Branch Bank Controversy

November 23, 1923

Report Outline
Legal Situation
Foreign Situation

“The unlimited extension of the practice of branch banking will give to banks operating under liberal State charters such competitive advantages over the unit banks which are members of the Federal Reserve System, as to impair materially their usefulness, if it, in fact, does not ultimately result in their extinction”.

Majority Report of the Federal Reserve Board

“Economic developments, such as the growth of branch banking, do not take place without reason and should not be arbitrarily repressed by any governmental body. Branch banking has been recognized by the foremost authorities on banking in the United States as a natural method of extending banking facilities to small communities, as presenting opportunities for diffusing business risks over larger areas than at present with a gain analagous to that which such diffusion brings to insurance, and as having the advantage of ability to make loans from a common fund of capital and deposits in accordance with the unequal and varying demands of different industries and sections served”.

Minority Report of the Federal Reserve Board

The branch bank question will be one of the important matters brought before Congress at the forthcoming session. An extremely confused situation exists, due primarily to different varieties of State legislation. There is a strong demand, therefore, for clarifying federal legislation bearing on the subject as related to the Federal Reserve System and the national banks. Herewith is an outline of the elements the branch bank controversy embraces.

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