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U. MOVES TO AID BANKS IN FLORIDA
Treasury Asks Removal Of Discrimination By Firms Against Checks.
LOCAL CONCERN AGREES
Federal Reserve Board Is Not Alarmed Over Situation In Georgia.
Washington Bureau of The Sun.] Washington, July 15.-With fifteen additional State banks in Georgia and four State banks in Florida listed as having closed their doors today, the Government made its first move to relieve the situation in the two Southern States where more than sixty banks have suspended in the last few days. Following a complaint of Representative Sears, of Florida, that certain Eastern business concerns had refused to accept checks drawn on Florida banks, J. W. McIntosh, Comproller of the Currency, obtained a promise today from the corporations that they would stop this practice. Mr. McIntosh explained that the Treasury had been aware for some time that the Mortgage and Acceptance Corporation of Baltimore had been sending out stickers to persons in Florida, whose notes they held. advising them they would not accept checks on Florida banks. These stickers gave as a reason banking developments in that State, and declared remittances should be made by postoffice or express money order. Company Withdraws Objections. The matter was taken up with the Baltimore concern and Mr. McIntosh stated he had been advised the practice would be discontinued. He said the company informed him they would send out notices withdrawing their objections to checks on Florida banks. It was explained at the Treasury that the Baltimore corporation was within its rights in refusing to accept checks. but it was suggested that the wording of the notices gave rise to suspicion that all the banks in Florida were in bad shape. Such, it was declared emphatically, was not the case, and it was stated there have been no failures of national banks there recently nor have member banks of the Federal Reserve System been in difficulties. However, it was explained that the laws of Florida are such as probably to have given rise to disinclination on the part of some business concerns to accept payments in checks drawn on Florida banks. In 1921, it was explained, Florida enacted law providing that when check is presented for payment to bank in that State by anyone other than the payee the bank has the privilege of making payment by draft on New York. Banks Charge Exchange. This law was enacted to meet the objections of small country banks to the par clearance rule of the Federal Reserve system. Small banks make a profit out of charging exchange for cashing checks drawn on banks in other sections. The Reserve system forbids this practice and when non-member banks would not cash checks at par they would send agents to demand cash over the counter. The effect of this law has been to enable Florida banks to pay their bills with notes. Thus. it is explained, note due as an installment on the purchase of an automobile is paid by check on a Florida bank. The bank debits the account of the drawer of the check, but instead of forwarding cash to the finance company, sends draft on New York. By the time the draft is presented for collection to the Florida bank that institution may have closed its doors, in which event the holder of the note only has recourse against the bank, as the maker of the note has discharged his obligation when he paid by check.
Blame Operation System. Treasury officials today insisted that there was nothing fundamentally wrong with banking conditions in Florida and Georgia, despite the string of collapses. Inflated land values were regarded as one of the causes of the trouble, but the chief blame was laid on the system of operation by which the funds of banks in the fallen chain were utilized. Trouble is expected in Florida because of the connection between number of banks there and the institutions which have failed in Georgia. According to official reports, funds from number of Florida banks were lent on call to Georgia banks in the same chain. When banking troubles developed in Florida demand was made for these funds, which the Georgia banks apparently were unable to return, and the institution of receivership proceedings affected the whole chain bank structure in Georgia. Government Not Worried. Except for using its good offices to overcome the sticker campaign against Florida banks, the Government does not seem to be greatly disturbed over the troubles in Georgia and Florida. The Federal Reserve Board met today and decided there was no need for sending additional funds to the Federal Reserve Bank of Atlanta, on the theory that the Federal Reserve member banks in the State were not encountering financial difficulties. National banks in those States also are said to be without the need for assistance.
Company, which was the financing company for a string of 120 banks. The four Florida banks were reported to have been members of the system. Many of the banks, officials of the State banking department said, probably would reopen as soon as other financing arrangements could be made. Officials expressed the belief that number of them would be found to be in good shape, having turned their affairs over to the department pending reorganization and the completion of other financing plans. Suit Starts Trouble. Trouble started Tuesday when the Bank of Umatilla instituted suit against the Bankers Trust Company, applying for receivership for the company and obtaining temporary injunction to prevent officials of the company from altering in any manner the status of the chain of banks for which it acted as financing agent. In its suit, the Umatilla Bank alleged the Bankers Trust Company had procured several hundred thousand dollars from the bank and distributed it among the various banks of Georgia and another financing company in Florida. The bank alleged officials of the company had admitted their inability to pay. Atlanta creditors of the Bankers Trust Company intervened today and the Federal Court assumed jurisdiction of the case, Judge Samuel Sibley appointing a receivership for the company. Florida Creditors Oppose Move. Florida creditors resisted Federal intervention by endeavoring to show that the company conducted an insurance business, insuring the deposits of member banks, and that it was not under Federal jurisdiction. Atlanta creditors charged that the company had committed acts of bank. ruptey when it "preferred certain clients over others when the bank was insolvent." They also cited the receivership granted in Superior Court. Former Gov. Hugh M. Dorsey and J. K. Ottley, of the Fourth National Bank, Atlanta, were designed as receivers for the Bankers Trust Company by Judge Samuel H. Sibley, of the North Georgia District Federal Court.
