Knowing that your committee is likely to be pressed for time, I am not asking an opportunity to personally appear, but would be very much obliged if you would have this letter placed in the official records. Yours very sincerely, SIDNEY F. TALIAFERRO, President. THE UNION NATIONAL BANK OF PITTSBURGH, Hon. ROBERT F. WAGNER, United States Senate Building, Washington, D. C. DEAR SENATOR WAGNER: I am sincerely sorry that due to wretched weather conditions here, I was unable to appear before the Banking and Currency Committee yesterday in connection with its hearings on the Maybank bill. I appreciate your willingness to accept this communication as an expression of my thoughts on the subject. The Maybank bill proposes an amendment to the Federal Reserve Act and makes provision that the absorption of exchange and collection charges shall not be deemed a payment of interest on deposits. The practice of some 2,500 nonmember banks in deducting exchange and collection charges upon checks drawn on their own institutions and then permitting member banks to absorb these charges for the endorsing customer is archaic and not at all necessary. If the practice is permitted to grow, which can easily be visualized under the terms of this amendment, then no one is going to know what the eventual value of checks accepted in ordinary trade circles may be worth. I am not persuaded that the twenty-five-hundred-odd banks which are being distinctly favored under this legislation cannot eke out an existence if more than 11,500 banks are able to live without resorting to this practice. A great deal of stress has been paid upon the small fee involved when checks are "shaved." The proponent of the bill has written at some length upon the fact that only 50 cents was charged in the collection of a $50 check. Let us make a comparison in the collection of a $1,000 check. The fee in this instance is also one-tenth of 1 percent and the deduction $1. One can easily figure that the fee of $1 would represent a return to the bank of interest for 6 days at 6 percent if the money were loaned and the same reduced ratio would apply in the case of the $50 check. I am quite sure that you and your colleagues in Congress would immediately undertake remedial legislation to correct such a practice if the borrowing public were charged such an amount. If a bank depends upon the collection of such charges to make a living, it seems to me that the charge should be leveled upon the maker rather than the endorser who is a holder for value. You are probably aware that in Pennsylvania we have a few more than 1,000 banks all of which pay checks drawn upon them at par. This is also true in 19 other States, and I am quite sure that in all of this group of banks there are 2,500 or more which compare in size with the twenty-five-hundred-odd which are being given special consideration under the terms of this amendment. I think you will agree with me that the Federal Reserve System has proven a mighty fortress both as applied to our banking system, as well as to the fiscal policies of the United States Government. It was the sincere intent of the creators of this System, particularly such esteemed gentlemen as President Woodrow Wilson and the Honorable Carter Glass, that all checks drawn on banks located in any of our 48 States should pass from holder to holder with the same recognized value as that applied to our own currency. I admit, however, that under section 13 of the Federal Reserve Act a loophole was created which permitted of the absorption of exchange charges by member banks of the System but prohibited such charges being made against the Federal Reserve banks themselves. I believe it is high time that legislation be passed definitely prohibiting the discounting of checks by all banks. I agree with many other banks and commercial concerns that the passage of this bill may well bring about a serious deterioration of the Federal Reserve System. Many banks may quickly recognize the easy and substantial income which may be realized through the practice of discounting checks. It is not without the bounds of possibility that a substantial number of the 6,738 national banks may convert to State-chartered institutions and that the same ratio of 4,763 members by choice may wihdraw from the System to take advantage of easy earnings. There has already been submitted, as evidenced to you, the capital which some banks have made in advertising that they would be willing to absorb collection charges in order to attract new accounts to their institutions. I do not intend to further enlarge upon this subject as you already have sufficient evidence on file. My thoughts may be well summarized by stating that in my opinion, a check drawn by a customer on his bank should be paid at 100 percent of its stated value just the same as the holder of a United States Government obligation should expect a similar payment. It is my hope that you and your associates will consider my remonstrances along with many others from reputable sources already on file and that you will use your influence to see that the Maybank bill is defeated. Respectfully, Hon. ROBERT F. WAGNER, LAURENCE S. BELL, Vice President. ASSOCIATION OF RESERVE CITY BANKERS, Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. MY DEAR SENATOR WAGNER: On behalf of the Association of Reserve City Bankers, may I respectfully request that the contents of this memorandum be communicated to the members of your committee as well as inserted in the hearings before your committee on the so-called Maybank-Brown bill. At the annual meeting of the association, held in Chicago, April 13-14, 1944, its committee on Federal legislation made a report on the broader aspects of the Brown bill as passed by the House of Representatives. Following this report, the members