Senator FLETCHER. Have you any suggestions of any amendments by which you could make this bill more acceptable?

Mr. WOLFE. On the particular clauses that I have mentioned, Senator?

Senator FLETCHER. Yes.

Mr. WOLFE. I would rather have the present bill let alone than attempt to change it in the manner that you have

Senator GLASS. You mean the present law?

Mr. WOLFE. The present law. Pardon me.

Mr. WILLIS. I notice you use the word "collateral," Mr. Wolfe, frequently in your testimony. In what sense do you use it there? Mr. WOLFE. Depending on the section, Mr. Willis. Which one did you refer to?

Mr. WILLIS. You were speaking of it right along.

Mr. WOLFE. As collateral loan?

Mr. WILLIS. Section 8. You spoke of your bank as having_a large percentage of its loans in the form of collateral loans. In what sense do you use the word there?

Mr. WOLFE. Listed bonds, stocks, and other securities.

Mr. WILLIS. You do not lend much to farmers on warehouse receipts?

Mr. WOLFE. Practically none. We are not a rural community. We are a manufacturing community.

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Mr. WILLIS. So that in your sense collateral loan" means loans on stocks and bonds?.

Mr. WOLFE. Generally listed securities.

Senator WALCOTT. Do you carry any foreign securities?

Mr. WOLFE. Very few.

Mr. WILLIS. In connection with what you say of the change in reserves there, I notice you say you think till cash should be given a status as reserves. In the plan that you referred to suggested by the Reserve Committee, that till cash is made to include national-bank notes and Federal reserve notes, you remember?

Mr. WOLFE. Yes.

Mr. WILLIS. Does that seem to you right, or not, to include those in the till cash?

Mr. WOLFE. I see no objection to it. The percentage of them would be so low it would have no appreciable effect.

Mr. WILLIS. It seems to me one ought not to take a hypothesis of that kind. Suppose your percentage would be beneficial-we are making a general rule that applies to cases where they are both large and small.

Mr. WOLFE. I would say I see no objection.

Mr. WILLIS. No matter how large they were. There has been some difference of opinion. I should like to know what you thought

on that.

Senator BROOKHART. If you count the till cash as reserve, that would reduce the reserves in the Federal reserve bank?

Mr. WOLFE. In the Federal reserve bank.

Senator WALCOTT. Mr. Wolfe, with reference to affiliates, have you given any particular thought to the question of regulating the affiliates?

Mr. WOLFE. Senator Walcott, we have been a little selfish in that. Our bank has an affiliate but it is merely a holding company and not a marketing or underwriting company.

Senator WALCOTT. I understand, but I was anxious to get your individual opinion as to the advisability of regulating affiliates along the lines outlined by this bill.

Mr. WOLFE. If I do not answer your next question, I would like to say I think they could bear some moderate regulation.

Mr. WILLIS. About this reserve question, Mr. Wolfe-am I interrupting you, Senator?

Senator WALCOTT. No; I had finished.

Mr. WILLIS. Do you regard reserves at the present time as too small or about right?

Mr. WOLFE. Not as a hardship, Mr. Willis.

Mr. WILLIS. Not as a hardship, certainly; but if you were establishing reserves, would you establish them about where they are now, or larger or smaller?

Mr. WOLFE. About where they are now; and I only have our own experience in our own type of bank.

Mr. WILLIS. Under any new plan, such as this one we speak of, would it not be well to have a minimum requirement that they should not be less than they are now, for example? The plan contains a maximum requirement, as you remember.

Mr. WOLFE. Yes; I remember.

Mr. WILLIS. Would it be well to go so far as to take it without either maximum or minimum?

Mr. WOLFE. Well, obviously it would be fair for both the maximum and minimum.

Mr. WILLIS. If you had one, you would have the other?

Mr. WOLFE. Yes. It would naturally follow.

Mr. WILLIS. If you were going to put in a minimum, would you think it would be fair to put the two at the existing level?

Mr. WOLFE. I think so; again speaking from our own experience only, because it strangely works out there is no hardship, and it meets our wishes very well.

Senator WALCOTT. May I insert a question there? Would it in your city be safe or advisable to have a minimum expressed without a maximum?

