BRANCHES OF STATE BANKS IN REPRESENTATIVE STATES, 192o Alabama 21 New Jersey 19 Arizona 2I New York 148 California 118 North Carolina 23 Delaware 10 Ohio 61 Georgia 32 Pennsylvania 12 Indiana 4 Rhode Island 13 Louisiana 5o South Carolina 14 Maine 25 Tennessee i6 Maryland. 36 Virginia 20 Massachusetts 22 Washington ri Michigan 72 Wisconsin 9 Mississippi 23 Although a national bank may not directly establish a string of branches, this may be accomplished indirectly. A state bank having branches may become a national bank and retain its branches; the branches are then treated as if they had no separate corporate existence. A national bank, by purchasing a bank with branches and then liquidating the purchased bank, does not ac quire the right to establish branches. A state bank joining the federal reserve system may retain its branches. National banks having branches within their domiciling states are (1921): Congress has recently considered the advisability of per mitting national banks to establish branches in their home cities. Such legislation would put those national banks having no branches at present on a competitive equality with national and state banks that have branches. One state bank in New York City has forty branches in the city, and one national bank has twelve branches in New York City. The Federal Reserve Board favors permitting national banks of capital and surplus of $i,000,000 or more, located in cities of roo,000 population or more, to establish not more than ten branches, each within their home cities.
Development of Branch Banking Altogether it would seem that branch banking is an inevitable future development in the United States and that the state and national bank laws will be liberalized in this respect. It is a per version of justice that in New York City three national banks should have branches while the others are denied this privilege, because it is impossible for the other national banks to acquire equivalent chains by the same process as did these three. The permission granted by certain states to their state banks to main tain branches puts the state and national banks on unequal competitive planes; the obvious remedy is that the National Bank Law permit national banks in such states to have branches under the same conditions and limitations as the state banks. It is to
be remembered that in Canada, where economic and political conditions are similar to those in the United States, branch bank ing prevails. On the whole it does not appear that branch banking conflicts with the principles of sound banking.
Another method of obtaining advantages equivalent to those of a branch bank is to create subsidiary or affiliated banks or finance houses, controlled by various corporate devices. Numer ous national banks have such affiliated savings banks, trust com panies, cattle loan companies, bond houses, or other commercial banks which specialize in one line of service or in service to one class of clientele. These may be run in conjunction with other banking houses. A good example is the Textile Banking Com pany, Inc., recently organized by officers of the Guaranty Trust Company and the Liberty National Bank of New York especially to serve the wholesale dry goods trade.
Need for Foreign Branches of American Banks American banks have been slow to establish foreign branches. The National Banking Act gave the national banks no such right and in this respect most of the state banking laws followed the national law. Although some states permitted the establishment of branches abroad, the privilege was little used and the field was left to private banking houses, which did open some branches. The one notable success was the International Banking Corpora tion, which maintained a chain of banks, chiefly in the Orient. As a result of this abstention from the establishment of branches our banking system remained provincial, and we were obliged to depend upon foreign banking houses for accommodation to our traders. In contrast with this, the number of European banks having branches in foreign countries exceeds ioo, and the number of branches exceeds 2,000. Of these about Ioo are in South America, 30o in Asia, 40o in Africa, and 700 in Oceania.