wards the end of June, 1917. "I am convinced," the message concludes, "that these men are not overstating their case. Unless we come to their rescue we are all in danger of disaster. Great Britain will have to abandon the gold standard."

At the present moment, with speculation running high throughout the United States and stocks reaching levels never before attained, the situation would be impossible without some such controlling influence as that which the Federal Reserve System exercises with its power to check speculation by raising rediscount rates. Any new developments, such as branch banking, which may endanger the efficiency of this system is clearly the concern of everybody.

How does branch banking endanger the Federal Reserve System?

In the first place, it needs to be remembered that many bankers in a position to give an unprejudiced judgment. are by no means satisfied that it does. There are, however, a very great number who believe that branch banking is unAmerican and opposed to the individualistic genius of the American people. The situation is really not difficult to understand. The backbone of the Federal Reserve System is the National bank, and National banks cannot engage in branch banking. In States, therefore, where branch banking is permitted, and where this permission is being taken advantage of, there is a strong tendency for National banks to surrender their National charter and incorporate themselves as State banks. Within the last six years some two hundred National banks have become State banks, and it is claimed by one authority that through the elimination of small-town and city National banks the Federal Reserve System is rapidly losing touch with the business and financial life of millions of the American people.

How is all this being done?

The question is best answered by a concrete example, as indicated in the opening paragraph of this article, namely, the Bank of Italy. It first of all needs to be said that this huge organization, having its headquarters in San Francisco and known as the Bank of Italy, makes no secret at all of its operations. Any reasonable information desired is readily obtainable, and from time to time official statements of the bank's expansion are published in the daily press. Any one who travels up and down the Pacific coast must be struck with its ubiquity. In almost every town one passes through the one building impossible to overlook is the Bank of Italy. It understands the art of advertising as few business houses understand it, and it exploits this knowl

edge to the utmost. The Bank of Italy, however, is only one part of its operations.

Behind the Bank of Italy is the Bancitaly Corporation, which was formed, in the words of one of its directors, "to do everything that the Bank of Italy cannot do."

Now the Bancitaly Corporation is undoubtedly one of the largest holding corporations in the world. "This vast investment trust corporation," as one quite friendly writer recently put it, "whose

P. & A. Photos

Representative Louis T. McFadden of Pennsylvania

In

ramifications now extend all over the United States by reason of its holdings in most of the substantial banks in the country and of its investments in choice real estate, has become an eighth wonder of the world." The most recent published list of the holdings of this corporation are indeed truly remarkable. California the Bancitaly Corporation owns shares to any extent from 100 to 10,000 in the most important banks in the State. It controls two banks in San Francisco and has shares in seven others. Through the Americommercial Corporation, another subsidiary holding company, it owns banks in Los Angeles and has shares in four others. Outside of California, within the United States the Bancitaly Corporation owns shares in the most important banks in Atlanta, Boston, Buffalo, Chicago, Cleveland, Kansas City, Minneapolis, New Orleans, New York, Philadelphia, St. Louis, and Washington. In New York the corporation already controls two banks and has shares in twenty others. Outside of the United States the Bancitaly Corporation

holds shares in the most important bank: in Amsterdam, Berlin, Brussels, Copenhagen, Dublin, Edinburgh, London Milan, Montreal, Oslo (Norway), Paris. Rome, Stockholm, Toronto (Canada). Vienna, and Zurich. The Corporation holds shares in the Bank of England, the Bank of Scotland, and the Bank of Ireland, has a controlling interest in the Bank of America and the Bank of Italy in Rome, and is a considerable shareholder in the Reichsbank in Berlin.

A

LL this would be a question of no special moment, as far as the Federal Reserve System was concerned, if it were not for the fact that the more powerful financially the Bank of Italy becomes, the more surely can it gain control of other banks engaged in branch banking, and so gradually establish something very like a monopoly. Now State banks can, of course, become members of the Federal Reserve System if they so desire, and the Bank of Italy is a member of the System. But State banks are at liberty to withdraw from the System at will, and National banks cannot do so without surrendering their charter. The advantages of belonging to the Federal Reserve System are very great, but there, can be no doubt that, just as the British Empire is virtually a league of nations in itself, while still a member of the organization having its headquarters at Geneva, so a vast internationally flung banking, branch banking, and holding system is virtually a reserve system in itself, while retaining its membership in the Federal organization. It is only a question of to what length it can go.