Mr. WOLFE. I see no objection to that, Senator Walcott. I can not see how there would be any hardship in that.

Senator GLASS. Would it be wise to have a maximum expression without a minimum?

Mr. WOLFE. You have done that.

Mr. WILLIS. I notice in your testimony you use the word "segregate" assets behind savings deposits. That is merely colloquial, is it not? That is, you do not think this bill does any segregation? Mr. WOLFE. It says, "in liquidation."

Mr. WILLIS. It simply gives a prior lien on certain assets after the other assets have been exhausted.

Mr. WOLFE. But it does specifically say "in liquidation." Those time deposits shall be paid out of that.

Mr. WILLIS. It says these shall be a prior lien for certain deposits. Mr. WOLFE. I do not see anything else to that but segregation. Mr. WILLIS. There is nothing? You do not think

Mr. WOLFE. No segregation in a physical sense, but a form of security.

Mr. WILLIS. In the event of liquidation only?

Mr. WOLFE. Yes.

Mr. WILLIS. But you do not gather there is anything here that compels the investment of any special amount in various kinds of assets?

Mr. WOLFE. Except as regulated by one-half.

Mr. WILLIS. It is permissible, though.

Mr. WOLFE. Yes; but the percentage of any investment-and I think the bill is unfortunate in that respect that is a capital investment-the percentage in loans whose final payment is realized on real-estate security, would be the hardest problem any bank would have to determine.

Mr. WILLIS. That is all permissive, however.

Mr. WOLFE. That is perfectly true; but about that it must go into acceptable securities up to one-half of your deposits.

Mr. WILLIS. It is not compulsory in any case, you understand.
Mr. WOLFE. If you are going to invest it-

Mr. WILLIS. You can go on generally as you do now.

Mr. WOLFE. You see, we have the problem in Connecticut, particularly germane to us, where we do have segregation of practical guarantee of savings in time deposits of our commercial banks, and it is quite a problem with us.

Mr. WILLIS. But under this if you wanted to do so, of course, you could go on using your funds largely as you do now, could you not? This is simply a permissive limitation.

Mr. WOLFE. Yes; but in liquidation it is

Mr. WILLIS. A prior lien?

Mr. WOLFE. A prior lien, and it tends to drive your commercial deposits to your time deposits, for two reasons: First, in liquidation they would be obviously apparently security; secondly, there would be a higher rate of interest.

Mr. WILLIS. Other witnesses have testified about the prospect of driving them in the opposite direction.

Mr. WOLFE. There would be some portion of them that would be driven away.

Mr. WILLIS. So if you get them too high, you would have to contrive some way to force them back.

Mr. WOLFE. I would have to get a pencil and paper and figure that.

Senator BROOKHART. Is that all? Thank you, Mr. Wolfe.
The next is Mr. Allendoerfer..

STATEMENT OF G. W. ALLENDOERFER, VICE PRESIDENT OF THE FIRST NATIONAL BANK OF KANSAS CITY, MO.

Mr. ALLENDOERFER. Gentlemen, I expected to be called for tomorrow's hearing and to prepare a statement to-night after having learned something about the methods of the hearing. Since there is to be no hearing to-morrow and I have no prepared statement, if I may, I will speak from some notes.'

I represent the Missouri Bankers' Association. I was reared in a country bank. Our bank in Kansas City is the correspondent for

a large number of country banks, with whose relations with our bank I have a great deal to do; and what I have to say will be from the standpoint of an interior banker with the thought of his country constituents very close to his heart. The First National Bank, of which I am vice president, has a capital of $2,000,000 and a surplus and undivided profits of $3,600,000; total deposits, $54,000,000; and $10,000,000 time deposits. The bank is 46 years old, 45 of which have been under its present management, during all of which time there have been no consolidations. Our bank has no affiliates. We are not interested in branches or groups. We do not sell bonds or real-estate loans. Our par value is $100, and we expect to remain an independent unit.

Senator GLASS. That is a pretty nice bank.

Senator WALCOTT. A real commercial bank.

Senator FLETCHER. It sounds like a real bank.

Mr. ALLENDOERFER. Yes, sir. I have had no opportunity since the call to come down here was made to confer with

Senator COUZENS. Who called you to come down here?

