Show I 1 THE TIlE DAILY NEW YORK J Fin Financial a n cia 1 Whirligig h i r 1 i gig I Written for tor The Telegram m J By Dy JAMES McMULLIN NEW YORK YORK New New York learns that friction between federal authorities and state banks is getting hotter Many of the little fellows have gone mulish on the question of selling preferred stock to the R F C. C Inside estimates indicate that 60 CO per percent cent of the small banks which need extra capital to meet deposit insurance standards stand stand- ards and ards-and and which agreed to raise it via the R F C to participate in deposit insurance simply insurance simply decline de de- de cline dine to do anything about it Neither plans nor threats have had any ef effect effect ef- ef feet and F D DIe I C officials who officials who had planned to heave the offenders out on their cars ears cars are holding holding holding hold hold- ing fire firc because they dont don't want to compound the the confusion in the business outlook created by drouth and strikes But they're plenty warm around the collar the collar the more so because a lot of state banks haven't hesitated to use this extensive exten sive political drag to bolster their refusal to carry out their end of the bargain Nationalization Plan Flan Original plans for complete nationalization of the banking structure called for spreading the process over several years and the use of rewards rather than penalties to induce state banks bans to join the federal reserve system But its it's all different since so many small in institutions institutions institutions in- in have gone one Gandhi on the federal gov gov- Insiders say that interested officials arc are now mapping a program for presentation to the next session of congress which will greatly speed up unification The program as tentatively outlined still stresses rewards State banks which elect to join the federal reserve will rate a privileged status over those which do not But in case this honey isn't a sufficient lure therell there'll be a nifty club to wallop the holdouts It may take the form of a tax on state bank operations which would virtually drive them out of business Experts believe this can be done Theres There's legal precedent in the law which killed off state bank currency issues by imposing a prohibitive levy on the banknotes of state institutions Big Stick Shown Some months ago the president intimated it would be swell if corporations would arrange to p pay y off their debts like everybody else Now the interstate commerce commission has taken the first i st practical step toward putting this ideal into effect In approving the recent Pennsylvania and Baltimore Ohio bond issues it quietly insisted that the roads set up sinking funds to retire them at maturity Wall Vall str street et is positively agog The idea ide that railroads railroads railroads-or should utilities should should ever retire their funded debt is so novel as to be almost revo revo- The roads and their bankers have gone on the theory that bonds were a permanent permanent permanent perma perma- nent obligation to to be renewed at each maturity ma ma- You might think it would have been worth the roads' roads while to retire their bonds so the earnings diverted to paying interest could be used for divid dividends dividends but but but they couldn't see it They always figured any savings they effected that way would be promptly taken away from them by the I. I C. C C. C in the form of lower rates so so what was the use r Utilities followed the same saE line of re reasoning so as applied to state commissions com com- missions t I Insiders believe the president had this hs h s 's very thought in mind So if the L C. C C C. action be becomes becomes becomes be- be comes precedent travel travelers rs and shippers and electric consumers sho should ld eventually get a break 1 Crime Doesn't Pay One of Wall Vall streets street's attempts to gle new deal restrictions has backfired Several weeks ago a group of investment bankers engineered an oral sale of an issue of Manhattan Brooklyn Transit bonds The entire deal was arranged by word of mouth and all the bonds were sold old in in New York state There was no use of the mails no advertising and no printed publicity The object was to duck registration registration registration regis regis- under the securities act and was okayed by some of Wall VaU streets street's ranking legal lights But the devious marketing method proved unexpectedly expensive For instance checks mailed in by subscribers to the issue had to be besent besent besent sent back and recollected by messenger Some insiders say it was costlier to dodge than it would have been to comply Then the stock exchange exchange on on the alert to avoid friction with the federal trade commission commis commis- sion was sion-was was notably unenthusiastic about listing the bonds after they had been floated It finally did so with its fingers crossed And now that they are listed nobody wants to trade in them for fear of a possible kickback from Washing Washing- ton The B. B M. M T. T itself strenuously denies it had anything to do with the stunt and pins the onus on the bankers and their lawyers So now the issue may have to be registered with the F. F T. T C. C after all alJ Otherwise it has no market Wall VaU street will think twice before it tries to be so smart another time it Copyright UHf McClure Newspaper |