What is true potentially of the Bank of Italy is also true potentially of several other banks. The fight for control is quite definitely on. Four other California banks have 190 branches between them, while eighty-two banks in the State now own over 600 of the local banking agencies of the State. There are, moreover, already some 300 branches of State banks in Michigan and some 250 in New York. Such great banking centers as Chicago, Minneapolis and St. Paul, Portland, and Seattle are saved from the difficulty by reason of the fact that they are in States which prohibit branch banking. Thus it is seen that branch banking is being developed everywhere to an amazing extent, and the more it develops, the more anxiously is it observed, not only by bankers, but by business men of all kinds, who realize that the stability of their business in the last resort depends utterly on the sta bility of the banking system of the country.

The latest development is the so-called

ok

C

-00

F.

na

Itá

McFadden Banking Bill, which, failing to get through the last session of Congress, has come up again in the present Congress.

This bill is backed by the Federal Reserve Board and by the Controller of the Currency, and it is designed, by amending the National Bank and the Federal Reserve Acts, to enable the National banks to meet the State banks on

hare their own ground, and at the same time definitely stop the further spread of branch banking. The combined effect of Sections 8 and 9 of this bill would, in Fed Mr. McFadden's own words, be to con

1

have beyond the limits of the city in which you are located.''

In other words, the National banks are to be authorized to establish local home town branches in such States as permit branch banks. State member banks are to be permitted to retain such branches as they already have, but are debarred from further extension; while both National and State member banks are debarred from developing branch banks in any State at present closed to branch banking but which may subsequently permit it.

At the same time, under the proposed act, the National banks would be accorded privileges and facilities so as to enable them to compete on favorable terms with the State banks. They would be authorized to absorb State banks directly, to acquire real estate for further banking needs, and to make larger loans to customers on non-perishable agricultural commodities. They would be further helped by increasing the limits on the amount of paper of a borrower that may be rediscounted by a Federal Reserve bank. National bank charters would be given for an indefinite period

so as to enable National banks to administer long-time and perpetual trusts, as is now done by State banks and trust companies, and by permitting them to make city real estate first-mortgage loans for as long a term as five years, instead of one year, as at present. How far such expedients would be successful time alone would show. That something of the kind must be done if the present situation is to be met is an opinion very widely held.

eliminated, or

"Whether branch banking be good or bad of itself," says the "Magazine of Wall Street," "it is certain that it will undermine if not wipe out the National bank system, unless the banks of that system be permitted to fight fire with fire. And when the National banks are eliminated, or even substantially reduced, the Federal Reserve System becomes a phantom or a hollow shell." As to the final justice of such conclusions, opinions will differ, but there can be little doubt that the branch banking system represents a great revolutionary process at work in the body financial of the country, and as such vitally affects the interest of the American people as a whole.

re

=hi

t

a

all

A

LMOST the last thing I heard in America before sailing back to France was an urgent request from an influential New York hostess and a brilliant actress almost as popular in Paris as in the United States to let them know if it was true that there had developed in France an antagonism to Americans. Millions of people in America would detest the idea; they are happier in France than anywhere else in Europe and entertain for the French nation the same feeling which many Frenchmen cherish for Italy or Poland― at all events the supremely distinguished élite in Warsaw or Cracow. The douceur de vivre which seems to permeate the atmosphere the moment you land at Havre or Cherbourg would promptly disappear if sourness or sullenness replaced the familiar smile generally welcoming Americans. But is there any real danger of such a change?

I am afraid that some members of the American colony in Paris are largely responsible for the idea. Not that they themselves are conscious of any unpleasantness-more than half of them become in time almost undistinguishable from natives--but because they get irritated

at the rush of American visitors whom the stabilization of the pound and of the mark has diverted from England and Germany, and fear to be drowned in the multitude of their own countrymen. It is by no means infrequent to hear them talk as if they were the authorized mouthpieces of the French, and with a vim resulting from the combination of their love for France with their freedom of speech as Americans. How should not the French get irritated? they say. More than half a million Americans crowd Paris every year; the American colony in Paris has risen from 28,000 to nearly 50,000 since 1923, and the cost of living registers their presence. The dol