in attendance, 300 approximately, unanimously adopted the following resolution: "The members of the association are opposed in principle to any legislation which, in substance, infringes (1) on the principle and practice of par collection or (2) on the existing prohibition against the direct or indirect payment of interest on demand deposits by any Reserve member or insured bank." Inasmuch as the provision of the Maybank-Brown bill, in our opinion, would violate the principles of the above-stated resolution, if adopted and enacted into law, we desire to hereby record our opposition to the passage of this legislation. As you will recall, the Association of Reserve City Bankers is composed of individuals as distinguished from banks. Our membership of 450 is drawn from the senior, policy-making officers of 198 banks located in Reserve cities. It has been our practice to defer to the American Bankers Association in the presentation before congressional committees of matters of general scope such as the one now before your committee. We therefore desire to file this memorandum, outlining the position of our association, with respect to this proposed legislation. Yours very respectfully, ROBERT V. FLEMING, President. NATIONAL RETAIL CREDIT ASSOCIATION, Hon. ROBERT F. WAGNER, Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. DEAR SENATOR WAGNER: The National Retail Credit Association respectfully submits to the Senate Banking and Currency Committee this letter in which its opposition to the Maybank bill (S. 1642) is expressed and the reasons for its position. Our association numbers approximately 16,000 members, located from coast to coast. Our members represent all lines of retail credit granting, including retail stores, utilities, hospitals, banks, petroleum companies, etc. As it pertains to retailing, the effect of giving legal sanction to the absorption of exchange would be far-reaching. Passage of the bill would encourage the practice of charging exchange on checks to such an extent that checks given to wholesalers in payment of merchandise would have to be larger, in order to pay for the goods and also pay for the exchange charge which would be exacted by the bank on which drawn if it were a nonpar bank. Checks accepted by retail ers in payment of goods sold would have to be for a greater amount than the selling price of the goods also, since they, too, would have to protect themselves against the deduction which would be made from the face amount of the check and pocketed by the bank on which drawn as its exchange charge, assuming again that it would be a nonpar bank. The maze of accounting which would accompany this method of doing business would add immensely to overhead expenses, and would serve no purpose except to enrich nonpar banks at others' expense. There is no objection to legitimate service charges collected by the banks from the person or business who draws the check instead of from one, who in good faith accepts a check in payment of an obligation and who has every right to expect full payment therefor. Bank checks constitute the principal currency of the Nation. Amounts transferred by checks in settlement of obligations bear a ratio to the amount of actual currency used of more than 10 to 1. If currency, which is used in only onetenth the amount of checks is to be honored at its face amount, why pave the way for devaluing bank checks when they are accepted in lieu of currency in nine-tenths of the total amount of transactions? This association favors continuance of the system whereunder all but a scant 2,500 of the more than 14,000 banks in the Nation operate on a nonpar basis. - It is opposed to the Maybank bill because it is convinced that passage would cause a departure from par banking to nonpar banking with all of its attendant evils. It is opposed to the Maybank bill because it would hamper the free use of checks in settling obligations and would greatly increase the cost of doing business. It opposes the Maybank bill because it tends to nullify that portion of section 19 of the Federal Reserve Act which prohibits the payment of interest on demand deposits, which provision has served a useful purpose in stopping the shifts of funds from the areas in which the funds are owned. We are opposed to the Maybank bill because we feel that the person who received the privilege of tendering a check instead of cash should pay for this privilege, rather than the one who receives a check as an accommodation. We oppose the Maybank bill because the resulting spread in nonpar banking practices will cause delay in the collection of checks due to circuitous routing by banks endeavoring to escape the exchange charge which will be imposed at the end of the line by the nonpar bank on which drawn. The National Retail Credit Association strongly favors payment of checks at par by the bank on which drawn and hence is even more strongly opposed to any measure which would mitigate against par payment of checks. For this and other reasons we are unalterably opposed to the Maybank bill (S. 1642). Respectfully yours, Hon. CARTER GLASS, United States Senate: L. S. CROWDER, General Manager-Treasurer. CHARLOTTESVILLE, VA., December 11, 1944. We desire to express the very emphatic opposition of our merchants to the Maybank bill (S. 1642) as being exceedingly detrimental to mercantile interests and to the interests of the public at large. We urge therefore that you do all in your power to defeat this bill. Very respectfully. RETAIL MERCHANTS ASSOCIATION OF CHARLOTTESVILLE, QUANTICO, VA., December 6, 1944. Hon. CARTER GLASS, United States Senate: We oppose Brown-Maybank bill and urge its defeat. THE FIRST NATIONAL BANK OF QUANTICO, VA. Hon. CARTER GLASS, United States Senate: CLARKSVILLE, VA., December 6, 1914. We are still opposed to passage of