Compromise legislation to end an exodus of banks from the Federal Reserve System -- the subject of various bills that have bobbed up and down on Capitol Hill this year -- suffered another defeat yesterday.
By a slim 21-20 margin, the House Banking Committee killed a bill that would have reduced the amount of reserve but would have required non-Federal Reserve banks to establish non-interest bearing reserves.
Federal Reserve Chairman G. William Miller, eager for Congress to act on problems of monetary control created by dwindling central bank membership, endorsed the compromise earlier this week. To avoid reserve requirements, a growing number of banks have moved out of the the central banking system and switched to state charters.
Banking Committee Chairman Henry Reuss (D-Wis.), who fashioned the compromise and won support of the Independent Bankers Association, said yesterday he hopes to work out another measure to bring before the committee within two weeks.
But a committee staff member said that "at this point no one knows" what will happen in the attempt to stem the Federal Reserve exodus. Reuss had tabled an earlier bill because of objections from the banking community and Fed officials.
The American Bankers Association, representing more than 12,000 of the country's 14,000 banks, opposed the Reuss compromise and backed rival legislation of Rep. William Stanton (R-Ohio), which would maintain a voluntary system, reduce the required reserve levels and require the central bank to make interest payments on such funds, to encourage more banks to join the central banking system.
The Reuss bill would have forced large and medium banks to keep reserves with the Fed in non-interest bearing accounts, while small banks would have been exempted. Federal Reserve officials face a difficulty of controlling monetary policy if larger banks -- with most of the nation's deposits -- pull out.