lar can buy everything, and does buy too many French out of their homes. Do you in New York realize, they go on asking, that the triangle marked by the Crillon, the Opéra, and the Hôtel Regina -that is to say, as vast a section as forty blocks along Fifth and Madison Avenues is entirely American, and practically as forbidden to the French as the Concessions Quarter in Shanghai is forbidden to the Chinese, because they can afford there neither a room, nor a meal, nor a jewel? The heart of Paris-the Place Vendôme consists of American hotels or American banks. Number the châteaux in Brittany, Normandy, or the vicinity of Paris now American-owned. Where do French pictures, French statues, and French furniture go in rapid succession, especially now that the upper middle class is getting poorer? Whole country houses are shipped over to incongruous surroundings. And is it not true that half an ancient French monastery, loved and admired, it must be admitted, by the American artist who bought it, now shows its melancholy beauty near Fort Washington? How could the French not resent this? Above all, how could they not resent the atti

tude of official America on the debt question? You at home think you solve it by repeating the slogan, "They hired the money, let them repay it;" but we who live over here know what the French point of view is. The French say: "No money was ever hired; only munitions were sent over. From April, 1917, when America came into the war, these munitions ought to have been used by American soldiers. But the American soldiers did not appear for more than a year, and during that time the shells were shot for them by French gunners, who often lost their lives in doing so. Do you really mean to demand payment for those shells?" In that way do many Americans settled in Paris often represent the feelings of the French.

Are they right or wrong?

Every now and then an American of some prominence lands in New York and is asked the question. He may not know a word of French, may not have spoken with a single Frenchman except his chauffeur and his Swiss hotel-keeper, but he will answer. If he says, "Well, I am not quite sure that the feeling is what it

used to be," the reporter, especially if he has reasons to be on a certain side, will abbreviate the impression as "hatred of U. S.," and the formula will be duly made even more snappy in the headlines. That is the way prejudices, or complexes, as the current phrase goes, are created; for Americans hardly look at the newspaper but what is supposed to be said against themselves in it they always believe to have been actually said, even if they regard it as entirely wrong.

The trustworthy witnesses ought not to be the permanent American residents. in France, who become more sensitive than the French; nor the casual illequipped visitors, apt to misinterpret perfectly innocent little things (for instance, just now the inevitable jokes on the debt question in the music-halls, probably answering Will Rogers's daily satire at the Follies); but the intelligent, wide-awake American students, whose hundreds fill such university towns as Grenoble or Montpellier, not to speak of their thousands in Paris. These young men and women, now regularly sent over by their colleges in America, know the

language, live with the natives-frequently in French homes-and in a few months become aware of all nuances without growing too French-like. They should know and they should be asked.

As a matter of fact, the French like strangers. As early as 1919 I saw large parties of Germans conducted through the Louvre and talking in their own language loudly; not a remark was made, although such visits were certainly premature. Foreign colonies in time become very dear to the French; under the Second Empire they were proud of seeing so much English aristocracy in Paris or Cannes, and even so many Prussian noblemen in Biarritz. The Waddingtons in Paris, the Johnsons in Bordeaux, not to speak of numerous MacMahons, O'Connors, Hennessys, Archdeacons, etc., have been thoroughly adopted without having to give up their language. American châtelains and châtelaines are almost universally beloved, and when there is a noble seventeenth-century mansion for sale in the old quarters of Paris the intelligent, sympathetic American purchaser is prayed for as its natural savior.

TH

Europe during the past few seasons remember the car beauty contests which have been a fad at the famous watering places on the Continent. Concours d'Elégance-Automobiles they are called in France.

In these contests, held where the wealth and fashion of all nations gather at play, the most luxurious special bodies, the world's finest motor cars, are judged for beauty and distinction.

Americans will be proud to learn that a standard American motor car has won first prize in such a

competition not once but eleven times!

Packard cars, entered by their private owners, have won first place for grace and beauty at Vichy, at Le Touquet and at Aix-les-Bains in France. At Wiesbaden, Neuenahr, Trier and Baden-Baden in Germany. At Oporto in Portugal. And now at Monte Carlo-that cosmopolitan center of luxury and beauty on the Riviera!

Such international acclaim confirms America's verdict -that the unchanging beauty and distinction of Packard lines have yet to be equaled or surpassed.

