The Richmond Virginian. (Richmond, Va.) 1910-1920, 1916-12-09
MUST OBJ RE CAUTION
IN EXTENDING CREDIT
Not Time for Large Constructive
Enterprises On Borrowed capital"
Says Governor Seny.
CONDITIONS UNPRECEDENTED.
Part of Gold which Has Flowed Into
Country VIII Return 10 Europe
After War. and Plans Must he Laid
to Hold Gains Made


That caution should he observed as
extension of credit and the making of
loans is the view presented BY Cover
nor George j. Seay, of the Richmond
Federal Reserve Bank. who was the
principal speaker at the first annual
banquet Of the conference OF Virginia
Credit Men. in Jefferson Hotel audi
forum last night.
Mr.. Seay averred: 1T is n time for
banks 10 see to ii that their resources
are kept as liquid as possible: that
they should confine their loans. as far
as possible, to those commercial and
agricultural transactions which lieui-
date themselves within a reasonable
time and in the regular course of af-
fairs
1t is not a time" Governor Seay
cautioned, TO embark Upon large con-
struCtive enterprises upon borrowed
capital The pace should he moder-
ated. We have been having things
all our own way. Some strength
should be reserved to meet the com
petition which will most certainly be
resumed. probably with greater in
tensity after the war"
New System Gives Protection.
Governor Seay spoke of the present
prosperity and OF the unprecedented
influx of gold and the equally unpre-
cedented gain in the deposits in the
national banks of the country He
told of the reformation OF the ma
uonal banking system through the
Federal reserve act and asserted that
has ALREADY piECp a n
a protection to business which under
the old banking system was impos-
sihle
Formerly. when the credit power
OF the national banks was used up"
said Mr.. Seay. there was nothing to
do but halt in the extension of loans,
Events Of the last few days trefer-
ring to the recent high rate on cali
money! have shown that the point
has been reached where we must ex-
ercise more prudence and caution in
the extension OF credit and In all new
constructive enterprises requiring
credit. 1t has been reached before
but II was not so clearly recognized
While the deposits of the national
banks were enormous in the two-year
period under consideration G915 and
1870. their loans and investments ex
banded one billion and CTS million.
which is also unprecedented" de-
clared MIR. Seay. Speaking of the
influx of gold. he said:
Much of the Gold Absorbed
we have seen that all that has
come so far has been put to use as
a basis for credit expansion and there
IN, of course. lies the source OF real
danger, There is no danger what
ever in the volume of gold. however
great. in putting 1t To sound use. AID
that is not within the control OF any
organized banking power. 1t lies with
all the banks OF the country ard win
the dopositors Of the banks l.. has
acted as a stimulus TO expansion am
unnatural stimulus-in that the vol
ume imported has been beyond all
precedent
If we were TO turn round now and
export 1t In volume 1t would result in
contraction of credit because it has
been absorbed The Reserve system
alone would stand between bu mess
and sudden severe contraction Of
credit
The time will come. follow ing soon
upon the close Of the war. when we
shall be compelled to export a part
doubtless a large part OF the gold
which has poured IN upon us. Other
nations will be compelled to have 1t to
strengthen their financial systems
which are now. like their industries
operated under the law of military
necessity.
Hust he Able to Hold Gains.
They will be able to send us more
goods in exchange for the goods they
buy from us, and they will regain
the power over The movements of
gold which they have always had In
normal times Then the process of
credit he
much is certain and il must be re-
membered that pulling down is fast
er process than building up We must
he able to hold what We have gained"
h. concluded
Secretary Treasurer Tregoe, of the
National Association of Credit Men
was called by a business engagement
and was unable to remain to speak at
the banquet last night Gle was heard
during the day. however. in several
of the open discussions which fol-
lowed the addresses.
Among the speakers during the day
were c. s Fenson. f f. Hinckle, Leon
Wallerstein, Caldwell Hardy and Colo
mel 10 Lane Stern. OF Richmond;
WALES Hank. OF Norfolk; f. F. Shelf
fey. of Lynchburg; S. II, Coleman. of
Roanoke, and f. Pilsbury. OF New Or
leans Luncheon at the Country Club
followed sightseeing auto trip at
noon.
The first annual conference was a
most successful one and already plans
are being laid for another similar
conference in 1877. which will prob
ably be held in Norfolk. the associa-
ton of that city having extended an
invitation to the Virginia Credit Men,
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