Summary of national banks discontinuing business in State of California, from January 1, 1919, to April 1, 1924

States in which branch banking is prohibited by law:

1. Alabama: Banking laws, section 28. Does not affect status of branches established prior to March 2, 1911.

2. Arkansas: Act of February, 1923.

3. Colorado: Act of February 14, 1923, section 48, Colorado banking law.

4. Connecticut: General Statutes, banking law, section 3920.

5. Florida: Banking Law, section 4139.

6. Idaho: Title 39, chapter 205, section 5244.

7. Illinois: Act has passed senate and house, has been signed by the governor, and is now before the people upon referendum to be voted on in November, 1924.

8. Indiana: Banking act, section 1, page 367.

9. Minnesota: Act of 1923.

10. Missouri: Act of 1923, section 11737.

11. Nevada: Prohibited by law.

12. New Mexico: Prohibited by law.

13. Oregon: Banking law, section 36.

14. Texas: Prohibited by State constitution.

15. Utah: Laws of Utah, section 1005. One year allowed for discontinuance of branches in operation.

16. Washington: Banking law, chapter 209, section 7.

17. Wisconsin: Statutes, sections 2024 to 2029, subsection F. to branches established prior to May 14, 1909.

97134-244

Does not apply

II. Law silent but branch banking prohibited under ruling of attorney general or banking commissioner:

1. Iowa.

2. Montana.

3. North Dakota.

4. New Hampshire.

5. New Jersey.

6. Vermont.

III. Law silent.

No ruling by attorney general or banking department.

No branches in operation by State or national banks:

1. Kansas.

2. Nebraska.

3. Oklahoma.

4. South Dakota.

5. West Virginia.

A. INTRACITY BRANCH BANKING PERMITTED

IV. Law silent. Permission under State authority.

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1. Kentucky: Tellers' windows" permitted within city limits under decision of court of appeals.

2. Michigan: Ruling of attorney general.

3. Pennsylvania: Tellers' windows" permitted within city limits under opinions of two attorneys general.

4. Tennessee: Permitted by implication.

5. Wyoming: Permitted by implication. (No branches in operation.) Laws of Wyoming, chapter 326, section 5135.

V. State legislation permiting intracity branch banking only:

1. Massachusetts: Banking laws, chapter 168 and chapter 172. Permits trust companies to establish not more than two de novo branches. Savings banks and cooperative banks also permitted to have branches.

2. Mississippi: Banking laws, chapter 184. Permits additional offices in cities with population in excess of 10,000.

3. New York: Banking laws, sections 51, 110, and 195. Limited to cities having a population in excess of 50,000.

4. Ohio: Banking law, section 710 to 773. Limited to city limits and contiguous villages. Contiguous not construed to mean adjacent.

B. COUNTY-WIDE BRANCH BANKING PERMITTED

VI. Law silent. Permission by banking commissioner:

1. Maine: Trust companies may have branches in the same or adjoining counties:

VII. Permitted by legislation:

1. Louisiana: Banking act of 1910, No. 238, section 7, as amended. in excess of $50,000. Two branches permitted in same parish. as to number of branches for trust companies.

C. STATE-WIDE BRANCH BANKING

VIII. Permitted by legislation:

1. Arizona Arizona bank act, section 21.

2. California: California banking law, act 409, section 9.

3. Delaware: Banking law, 1923, section 4.

4. Georgia: Banking law, article 1, section 3.

Capital No limit

5. Maryland: Banking act of 1910, chapter 219, section 20, amended 1920; chapter 268, section 20. Recognizes branch banking and permits it by implication.

14.

6. North Carolina: Banking law, section 43.

7. Rhode Island: Banking law, chapter 229, section 9; chapter 230, section

8. South Carolina.

9. Virginia.

The CHAIRMAN. Mr. Kruse and Mr. Lovell, representatives of the Brotherhood of Locomotive Engineers, are here and would like to be heard.

STATEMENT OF MR. E. H. KRUSE, ASSISTANT LEGISLATIVE REPRESENTATIVE BROTHERHOOD OF LOCOMOTIVE ENGINEERS, WASHINGTON, D. C.

Mr. KRUSE. The Brotherhood of Locomotive Engineers, as an organization, are in favor of the principles of the McFadden bill, because, as you know, they are in the banking business. As a matter of fact, it is not all that we wish for in the relief of our banking institutions, but there is remedial legislation there to help the national banks, of one of which we are the sole owner, and that is the reason we are in favor of the principle of the McFadden bill. Mr. MOONEY. Your bank is the Brotherhood of Locomotive Engineers Cooperative National Bank of Cleveland, Ohio?

Mr. KRUSE. And you know we have branch banks all around us, through the whole city. As Mr. Dawes says, Cleveland is filled with branch banks of the State banks, and we would like to have the same opportunity as the State banks in carrying on our business. We are not worrying about the business, because if the business is not there the national banks will not start the branch.

Mr. BLACK. Here is the same point of which I inquired of Mr. Dawes that I would like to have your idea on: The danger to guard against is the danger that arises in connection with these chain grocery stores. When one of those is established in a neighborhood, each one thinks it must put up a grocery store in that community whether the community needs it or not. I have the fear that that is the danger we are getting into in this.

Mr. WILLIAMS. I have had some experience with chain stores and I can assure you that the large chain stores of this country are not putting in chain stores unless they have figured out carefully to their satisfaction that it is a good proposition. They only do that where they see they have an opening.

Mr. BLACK. And the tendency is to drive out the small independent grocer?

Mr. WILLIAMS. Which it is doing.

Mr. BLACK. And that is what is going to happen in these large cities where they have community national banks if we open this up by enabling the big ones to put up branches, and, of course, pretty soon we will not have any community banks; they will be dominated by some three or four large ones.

