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banks were guaranteed, and the bankers, in turn, allowed to fix their own rates of interest to be paid their depositors, that would no doubt bring about improper competition, where a banker might say: "My deposits are guaranteed as well as my competitor across the street. He is only paying 3 per cent. Come to me and I will pay you 314 per cent."

I believe we should inject into any legislation a fixed rate of interest to be paid on the time deposits.

Mr. STEVENSON. A maximum rate, you mean?

Mr. FIERSON. Yes.

Mr. STEVENSON. You would not necessarily fix it arbitrarily at a certain rate, but you could fix the maximum rate.

Mr. FIERSON. Fix the maximum rate, because if you do not you can readily see that you are courting improper competition.

Now, then, the Postal Savings System is to-day the greatest menace to the banking structure of the nation. In my judgment, they are conducting a regular banking business, except making loans. I have in my portfolio here a deposit certificate in the Postal Savings System for $1, and the Postal Savings man in my town told me yesterday, just before leaving, that a customer came in and wanted to deposit $1.200, and he wanted it in $1 certificates, so he might come back every day and draw out $1, or at will: it is conducting a regular banking business. There is very little difference between the Postal Savings System and the ordinary savings department of any bank, because the depositor can come back the next day and draw it all out, if he desires. In the issuing of their money orders, they are virtually conducting a banking business, and they can go to the post office and buy money orders. There is hardly a day passes in any community when someone does not go to the Postal Savings and buy a money order, because he is afraid of a bank draft, and he has orders from his home office in one of the great metropolitan centernot to take a bank draft, but to take his money to the post office. Why? Because they have confidence in our Government.

The CHAIRMAN. The public is not to blame for that, is it? Mr. FIERSON. The public is not to blame for that, certainly not: our system is to blame for it.

The CHAIRMAN. They are following the same policies that any individual is supposed to pursue in handling his business; he is trying to be prudent and careful.

Mr. FIERSON. Yes.

The CHAIRMAN. Prudent and careful in handling the money that he has earned. Do you not anticipate that this development or th enlargement of the use of postal savings will grow and continue to increase rapidly in coming years, unless something is done to remove the conditions that have brought it about?

Mr. FIFRSON. Why, Mr. Chairman, I believe that unless some thing is done to make the banking business of the Nation safe, that the Government will have to go into the banking business alto gether, and not partially, and your individual banks will be a thing of the past.

The CHAIRMAN. Have you studied the plans which have been suggested, with respect to Government control of deposits entirely. and the reloaning of funds to banks with which to operate, the deposits at all times to be handled by the Government?

ERSON. I have not, Mr. Chairman.

, on the contrary, read all of the measures that have been , and I do not believe that, under our system, it would be the Government to engage in the banking business; nor do that we should interfere, with the dual system of banking ich we now operate.

CHAIRMAN. The suggestion has been made, from time to at the Government should afford a proper and adequate for taking care of all depositors' business, and set up an nent under which the banks may obtain loans or funds ich to conduct their business, by borrowing from the Govout of the deposit accumulations. It would be interestay, in that connection, that the Grange farm organization s a plan of that sort.

you may proceed.

IERSON. I think, as said before, that we must abandon the national banks" or in some way increase the safety of the rs-place the Government behind them.

HAIRMAN. What you mean to say is that, having chartered nks and undertaken to safeguard and supervise their operad having permitted them to advertise to the world that they onal banks and under national supervision, and depositories ernment funds, that there is a sort of moral obligation. IERSON. Yes, indeed.

HAIRMAN. To see that the system is made to operate along lines.

ERSON. Make it safe, or get out of it entirely.