There the dollar becomes eminently useful. Transients cannot hope to be treated like semi-naturalized residents; but how scarce are their really wellfounded complaints! Certainly the French fonctionnaire, embittered by the constant effort to adjust his immovable salary to the ever-changing scale of prices, can hardly be expected to be more polite to foreigners he understands with difficulty than to his own countrymen, who generally resent his poor superiority and make him feel they do so. Parisian -not provincial-tradesmen have also lost their charm of the days when Heine would jostle people on the sidewalk "pour entendre la musique des excuses," they make too much money and get spoiled, but the least reminder of commercial uncertainty is enough to make them perfectly civil again. Even the unfortunate prying of American customs agents into the shops in the Rue de la Paix is already forgotten. However, Americans ought not to imagine that everything should be done their own. way, even, or perhaps especially, where their prejudices are at issue. Two years ago a colored gentleman-there are not a few here who had been a brave officer during the war was turned out of a Montmartre café because his presence displeased the many American patrons of

W

the place. Such a thing cannot but be deeply resented, for the French pride themselves on their kind treatment of Negroes. I would also advise American visitors not to suppose that everything in France must be cheap. "Cheap or cheat" is not the proper slogan in these days of uncertain monetary values. Once I acted as interpreter for a couple of Americans near Montparnasse who had given a taxi driver four sous for his tip and were surprised to see him furious. Less than twenty per cent of a taxi fare, as well as more than ten per cent of a restaurant bill, as a tip should be discouraged; but in most cases where unpleasantness is shown to an American he ought to have no doubt that the same, in similar circumstances, would be shown. to a Frenchman.

Concerning the debt question, let me remind Americans that, in spite of what I said above of the interpretation-largely correct given by some of his own countrymen over here, the French are eminently a debt-paying race. A nation of thrifty people living on the soil inevitably is. It was the conjunction of the Washington failure with a terrible increase in the French difficulties that embittered the situation. Had Mr. Mellon come out earlier with his statement (of January 6) that "no nation should be

forcibly compelled to pay, and that a prosperous Europe means more for America than the payment of the European debts," an immense feeling of relief would have prevailed at once. I was also sorry to find, on arriving from America, that only newspapers like the "Temps" or the "Débats" had given the attention it deserved to the illuminating correspondence between Mr. Piez, chairman of the Association of Illinois Manufacturers, and Senator Borah. But how many American readers, in my own observation, conscientiously skipped those letters!

The debt question, like all

money questions, especially with a background of sentiment, is irritating, but the moment it gets settled it will be forgotten, as the non-ratification by the American Senate of the Pact of Security for France is now forgotten, although it was the real cause for which the French were compelled to maintain a costly army and get called militarists for their pains. The French are naturally too cheerful to cultivate grudges, and the least chance they discover of relieving the somberness of their present situation is gladly seized upon. The Americans who sometimes complain of the French press should see with what enthusiasm the gift of an American home to a Paris institution is now welcomed by the newspapers.

HETHER the fault lies in the Gallic temperament or our own, we have never gotten on well with France. General Pershing's "Lafayette, we are here!" sounded fine, but it ceased to echo long ago. Since France came to our aid in the American Revolution with men and money, and helped corner Cornwallis at Yorktown, friction has been almost continuous. The record would indicate that we treat foes better than we do friends.

For proof of this we can point to the cash paid Mexico for the taking of the Southwest, to the refunding of the Boxer indemnity to China, and the payment of $20,000,000 to Spain for the Philippine problem.

While France overthrew the Bourbon king who sent us the cargo of livres in time of need, it was the money of France, not of Louis XVI. After that worthy man lost his head France nearly lost its money. The new U. S. A., under its early Articles of Association, was a shaky affair, much bent on repudiating

was still stepping on American grass along the Ohio country borders, holding Detroit and forts as near as the Maumee. Upon the sea she took such liberties as she would and forbade all neutral trade in supplies with France.

This we should have forcefully resented, but did not. Instead, John Jay was taken from the Supreme Court Chief Justiceship and sent to make a treaty in London. Thomas Jefferson, who was friendly to France, resigned as Secretary of State because he could not fit himself into the situation. Edmund Randolph, of Virginia, who had been Attorney-General and Washington's personal counsel, took his place. He did not better matters, and wound up in a bad scrape.

The French recalled Genêt, who was wise enough not to go home, where his young neck would have suffered. France demanded that he be sent back a pris