New Glass Bill

Members of the Senate Banking & Currency Committee last week clustered about 74-year-old Senator Carter Glass of Virginia, wrung his hand, gave him congratulatory back pats. They had just approved his latest version of a bill to reform the national banking system on a tremendous scale.

The crusty little Senator had been fighting a winter-long battle to frame legislation to curb speculation on Federal Reserve credit. The first draft of his bill sent bankers flocking to Washington to condemn it as deflationary. The second draft drew sharp criticism from the Federal Reserve Board itself. Senator Glass charged that there was a bankers' conspiracy afoot to kill his bill. The third draft which went favorably to the Senate floor last week constituted a series of changes and compromises to make the measure generally acceptable to the financial fraternity.

Gone were the stiff penalties which previous drafts imposed upon banks caught speculating with Reserve funds. Dropped also was the extra rate banks would have had to pay for 15-day money on their own notes. Instead the Federal Reserve was given broad discretionary power to deal with banks which made "undue use" of their credit for speculative purposes. Senator Glass was sure his bill would "correct evils as to stock speculation unless dreadfully maladministered."

The new bill, unlike the old, permits national banks with capital of $500,000 or more to establish branches, regardless of whether or not State laws give State banks the same privilege. Likewise national banks were permitted to put branches across State lines within a radius of 50 mi. in the same trade territory. This provision brought howls from Insurgents who view branch-banking with great alarm.

Still in the Glass bill was a special corporation to assist in liquidating closed banks but with capital reduced from $200,000,000 to $125,000,000. This sum would be raised in part by contributions of 1/4% of total deposits by member banks of the Federal Reserve.

Security affiliates would have to be divorced from parent banks within three years. A bank's direct dealing in securities would be sharply limited. The Federal Reserve Board in Washington would take over the present activities of the Federal Reserve Bank of New York in the field of foreign finance.

Happy to get his bill at last before the Senate where he could press for quick action, Senator Glass declared: "Not a fundamental provision of the original bill has been materially altered. .... The committee approved the bill heartily as perhaps the most important banking legislation since the adoption of the Federal Reserve Act."

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