New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-11-20
WORKING In A
CREDIT VACUUM
Banks in the Dilemma OF
Having More Funds than
They Can Lend

INlCNUO, 4NOttUtOtI 10
Il is a paradox that the banker al
ways wants TO have as little money in
his treasury as possible and that he be-
walls the period when his SURPRISES
are large. This is easily explained,
because when the surplus is at low
ebb-making full allowance, Of course
for reserve requirements-all his
funds are usually employed profitably.
To-day throughout the United States
the banks are seriously concerned
about the large sums accumulated IN
the vaults. They cannot refuse to re-
ceive deposits, but they have no means
of using the enormous sums accumu-
lated from deposits.
Tho manufacturer, who in times past
was almost clamorous for money, has
no further use for the banks, except
to deposit his money. The farmer
who was also a good borrower in times
mast. is able to keep away from the
banks altogether. During the past two
wears the new developments in indus
try have been almost altogether IN
limos that are connected with war or
ders. and. in a few cases, with supplies
needed by European countries for
reconstruction after the war. Factor
les have been enlarged, additional
plants have been installed and the
producing capacity increased in num-
Der Of industries.
Capital Out Of Profits
One may ask with reason: How
was this possible without an outlay
Of new capital?" The answer is that
the industries that cater to war sup
plies have in most cases made such
large profits that they have been able
to muster enough Of capital to en-
large their plants. In many cases the
urgent necessity of obtaining goods
has been responsible for the Allies
granting large advances to manu-
facturers. These advances enabled
the producer to enlarge and earn large
profits without recourse to the banks.
The farmer, who sells grain and cattle.
has profited by the increase in prices.
Unlike in the past, he was not forced
to sell. His ability to hold on and the
urgency of the demand from Europe
have combined to increase prices to
such an extent that the farmers have
not in the least been obliged to wait
for even the usual period before they
disposed OF all their produce and cat
tie. The farmer simply increased his
account with the banks, so much so
that the new season, and even the
movement Of crops have been managed
without the normal recourse 20 bor-
rowing.
Excepting in New York, and to some
extent in Boston, the problem before
bankers is how TO make the plethora
of deposits pay even small return.
The manufacturer and the farmer,
who constituted in the past the chief
borrowers, are no longer in the mar
ket, as usual. Little new industrial
expansion is taking place, except in
such industries as are principally con-
nected with war supplies. There has
been a complete lull in new railway
building; and even the improvements
that are tsking place at present owing
to increased revenues have not neces-
STATED the expenditure Of large out
lays OF capital; as matter Of fact,
such expenditure has been met out OF
income.
The Strange Embarrassment
II is extraordinary that the reduc-
ton of reserve requirements OF ma
tonal banks, which was one of the
principal results of the passing Of the
Federal Reserve act, should embarrass
banks at present. The object of the
sponsors OF the act was to break down
the rigid rules with regard TO reserves
and give the banks an opportunity 70
utilize more of their deposits than un-
der the old regime. Normally this
should have helped. Unfortunately,