The Banking Situation: American Post-War Problems and Developments by H. Parker and Chapman John M. Willis

PAR T I 
A CRISIS IN AMERICAN BANKIN G 
BY 
H. PARKER WILLIS

CHAPTE R I 
T H E COLLAPS E O F AMERICA N BANKIN G 
INTRODUCTION 
For several years past it has been evident, even to casual stu-

dents of banking and of the general industrial situation in the 
United States, that a fundamental reform or reorganization was 
inevitably necessary. The inadequacy of the American banking 
mechanism to provide for the requirements of business had long 
been evident. It had been necessary to permit the existence of 
extensive innovations in banking practice, not sanctioned by 
the experience of older nations. These are exemplified in the 
custom of dividing the accommodation of the larger business 
enterprises among a considerable number of banking institu-

tions, thereby preventing the latter from gaining the complete 
knowledge of individual and corporate affairs, and of the basis 
for credit that would otherwise have been deemed necessary. 
T he constant recurrence of bank failures for a long time has 
been another outstanding phase of the situation. This failure 
habit has been minimized on the ground that it represented 
sporadic conditions or local bad management. It was in the 
latter part of the decade 1920-1930, for the first time recognized 
as the outgrowth of fundamentally wrong organization in Amer-

ican banking, and hence subject to correction only through far-

reaching and thorough reform. 
T he weakness and apparent unsuccess of the Federal Reserve 
system in its effort to control dangerous tendencies, denied or 
minimized for a decade after the close of the World War, was 
at length brought into glaring prominence by the collapse of 
1929 and the depression which followed that event. These con-

ditions were only slowly appreciated as being parts of a larger 
whole, and the legislation of Congress subsequent to the adop-

tion of the Federal Reserve Act had been correctly assessed as 
merely a series of incidental and patchwork changes in enact-

The Banking Situation: American Post-War Problems and Developments by H. Parker and Chapman John M. Willis