Mr. STEVENSON. But it will be confined to the municipal limits. The CHAIRMAN. If the people in the community desire that kind of business; they have no control over home rule.

Mr. CAMPBELL. Would you be disposed to establish branches in competition with State banks?

Mr. KRUSE. No: we would not start a branch unless there was demand for it.

Mr. BLACK. What is the biggest State institution in Cleveland? Mr. KRUSE. I think the Union Trust Co. at the present time. Mr. BLACK. Do you know how many branches they have?

Mr. KRUSE. I am not sure about that. The chief one in Cleveland is the Cleveland Trust Co. I think they have about 70 branches in Cleveland and the surrounding counties within a radius of about 50 miles outside of Cleveland.

STATEMENT OF MR. ARTHUR J. LOVELL, VICE PRESIDENT AND NATIONAL LEGISLATIVE REPRESENTATIVE BROTHERHOOD OF LOCOMOTIVE FIREMEN AND ENGINEMEN, WASHINGTON, D. C.

Mr. LOVELL. I just want to second what Mr. Kruse has said. Our brotherhood have no bank, but we have between $12,000,000 and $13,000,000 on deposit in these banks throughout various States, and we do not see any good reason why there should be any difference between the privileges of the State banks and the national banks. We do not know why there should be flesh of one and fowl of the other.

We think that the McFadden bill is good legislation and we are in favor of it.

Mr. GOLDSBOROUGH. Why should your national banks be confined entirely to the cities, as they are under the McFadden bill?

Mr. LOVELL. I do not know that I am competent to answer that question. I am not a banker, and it would be like a nonexpert giving an expert opinion. I think that has been pretty well covered by Mr. Dawes. I would rather not answer that, because I am not a banker. Mr. STRONG. AS I understand the comptroller, the reason is that there is still time to limit it to cities before it expands out into the country. We have let the proposition of branch banks in the cities get away from us in the Federal reserve system; that is, we have already got a great number of large State banks with branches in the cities. There is still time to limit it to the cities and not let it get out into the country.

Mr. WILLIAMS. There are only two or three States where branch banking outside of cities has been very much developed?

Mr. STRONG. Yes.

The CHAIRMAN. I believe Mr. Savage desires to make a statement, and we will now be glad to hear him.

STATEMENT OF MR. FRANCIS M. SAVAGE, PRESIDENT NORTHWEST SAVINGS BANK,WASHINGTON, D. C.

Mr. SAVAGE. I would like to give you what seems to me to be a striking example of the evils of branch banks. I was in South Africa last summer, and they have practically only two banks in South Africa, the National Bank of South Africa and the Standard Bank of South Africa. The National Bank had about 400 branches. The National Bank of South Africa got into trouble and the Government had to guarantee its deposits, and in conjunction with that guaranty they came to an understanding with the Standard. The Standard, to put it in common diplomacy, agreed not to solicit their business. In consequence of that they have practically but one bank in South Africa, the Standard Bank, which is under London control. I came back on the steamer with the manager of the Standard Bank. I got a good many points from him, and I asked him frankly and candidly if branch banking was good for a country, and he said he did not believe it was good. By the results in South Africa you can see what it absolutely grows to. My opinion is that it has retarded the development of South Africa more than any other cause, and I presented this to the Rotary Club and it was published in the Associated Press of South Africa: I am only giving you the most

striking features of it. Do not visualize South Africa as a Godforsaken country, because they are up to date, progressive business men, and there are good towns.

Now, as one interested in District business, I have come in contact with the effects of branch banking in Washington. A branch bank invaded the territory in which my small bank is located at a time when we had only $750,000 deposits, and after a year that branch bank was enabled to gather about $250,000 in deposits; and every banker will tell you that it is essential for a community or independent bank to have $1,000,000 in order to succeed and loan money at a fair rate of interest.

I have been interested in 150 banks in my time, and I know something about it. Or I believe I do.

I never would have opened a bank in the northwest section of the city of Washington, nor would any wise man open one in Chevy Chase or in other communities, if the branch banking plan is allowed to exist.

And another thing I want to put into this record that the State institutions, the trust companies of the city of Washington acted fair with the people and put in no competitive bank that I know of, and it remained for a former comptroller to use a bill initiated for another purpose to authorize branch banking by national banks and for national banks to use it.

It is stated and understood that these banks tried to buy a bank on the west side and also tried to buy one on the east side, and intended to encircle the city of Washington with branch banks; and that may be the effect of branch banking in a city like Washington. Mr. STRONG. How many branch banks have we in Washington? Mr. SAVAGE. I do not know; the comptroller can tell you, Mr. STRONG. Or this one you referred to.

Mr. SAVAGE. They have got four. I want to draw your attention to this situation: It is given as an excuse that automobile congestion in the downtown section made it necessary to have branches outside of the congested area, though one bank went down into the very center of automobile congestion and opened a branch.

Mr. STRONG. That is purely bunk, because all these bankers do get out into the country to play golf.

Mr. SAVAGE. A large national bank opened a branch in the community where I live under the Millspaugh Act. A permit was given the same day the application was made, without a hearing or publicity, and according to the substance of a letter of the comptroller, without a knowledge of the banking resources of the section. In a letter to me the comptroller said the chief reason for the branch was that the parent bank had a number of large customers who would not go to and from the parent bank twice a day to do business; and I challenged them to find one. I am telling you of the disinterested character of some of the branch bankers and what I believe was trying to be perpetrated by national banks. In my opinion it was an attempt to encircle the city of Washington with branch banks to gather up the savings of the people, that could be sent to New York and other places instead of having them for local use, for home building and other purposes.

I ask your consideration and I ask that a disinterested inquiry be made into the acts of these national banks in the city of Washington