HAIRMAN. The bill that I have introduced, Mr. Fierson, has ovisions as well as the plan that contemplates the protection its. One of the provisions of this bill requires a minimum for national banks amounting to $50,000, and also requires rplus of 10 per cent be paid along with the payment of the tock. What is your judgment about that provision? TERSON. I think it might be enlarged upon somewhat. As I ind, under the national bank act, no bank can pay a dividend surplus shall have equalled 20 per cent of its capital; and unprovisions of your bill that it can not start operation until 0 per cent into the surplus. I think that is very wise. Your rides, Mr. Chairman, as I understand it, that after the paydividends and setting up of 10 per cent of the earnings of eral reserve system, that one-half of the remainingHAIRMAN. I am coming to that a little later.

TERSON. Beg pardon.

HAIRMAN. I want you to give your view as to the requireto the capitalization fixed as the minimum, $50,000, plus ent to surplus.

TERSON. I think it is a good requirement.

HAIRMAN. The fact is, that the greater number of bank failoccurred among banks with capital of less than $50,000. IERSON. Yes.

HAIRMAN. Is not that true?

1841-32-5

Mr. FIERSON. Yes; the majority of failures of banks, according to the comptroller's last report to Congress, were among banks under $25,000 capital.

The CHAIRMAN. Of $25,000?

Mr. FIERSON. Yes.

The CHAIRMAN. I think the figures show that about two-thirds of the bank failures in number occurred among banks with capital not exceeding $50,000.

Mr. FIERSON. I think that is correct.

The CHAIRMAN. And a large per cent of the remaining, between banks of $50,000 and $100,000.

Mr. FIERSON. That is true.

The CHAIRMAN. But the ratio is not maintained in the figures of the resources and deposits carried by those banks. Have you information as to what the figures show with reference to the resources and deposits, the relative resources of the banks in amount of capital? Mr. FIERSON. Mr. Chairman, I made no compilation as to that. Now, I have the comptroller's last report to Congress, which I believe sets out that information.

Mr. BRAND. Mr. Witness, have you finished your general statement?

Mr. FIERSON. Yes.

The CHAIRMAN. Let us see what the comptroller's report shows. I have not examined it with that in mind.

Mr. FIERSON. This is the report of the Comptroller of Currency as of December 7, 1931. If I may, I will read into the record this short paragraph from his report:

It will be observed from the annexed chart that this depression in the past two years has caused no relative change in the character of bank failures. Nearly 60 per cent of the failures for the past two years have been of banks with capitals of $25,000 and less, and an additional 8 per cent were of capital between $25,000 and $70,000, but not including $50,000; 17% per cent were of banks of $50,000 capital and to $100,000. In other words, about 86 per cent of all the bank failures in the United States from 1921 to 1931 were of banks having less than $100,000 capital. During this period, only four-tenths of 1 per cent of the number of failures were of banks having capital of $1,000,000

or over.

The CHAIRMAN. I was more or less familiar with those figures, although it is very proper to have them in here, and I am glad you put them in. What I have in mind is the deposit resources of the large banks that have failed, as compared to the resources of the small banks.

Mr. FIERSON. Now, Mr. Chairman, I have no figures in regard

to that.

The CHAIRMAN. Those figures are not given in the comptroller's report

Mr. FIERSON. I believe not.

The CHAIRMAN, Mr. Fierson, the fact is, after all, that the policies of the small banks have been dictated in a large part by the large banks, and by the Federal reserve banks, have they not!

Mr. FIERSON. Well, I should say that the large banks

The CHAIRMAN. I would not say dictated

Mr. FIERSON, Dominated the situation.

The CHAIRMAN. I would not say dictated, but influenced.
Mr. FIERSON. Yes, no doubt.

AIRMAN. For a time the small banks were even advised by banks and by the Federal reserve banks, with reference racter of investments in which they should engage, were

RSON. I think they were, to some extent, yes; particularly ence to the investment in secondary reserves.

AIRMAN. They were told to invest in liquid securities, as thought to be.

RSON. Thought to be is correct.

AIRMAN. Is it not true that a great deal of the difficulty prung up among the smaller banks, and the banks that d, grew out of investments in these so-called liquid se

RSON. I think that is true, undoubtedly.