the Brown-Maybank bill for the reason that, in our opinion, the proposed legislation is not in the best interest of sound banking. Your influence in defeating the measure would be greatly appreciated. CITIZENS BANK & TRUST Co., WILLIAM A. TROTTER, Jr., President. Hon. CARTER GLASS, United States Senate: RICHMOND, Va., December 6, 1944. I hope you I believe, if poll is Understand hearings on Brown-Maybank bill began December 7. STATE PLANTERS BANK & TRUST Co. RICHMOND, VA., December 6, 1944. Hon. CARTER GLASS, United States Senate: In support of a sound currency and sound banking I trust you will do all you can to oppose the passage of the Brown-Maybank bill having to do with par collection of the checks of the banks of the United States. THOMAS C. BOUSHALL, President the Morris Plan Bank of Virginia. RICHMOND, VA., December 6, 1944. Hon. CARTER GLASS, United States Senate: It is with considerable concern that I am again calling to your attention Senate bill 1642 introduced by Senator Maybank. would be very harmful to sound banking, would lead to unsound competition In my opinion, passage of the bill among banks by allowing the absorption of exchange, and be a dangerous threat to the par clearance of checks. It would also counteract certain good that has been accomplished by the establishment of the Federal Reserve System. I am of the opinion that a vast majority of the banks in Virginia are likewise opposed to this bill. I therefore hope you will use your influence to defeat this bill. Respectfully, H. HITER HARRIS, President, First & Merchants National Bank, Richmond, Va. Hon. CARTER GLASS, PETERSBURG, VA., December 6, 1944. Senate Office Building, Washington, D. C.: We are opposed to Brown-Maybank bill. Hope you will use best efforts to defeat passage. CITIZENS NATIONAL BANK OF PETERSBURG. Senator CARTER GLASS, United States Senate: CHASE CITY, VA., December 6, 1944. We believe We strongly urge you to vote against the Brown-Maybank bill. that it would be most detrimental to the banking business if this bill passes. We are confident that if this bill is passed it will seriously weaken the banking structure of our Nation. 65785-45- -19 THE PEOPLES BANK & TRUST CO. Senator CARTER GLASS, United States Senate, Washington, D. C.: DANVILLE, VA., December 6, 1944. I understand that hearings on the Brown-Maybank bill will begin tomorrow. In my opinion the passage of this bill would be a definite step in the wrong direction and I sincerely hope that you will use your best efforts to defeat the bill. JAMES BUSTARD, President, The First National Bank of Danville. (The following material was inserted by Congressman Paul Brown, of Georgia :) Hon. ROBERT F. WAGNER, CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D. C., December 19, 1944. United States Senate, Washington, D. C. MY DEAR SENATOR WAGNER: In view of the fact that the hearings on S. 1642 were closed before I had an opportunity to appear personally before your committee and testify in support of the bill, I should appreciate it if you would include in the record of the hearings, as my statement in support of the proposed legislation, the remarks I made on the floor of the House on December 21, 1943 (Congressional Record, pp. 10959-10964) and my speech on the House bill (H. R. 3956) which appears in the Congressional Record for March 2, 1944 (pp. 2179-2183). I should like also to incorporate as part of my statement the remarks made by Congressman Doughton on March 2, 1944 (Congressional Record, pp. 2174–2175) and his testimony before the House Banking and Currency Committee on H. R. 3956 which appears at pages 160 to 165 of the committee's print of the hearings. Sincerely yours, PAUL BROWN. EXTRACT OF REMARKS OF REPRESENTATIVE BROWN ON FLOOR OF HOUSE FROM CONGRESSIONAL RECORD OF DECEMBER 21, 1943 PROPOSED ACTION OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM TO PROHIBIT BANKS FROM ABSORBING EXCHANGE AND COLLECTION CHARGES Mr. BROWN of Georgia. Mr. Speaker, I ask unanimous consent to address the House for 1 minute. The SPEAKER. Is there objection? There was no objection. Mr. BROWN of Georgia. Mr. Speaker, while Congress has been absorbed with important legislation arising out of the war and has been preparing for adjournment, a matter of vital importance to many sections of this country has arisen which I feel it my duty to call to the attention of my associates in Congress. This is the recent action of the Board of Governors of the Federal Reserve System in holding the widespread practice of banks in this country to absorb exchange and collection charges to be in violation of its regulations prohibiting the payment of interest on demand deposits. The Committee on Banking and Currency has been holding hearings on this question for the last several weeks but has been unable to recommend legislation owing to the absences due to the adjournment of Congress. The 1933 Congress passed a law prohibiting banks which are members of the Federal Reserve System from paying interest on any deposit which is payable on demand, and in 1935 this statute was amended to authorize the Board of Governors of the Federal Reserve System to define what should be deemed a payment of interest within the meaning of the statute. This legislation arose out of the disclosures in congressional hearings which indicated that corporations and banks were placing large sums of idle cash in the New York and other metropolitan money markets at interest instead of investing these funds in their home localities. Many experts believed that this practice gave rise to the inflationary trends of the late twenties, when interest rates on call money on the New York markets reached an all-time high. Many of the New York and large eastern city bankers favored the enactment of this law because they realized that its pro |