Show CHANGES URGED IN BANKING ACT Business Men and Bankers Agree in Objecting to Political Political Political cal Control Over Banks AMENDMENTS SUGGESTED Political Domination of Federal Reserve Re Re- serve erve Board Boud Declared to Be Undesirable for Depo Depositors as u Well as is Their Banks Bank W WASHINGTON D. D C. C C. C Business C.-Business Business Businessmen men and bankers bankes alike aUke who have appeared appeared ap before committees of Congress Congress Congress Con Con- gress to present views regarding tho the Banking Act of 1935 have found common common common com com- mon cause for criticism in those provIsions provisions provisions pro pro- visions which they agree would create create cre ere ate the means moans for undesirable political political cal control over the Federal Reserve System and thereby over Individual banks throughout the United States They have made the point that this undesirable condition would affect depositors in banks blinks even more than the banks themselves This view has hils been stressed In criticisms by the Chamber of Commerce Com Commerce merce of the United States and the question of partisan control over banking was the central theme of a statement presented by R. R S S. S Hecht President of the American Bankers Association who appeared before the Senate Sub Committee Sub on Banking BankIng Bank Bank- Ing and Currency hearings here Mr Hecht declared that his organization Is actuated by a desire to be helpful to Congress In enacting effective and workable banking le legislation In Inthe Inthe n the Interest of all aU our people He said In part If Ie it Is finally decided that U k is necessary to carry this legislation through at this session we are strongly of the opinion that special care should be taken to keep our credit control and banking mechanism mechanism ism bm free tree from any sort of political considerations In making this statement I do not wish to appear to question the propriety pro of at the Governments Government's exerting a certain amount of control over banking operations so far tar as they affect the nations nation's currency and general general gen gen- eral monetary policy Nor do we object object ob ob- sect to broad powers of supervision over the operation of ot our banking institutions because of the semi pub semipublic lic responsibilities they carry But when it comes to such matters as the granting of ot credit and the makIng making making mak mak- ing of Investments by our banks bank these are questions of business polIcies policies poli poll cies dies that surely should not be under sole control of a board so 80 constituted constituted as to be dependent upon partisan parti part san Ban or political considerations under any administration The Tbt Basis asis of Sound Credit The real conditions that create the necessity for the expansion or contraction of credit arise from the needs of at agriculture industry and trade themselves wholly Independent ent eat of the administrative policies atthe of at the tho party varty which happens to be be In power We feel teel that the financial requirements requirements re ro re- re of ot the nations nation's business constitute a continuing economic process that is not related to political political cal changes The fundamental principles prin of ot sound Bound credit do not vary with variations in public thought All experience nce teaches that the quality ity fly of credit is sound only so long as asIt asIt asit It 10 is based baaed purely on the requirements require ments of at sound business It Is not sound lound when any other considerations considerations considerations or motives enter into its com com- position The Banking Act would centralize central central- ize in the Federal Reserve Board at Washington means aimed to control the supply of at money In the co country which term includes the sum total o ot of currency in circulation and demand demand de de- de mand deposits in the banks which become current through checks The powers which it t Is la proposed to give the Board are Intended to enable it to Influence tho quantity of ot this deposit deposit deposit de de- de- de posit money through open market operations the discount rate and reserve requirements The Need Nee for Independence That Is the reason renson why we areo areso are so 10 o strongly In favor of at making the the- Federal Reserve Board a body of such uch independence nc and prestige that It would be definitely removed from all ll political thought influence and dictation Its members should bo be free tree to study and to act in accordance accord ance ante with the needs and conditions of agriculture industry and trade The policies of ot the board should have no reference to the politics or orthe orthe orthe the changes in politics of at the national nation al administration In our studies of or the bank bill we have been strongly impressed with the fact tact that it would set up a situation situation situa situ tion Uon under which the Federal Reserve Reserve Re Re- serve lene Board and its Ils policies might be subject to control from the political pout poUlI- cal administration lon of at the tho country In saying this I do not charge that it I Is f. the intention of ot the present administration ad ad- ministration to bring about any undue undue undue un un- due control over the nations nation's bank bank- lag Ine mechanism Tho The point is that if If the tha bill bUl passed as now proposed op opportunity op op-i for control would be there I Ifor for the use of ot the present or what what- over ever future administration might be in power Our criticisms of the bill are not d at the motives of the present administration but hut they are wholly Impersonal and nonpolitical po non and are arc aimed entirely at tho basic principles Involved Desirable Changes es Proposed Careful study h by his organization Mr Hecht said bald had resulted In a anum num number er of suggestions for constructive constructive tive revisions in the bill which he submitted to Congress On the other hand he declared that many of the changes proposed by bj the act in lii exIsting existing existing ex ex- laws are arc of a constructive e nature and should have ha e the support of at bankers if tr the method of appoIntment appointment appointment appoint appoInt- ment and tenure of office of the members of or the Federal Reserve Resen Board in whose hands It is planned to concentrate greater power than ever eyer before could be so altered as asto asto asto I to insure as far nr a as possible the absolute absolute ab air ab- ab solute independence of at the Board Doard from partisan or political 1 lions He ad added lied Supreme Court of Banking Since the passage of the Federal Reserve Act over 20 years ago opinion opinion ion in Congress and among bankers has been striving towards the Ideal deal of making the Federal Reserve Board a body of such Independence and prestige that thai It might be described described de scribed as the tho Supreme Court of at Finance and Banking We Wo believe u u F 4 a H A R R. R S. S HECHT there Is greater need now than ever before for realizing this ideal Mr Hecht emphasized that It Is the genuine desire of tho the banking fraternity to be helpful and constructive constructive con con- in making suggestions in connection with this pending legis lation lallon The changes wo we aro are urging are we believe essential to the tho continued continued con con- con independence of at the Federal Reserve System We have made it clear that we wedo wedo wedo do not object to a measure of public control in the national Interest for tor proper coordination of our manifold credit operations he said and we wedo wedo wedo do not believe the sponsors of at the legislation desire any political domination domination domi nation over these activities through our Federal Reserve Resene System Under such circumstances we feel that our recommendations should be favorably acted upon because they would enable the reconstructed Federal Fed eral oral Reserve Board to function freely freely free free- ly as ns a nonpolitical bod body actuated only by the dictates of sound financial finan cial and economic policies conceived in the interest of ot all of our people The adoption of our suggestions would both place operation of the Federal Reserve System wholly y and I distinctly apart from the Lions and vicissitudes of political conditions and free from undue Influence In fluence by banking opinion anI only Such a solution would thus have a stabilizing n and d confidence Inspiring effect on the entire business situation situa situa- tion |