to making loans on real estate security, - while the Federal banks for. the post part supplied the necessary funds for commercial enterprise. This was the broad distinction between the two classes of banks, although provision was made for a State bank to affiliate with a Federal bank if it wanted to. Most of the crises in American banking, and, he thought, the latest suspension of payment, Mr. Wessell attributed to the lending by the State banks on real estate, or as is called in New Zealand parlance, to lending on rural security. So long as the price of farming products was maintained, the value of land remained stable, or rose, but it was when prices of agricultural produce fell, as they had reecntly done, that the banks began to experience strain, and if they lacked the necessary solidarity and size, which generally went hand-in-hand with branch banking, there was, in many cases, no other alternative but to close the doors. In the United States, the State banks were the more seriously affected by the depression. Mr. Wessell agreed that some radical change in the whole banking system would have to be evolved, but it was impossible to say at present which way this development would take place. It appeared from the recent legislation that branch banking would be permitted, but he felt that there was bound to be opposition to any proposal to limit control to a small number of banks. Americans were always suspicious of movements toward trustification.

“However,” Mr. Wessell added, “things will be righted, and American banking will be placed on a satisfactory footing, but in what direction it is impossible to say at present.”