Senator HAWKES. Of deposits? Mr. SMITH. That is right. Senator HAWKES. Thank you very much, Mr. Smith. Mr. Gary Denise, of Freehold, N. J. Mr. DENISE. Well, I think there is no need of our going through all of this. We agree with what has been said. Senator HAWKES. Well, that will save time. We have other people here whom we would like to hear. Do you wish to say something, Mr. Kelly? · STATEMENT OF CARLOS D. KELLY, VICE PRESIDENT, FIDELITY UNION TRUST CO., NEWARK, N. J. Mr. KELLY. My name is Carlos D. Kelly. I am vice president of the Fidelity Union Trust Co., Newark, N. J. The Collector of Internal Revenue does not allow any nonpar bank to discount its checks. They are stamped on the front, "This check must be paid at par." I think that shows the attitude of one governmental agency toward this practice. I concur in everything said by the opponents of the bill. Thank you very much. Senator HAWKES. Thank you, Mr. Kelly. Mr. Coate? STATEMENT OF A. H. COATE, SECRETARY, NEW JERSEY BANKERS ASSOCIATION, MOORESTOWN, N. J. Mr. COATE. My name is A. H. Coate. I am secretary of the New Jersey Bankers Association. I would like to present this resolution, passed unanimously at our convention in May. It is very short. May I read it? Senator HAWKES. Would you like to have that incorporated in the record? Mr. COATE. I might save time by not reading it, but it is very short. Senator HAWKES. You may read it. Mr. COATE. The resolution is as follows [reading]: RESOLUTION Whereas it is our belief that the statutory prohibition against the payment of interest by banks on demand deposits is a wise and constructive provision, and Whereas the absorption of exchange by banks has been construed as a payment of interest on demand deposits; and Whereas Senate bill 1642 known as the Brown-Maybank bill, proposes to repeal in effect the prohibition against payment of interest by authorizing absorption of exchange: Therefore be it Resolved, That this association urge the defeat of S. 1642 on the grounds that its provisions are wholly unwise and inimical to the best interest of both banking and the public. Resolved further, That copy of this resolution be sent to the New Jersey Members of the United States Senate and the House of Representatives, with the urgent request that they take prompt steps to combat passage of the bill. I have a certified copy I am offering for the record. This resolution was passed unanimously at our last convention May 16. Senator HAWKES. Passed unanimously? Mr. COATE. Yes, sir. Senator HAWKES. Are there any further comments you wish to make, Mr. Coate? Mr. COATE. No, I think not. Senator HAWKES. Senator Buck, do you have any questions? Senator HAWKES. Mr. Wilson, have you a statement you wish to make to the committee? STATEMENT OF JAMES C. WILSON, PRESIDENT, FIRST BANK & TRUST CO., PERTH AMBOY, N. J.; PRESIDENT, MIDDLESEX, SOMERSET AND UNION COUNTY BANKERS ASSOCIATION, NEW JERSEY Mr. WILSON. Mr. Chairman and members of the committee, my name is James C. Wilson. I am president of the First Bank & Trust Co., Perth Amboy, N. J. I am also president of the Middlesex, Somerset, and Union County Bankers Association, which is an association of banks of those three counties. We have close to 100 banks in those 3 counties, most of which are small. By small, I mean banks having $2,000,000 or under in deposits. I am very much opposed to this bill, as are all of the banks in New Jersey, none of which charge exchange in the remittance of checks drawn on them. Previous to coming to New Jersey, I was in the banking business in my home State of Arkansas. Immediately before leaving there I was president of the Exchange Bank & Trust Co., a little bank in Eldorado, Ark., an oil community, which had deposits of a little less than $2,000,000. We were not members of the Federal Reserve System. We did not charge exchange, although we could have done so. I think that it is a very sad commentary that the banks that charge exchange should be in favor of the Brown-Maybank bill. If they want to charge exchange, they can continue to charge exchange even though this bill is defeated. It seems to me, though, that these banks are getting earnings sort of off of a black market. They could still charge exchange, but they want to get it under the cloak of having a larger bank absorb exchange charges. I heartily concur in everything that has been said here today by representatives of the New York Bankers Association and the New Jersey Bankers Association. I do not know that I have added anything to the discussion, but I thank you very much, Senator. Senator HAWKES. Thank you very much, Mr. Wilson. Do you have any questions, Senator