Mr. ALLENDOERFER. The officials of the American Bankers Association, and particularly the president of the Missouri Bankers Association. I have had no opportunity to talk with officers of that association or officers of our own bank. What, I will say will be my own thinking on this subject.

I have, of course, known of Senator Glass for many years and know of his wonderful work in the Federal reserve act and his hand in recent legislation has been very apparent, and it has been with much gratitude in my heart that I have known that in his position we have a man so zealous for the preservation of the integrity of our banking and currency system. It is, therefore, with a great deal of diffidence that I appear in opposition to any bill which he has submitted. If I guess properly the intent behind many of the provisions of the bill, I am in sympathy with the purposes aimed at, but the general situation of the country is such that I do not believe the bill in its present form and at this time should be passed. We are just beginning to recover confidence, both the public and the bankers. This bill contains matters of so much importance and so difficult to understand quickly that I believe that the bankers and the public alike will be stunned and that fear of its effect will cause hesitation and set back our recovery. In my judgment the bill should be broken up and presented as several subjects so that the particular features of each part may be concentrated on and given serious and long consideration. I believe some of them should be reintroduced and acted on by the Senate; others, if held for a few weeks or a few months for further consideration, would, I believe, be somewhat changed before they were presented to the Senate. Some of them I think could be held for as long a period as two years without doing any serious damage.

I will not speak on the sections dealing with affiliates, groups, or branches or capital stock, as others are much better qualified to speak on those things. The matters about which I will speak are in a measure details. Some of them I think are quite important and are mentioned largely for the purpose of bringing to your attention the fact that a number of these provisions need fuller and more serious consideration before going to the Congress.

I mention first, in a general way, that the words "collateral security" should have some definition.

Senator FLETCHER. Will you refer to the sections?

Mr. ALLENDOERFER. I will, except that "collateral security' appears in so many sections that it is general.

Senator BULKLEY. Will you tell us what is your definition of collateral security?

Mr. ALLENDOERFER. Well, collateral security in its general acceptance would include, for example, things which I think you do not mean to include in that, which I am about to speak of.

Senator BULKLEY. Give us some examples, if you will.

Mr. ALLENDOERFER. Collateral security as generally accepted would include warehouse receipts covering commodities. I think it is not the intent of the bill to prevent or to hold down the loaning of a bank in an agricultural community on warehouse receipts secured by commodities. In our relations with country banks, even some member banks, we have as collateral to their bills payable their customers' notes, a large part of which would be eligible for rediscount at the Federal reserve bank, but you call it none the less collateral security. It is collateral security. That word is generally accepted. Senator BULKLEY. Would the phrase "security collateral" mean anything different from "collateral security"?

Mr. ALLENDOERFER. I am afraid I can not furnish the definition, but I think one should be provided.

Senator BULKLEY. You think it should be put right in the act? Mr. ALLENDOERFER. I do not see how you are going to get around having it to some extent defined in the act.

Senator GLASS. If a highly intelligent and long-experienced banker of your type can not define it for us, it leaves us with an almost impossible task, does it not?

Mr. ALLENDOERFER. I believe that the experts who drew this bill, if it is reconsidered and a definition sought for, will be able to find words which will express just the type of collateral security they had in mind in drawing these sections.

Senator GLASS. My dear sir, I can say to you that we have done everything but sleep with experts, and I have dreamed about them, and other members of the committee have eaten with them. I have not.

Mr. ALLENDOERFER. Is it in order for me to ask questions, Senator? May I ask, then, whether you have found that a difficult thing to define?

Senator GLASS. I know very definitely, sir, what I mean by that. I do not mean warehouse receipts for commodities at all. I mean more or less speculative transactions represented by the market. I mean paper defined by the existing act as ineligible for rediscount by the Federal reserve bank.

Mr. ALLENDOERFER. Would it be, as a suggestion, possible to work that out by exclusion and say that collateral security consisting of warehouse receipts, bills payable secured by eligible paper or by Government securities would not be classified as collateral security?

Mr. WILLIS. May I call your attention, Mr. Allendoerfer, to section 5200 of the Revised Statutes, in which warehouse receipts are men