Business: Funny Race

Fortnight ago Bankers Trust Co. and Central Hanover Bank & Trust Co., two of the few big Manhattan banks that maintained regular dividends at 1929 levels throughout Depression, suddenly cut their quarterly payments one-third. Reason, Bankers Trust tersely explained, was “low interest rates and resulting reduced operating earnings.” Because both institutions had earned their dividends in the first half of this year, their announcements gave the over-the-counter bank-share market a bad turn for a few days. The fear that First National, the “Baker Bank,” would pare its $25 quarterly payment, sent First National stock tumbling $135 per share to $1,680. Not until Guaranty Trust, First National and other Manhattan banks declared their usual dividends did the bank-share market shake out of its gloom.

Last week, however, a big Manhattan bank made news that most bankers welcomed—secretly if not publicly. For the first time the constitutionality of Federal Deposit Insurance Corp. was challenged in Federal court. Under the permanent insurance plan in the new Banking Act, the FDIC assessment of one-twelfth of 1% per year is levied not just upon accounts of $5,000 or less, which are the only ones insured, but upon a bank’s total deposits. That provision works to the advantage of small institutions most of whose deposits are in small accounts, and to the disadvantage of big banks, only a fraction of whose large corporate and business deposits are covered by the $5,000 limit. But having signed & sealed a truce with President Roosevelt last autumn, the bankers have discreetly bowed to a New Deal measure which many of them detest.

The suit last week was brought not by a bank but by one Frances Garfunkel, a stockholder in Manufacturers Trust Co. Miss Garfunkel hopes to enjoin the bank from paying some $375,000 in FDIC assessments. Pointing out that the suit involved no reflection on his management, President Harvey Dow Gibson declared: “Manufacturers Trust Co. is quite willing to have this question of legality authoritatively decided but meantime it will scrupulously comply with the law. . . .”

Other banking news of the week: ¶ In Hartford, hotbed of rugged individualism, big Hartford-Connecticut Trust withdrew from FDIC because “the protection afforded our own depositors by the strong liquid position of this bank would not be strengthened by membership. . . .” Several other State-chartered Connecticut banks will shortly follow suit.

¶”Wing’s Fort” is a Boston nickname for the bulging limestone edifice ofFirst National Bank. Inside, the building has more the air of a cathedral. Although descended from Puritan stock, Board Chairman Daniel Gould Wing is no Bostonian. He got his start as a messenger boy in Lincoln, Neb. Arriving in Boston as a bank examiner in 1899, he stayed to become president of the Massachusetts National Bank. When that bank merged with First National, he became president, later board chairman. Last week, at 67, Mr. Wing retired because of poor health. Bernard Walton Trafford, vice chairman, stepped up into his place. A native New Englander, Chairman Trafford was born in Fall River, went to Phillips Exeter Academy and Harvard, where he won eight varsity letters. Long an engineer for Bell Telephone in the Midwest he was glad to join First National in 1912. A Boston job made it easier to preserve his record of never missing a Harvard-Yale football game.

¶ Meeting for a three-day session at Atlantic City, the Financial Advertisers Association fairly oozed Faith, Confidence & Recovery. President Leslie G. McDouall of the New Jersey Bankers Association keynoted: “I am satisfied that the opportunities are just as great today as they were in the so-called boom period.” From President Frank F. Brooks of Pittsburgh’s First National Bank popped a curious suggestion for the “most gigantic advertising campaign America ever saw, regardless of expense, to promote economic literacy. . . . a campaign that will draw the sharp line between right and wrong economics. . . .”

¶ To 2,000 businessmen assembled at Propheteer Roger Babson’s National Business Conference at Babson Park, Mass., President Rudolf Hecht of American Bankers Association trumpeted: “The banker is no longer haunted by the fear of impending disaster. He is no longer filled with doubts as to what unexpected weaknesses may be lurking in banking, or in business conditions affecting banking, that will come forth to plague him tomorrow.”

In fact, said Banker Hecht, bankers “can really sleep at night now.”

¶Noting such bold banking talk, the scrappy little New York Daily News (circulation: 1,550,000) ran a cartoon to point up an accompanying editorial titled: “The Bankers Are a Funny Race.” Emerging from a cyclone cellar in the cartoon was the pot-bellied figure with cane, cigar, spats and silk hat that traditionally represents the banker. The figure, however, wore neither pants nor coat and only the tattered remnants of a shirt around his neck. In confusion about the figure lay twisted steel rails, bits of machinery, other wreckage left by a black twister labeled “Rugged Individualism.” Disappearing in the distance, the twister was bearing off a flock of banks, factories and “reputations.” Says the banker: “It wasn’t much of a cyclone at that.”