Buck? Senator BUCK. No, Senator. Senator HAWKES. Anybody else from New Jersey? church, "Speak now or forever after hold your peace." Weiler, I understand you want to catch a train, so we Will you please have a seat by the committee reporter? As they say in All right, Mr. will hear you. STATEMENT OF J. R. WEILER, CASHIER, HARLAN NATIONAL BANK, HARLAN, KY. Mr. WEILER. I am J. R. Weiler, cashier of the Harlan National Bank, at Harlan, Ky. We have about a $6,000,000 bank. It has only been that large for a short time. I started in the banking business at the age of 17, and I had high ideals about banking, one of which was that every man, woman, and child who deposited money in my bank should have it kept so that they could get it back when they wanted it. I have been in the banking business over 40 years. I worked in four different banks. They were all small par banks. Notwithstanding the calamity that hit in the early thirties, all four of those banks functioned as going concerns on their own motive power. I mention that to show that the banks I have had business dealings with, by official influence, are sound banks. And in the interest of sound banking, not particularly my bank, but the banking business, I am here to protest against the passage of this Maybank bill. And as one of the vital factors that occurred in the past, in the twenties, the latter part of the twenties, the bankers in Kentucky got so much cut-throat competition for bank deposits that they began paying unreasonable and hazardous rates of interest for money. And the city banks were paying it to the country banks, and it became so hazardous that they called a meeting of the Kentucky Bankers Association for the sole purpose of trying to adjust that interest rate, to cut it down in the interest of sound banking. And it was the first and only time in the history of the Kentucky Bankers Association that they have ever been called in special session. And they argued and quarreled among each other, and they never got anywhere and never did anything with it, and nothing was ever done about it until after the calamity that hit us in the early thirties, when the Federal Government fixed regulations as to interest rates on deposits. And then we got our banking system in Kentucky into a good sound system and practically all of the banks in Kentucky are on the par list; in fact, I am told there are only two towns in Kentucky where the banks are not on the par remittance list. And I think that is vital to this. I have listened to some of the testimony here for the past 3 days, and it has been testified here that a branch banking system in North Carolina has taken the checks on its own system on a bank in a town 7 miles away and sent those checks up to another town into a big bank for clearance, 65 miles away, so that the bank over here, its own membership, could collect the exchange from that big bank over there. Now, gentlemen, in my opinion, that is shenanigan of the worst type, and it shows you what these banks will resort to if they are not held in restriction by some power from the Federal Reserve System, or the Comptroller's Office, or by State regulation. And the fact that each State in the Union has set up its own regulatory system for the State banks, indicates that the bankers are not capable of keeping a sound banking structure for the whole community, or the whole State, or the whole Nation, unless they are under restriction. And this restriction as to the absorption of exchange can be abused and will be abused, in my opinion, unless we defeat this bill. And it is in that. interest that I appear and make this statement. Senator HAWKES. Mr. Weiler, may I ask you just two questions? Senator HAWKES. What is the size of your bank? Senator HAWKES. Any questions, Senator Buck? Mr. WEILER. May I say in regard to that, that during my 40 years of banking, I have had run-ins with the Comptroller's Office, and sometimes with the Federal Reserve. Sometimes I could convince them I was right. If I did they acquiesced. If I did not convince them I was right, I went ahead and did what they told me, and I have never in any particular instance ever found where it did not ultimately prove that when I did what they told me it was for the best interests of my bank and the best interests of the banking business. My relations with the Comptroller's Office and the Federal Reserve have been most satisfactory and pleasant, and I think it is to the interest of the banking system that that be maintained. Senator HAWKES. Thank you very much, Mr. Weiler. Now is Mr. Carson here? Mr. CARSON. Yes, sir. Senator HAWKES. Would you like to make a statement? STATEMENT