AIRMAN. And it is also true that the accumulation of those s, right now, still a source of concern.

SON. Very much so.

AIRMAN. You think that the provision requiring that the inks shall have a minimum capital of $50,000 is a wholerement?

ISON. I do.

AIRMAN. There is also the provision in this bill which e stockholders of double liability; I would like to have in that connection.

RSON. Well, I should say that would be a very popular use the assessment on a stockholder is a very unpopular

IRMAN. The history of that shows that the public has not Ochase him on that liability, does it not?

SON. Yes; but I have never made a study of it, but I never bank

IRMAN. I have heard authoritatively that about 16 per epresentative selection of stockholders on their stock liaDanks that have failed; so that, so far as affording ample to the public is concerned, it has been a failure.

SON. I should say that would be negligible as to the protection.

IRMAN. When you say that would be a popular provision, tean is it would make investment in the capital of national attractive to the public?

SON. Yes.

IRMAN. If that were done, it would necessarily follow provision in the law would have a strong tendency to vestment of capital in national banks and in the organizaional banks in communities where there is found to be for new banks.

SON. Yes; I agree with you.

IRMAN. It is true that with the large number of bank have had, that there are many communities throughout that are in sore need of new banking facilities, new

SON. There is no doubt about that, Mr. Chairman.
RMAN. Because of the breakdown of the present banking

Mr. FIERSON. Many communities have no banking accommodations now.

Mr. STEVENSON. And the people are afraid, still, to organize new ones, viewing the experiences of the past.

Mr. FIERSON. That is one of the principal reasons, I think; they do not want to stand the chance of double liability. They have hai a noble experience along that line.

The CHAIRMAN. This is also true, is it not, Mr. Fierson, that practical operation a great many stockholders who might be required to pay find themselves able to get the drift of things ani then prepare for the day of reckoning, so that when the time come nothing can be made out of them; and the man who is conscientious and who feels honorably bound to respond to that obligation in goo faith, the man who invests to aid his community, is about the only one who is made to pay?

Mr. FIERSON. Well, of course, I can see the trend of your thought. but I am not qualified to answer that question. As I understand the national banking act, after failure of a bank a stockholder wh transfers his stock within six months

The CHAIRMAN. Sixty days.

Mr. FIERSON. Yes: 60 days next prior to the insolvency of the bank, he is liable. But now, whether his responsibility is such tha it can be collected, I do not know; but I do believe it would be very beneficial to remove the double liability.

The CHAIRMAN. Well, it has proven a failure, as far as protectin the public is concerned.

Mr. FIERSON. I think it has.

The CHAIRMAN. Mr. Fierson, what do you think of the prese machinery of the Federal reserve system, with reference to the ear ings of Federal reserve banks, and with reference to the returns that are paid by Federal reserve banks to member banks?

Mr. FIERSON. Well, the returns to the member banks, in the ligh of the amount of money that the banks have in the Federal reserv is negligible. They are now returning 6 per cent dividends on their stock investment; the member banks are receiving that, I mean. The CHAIRMAN. That is all they receive, is it not?

Mr. FIERSON. That is all they can receive, under the law; but th big end of it is their reserve requirement, on which there is no revenu to them whatever, and the present statute provides for a reserve in our particular district-it depends on the locality of the bank3 per cent on time deposits and 7 per cent on demand deposits, ar that runs into a huge sum of money that must be maintained dail with the Federal reserve bank, and on which the member receiv no interest or earnings whatever.

The CHAIRMAN. And, of course, the Federal reserve banks are r quired to subscribe this stock, which is 6 per cent of the capital Mr. FIERSON. The member banks, you mean?

The CHAIRMAN. Yes; and carry the reserve as suggested by you. Mr. FIERSON. That is the law."

The CHAIRMAN, And the only return they get is the arbitrary ra of 6 per cent on their capital.

Mr. FIERSON. That is all.

The CHAIRMAN. It has become pretty generally accepted amo bankers, in recent years, as a sound contention, that the memb

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