OF C. W. CARSON, PRESIDENT, FIRST NATIONAL BANK, ALBUQUERQUE, N. MEX., AND NEW MEXICO BANKERS ASSOCIA TION Mr. CARSON. Mr. Chairman, and members of the committee, my name is C. W. Carson. I am president of the First National Bank of Albuquerque, N. Mex., and I am representing the New Mexico Bankers Association. Until April 29 of this year, I was president of the New Mexico Bankers Association. At our convention held at Albuquerque on April 28 and 29, a resolution was passed without a dissenting vote opposing the passage of the Maybank bill. There are 41 banks in New Mexico, 22 of which are national, and 19 of which are State banks, and all of the 19 State banks but 5 are members of the Federal Reserve System. All of the banks of New Mexico are on the par list, and clear checks at par. Senator HAWKES. May I interrupt you there for just a moment? Mr. CARSON. Yes, sir. Senator HAWKES. Are some of the banks in New Mexico very small banks? Mr. CARSON. Some of them-quite a number-are less than a million dollars, and the majority of them, I would say, are less than $3,000,000. Senator HAWKES. Thank you very much. Mr. CARSON. The bankers of New Mexico all feel that the par clearance system is vital to the American banking system, and they have asked me to present the objection of the Association, which, as I say, was passed without a dissenting vote, at this hearing, if an opportunity were given. And if it is appropriate, I will be glad to prepare a written statement and have it incorporated in the record. Senator HAWKES. If you would like to, you may do that. Mr. CARSON. I will be glad to answer any questions anyone might care to ask me. Senator HAWKES. Senator Buck? Senator BUCK. Do you know whether this resolution that you speak of was forwarded to your congressional representative? Mr. CARSON. Yes, it was. Yes, I have a copy of it here in my brief case. Senator HAWKES. Would you like to file a copy of the resolution for the record? Mr. CARSON. Yes. I would rather do that this afternoon, because the only copy I have here is in the written proceedings of the New Mexico Bankers Association. Senator HAWKES. Well, you may do it this afternoon, if you will just leave it with the clerk, here. Mr. CARSON. All right, sir. Senator HAWKES. Is that all? Senator HAWKES. We will hear from Mr. L. K. Hills, of the Bank of Baker, Baker, Mont. STATEMENT OF L. K. HILLS, VICE PRESIDENT, THE BANK OF BAKER, BAKER, MONT., AND MONTANA BANKERS ASSOCIATION Mr. HILLS. Mr. Chairman, and members of the committee, I am L. K. Hills. I am vice president of the Bank of Baker, Baker, Mont. I have come down here at the request of the officers of the Montana Bankers Association to urge their protest against the passage of this Senate bill No. 1642. The attitude of the Montana Bankers Association is in complete accord with the attitude of my bank. I have been the managing officer of that bank since its organization 20 years ago. It operates in a small city of a bit less than 1,500 population. Since the organization of the bank it has remitted at par on all checks paid against customers' balances when presented through clearing channels. At no time could we justify honoring a depositor's order for a less amount than he had directed be paid by withholding the exchange deduction therefrom. We have relied upon the policy of charging our depositors such service charges as we regarded necessary and reasonable with the depositor's full knowledge, rather than require him to pay his obligations with a check which exacted a discount from the person owed or from some collecting agent through whose hands such check passed. A mass of data has already been presented to your committee explaining the process of this check discounting or clipping. That is important for a comprehensive understanding of the nature of this practice of a considerable number of banks, and the ground has been well covered, beyond my ability to add thereto. Out of the maze of data there appears the pertinent fact that this bill does not change the lawful power of any nonmember bank to charge exchange. It would simply legalize and permit member banks to absorb or pay that exchange to the end that neither the payee nor the drawer of the check pays such exchange. Senator BUCK. Do you have any nonpar banks in your State? Senator BUCK. The association has gone on record opposing the Maybank bill? Mr. HILLS. Yes. It is significant that the proponents of this bill are representative of small and medium-size banks who have followed the charging practice. Nothing in regulation Q prohibits their charging exchange and they can now do so. But this regulation appears to |