New-York tribune., 1918-08-09
Finance
WALL STREET OFFICE:
Mills Building, IS Wall st.


now under consideration by the Cap
ital Issues Committee, under which
that body would assume the right to
veto all bank loans Of 100000 or
more. 1t is an amazing proposal,
I for if adopted it would vest the
committee with authority to sit IN
/ Judgment on nearly all business,
passing the death sentence where It's
decision called for that. The object
would be to curtail loans to non
essential businesses; probably there
is no present intention Of going fur
ther than to say to a bank: "rhis
loan may not be made because it is
not essential to the prosecution OF
the war" And no one can dispute
the necessity for such curtailment.
There is not enough money to go
around, and war work of various
kinds is being held up for lack of
credit. But that is hardly the fault
of the banks. Lending institutions
are literally swamped with applica-
tions for funds wherewith to finance
essential businesses. A steady
stream of applicants for money that
would enable them to carry out gov
ernment contracts for everything
from shoe buttons to shrapnel shells
flows into the banks each day. AS
far as it is possible for them to do
so, the banks are taking care of
borrowers who can show that their
needs are essential to the war and
who have an adequate foundation
for loans. But not all the demands
can be satisfied, and part of the
stream flows out again to seek relief
at the War Finance Corporation or
elsewhere.
Yet the inability of the banks to
provide for the needs of all comers
cannot be attributed to lack of dis
elimination on the part Of the banks
as to essential and non-essential
loans. For months they have been
curtailing non-essential operations
as rapidly as that could be done
without causing widespread mortal
ity in business. The manufacturer
of a non-essential applying for a
loan has been refused, or told that
he must do with less than his nor
nal line Of credit. The Stock Ex-
change house has been asked to cut
down its loans, or at least not to
ask for more. The jeweller has been
told to arrange his affairs so as to
get along with minimum of credit.
and perhaps eventually no credit at
all. Naturally, the banks have re-
Trained from action so drastic as to
bring disaster overnight ta the bust
nesses which have always depended
upon them for credit, but as far as
it has been possible for them to do
so short CT that, majority Of the
local banks have put the clamps on
loans for purposes not directly or
Indirectly connected with the war.
All applications are considered first
in the light Of whether or not they
are non-essential. That is the start
ing point from which bank officials
work in passing on loans.
1t is seriously to be doubted if
any practical plan can be worked
out under which the Capital Issues
Committee could pass on all loans
of the indicated size without caus-
ing inconvenience, hardship and
even bankruptcy on large scale.
1t should be remembered that while
the plan would have little or no eff
feet on banks in smaller cities and
on the country banks, it would affect
perhaps as much az IS per cent of
the loans of the large institutions in
New York. And time is an impor-
tant factor. Judgment on loan
cannot be withheld indefinitely; tc
do that, in many cases, would have
the same effect as refusal, mas
much as borrowers cannot postpone
their obligations indefinitely. 1t fol
lows, therefore, that the Capital Is
sues Committee would have to work
/ ii 1T were to work effectively
either on what would be tantamount
to snap judgment or else under 6
set of general rules. And genera
rules cannot be applied successful,
to specific cases in the extension oil
credit. 1t is conceivable, for in
stance, that an important business
falling in a non-essential elias.
might be wrecked overnight by re
fusal Of a new loan or the extension
OF an outstanding one. Obviousl,
that sort Of procedure is not wha,
is needed in the circumstances.
The pan is especially interesting
from the stool; market viewpoint be
cause so large q part of stock mar
ket loans are for amounts i'm excSA.
) OF 100000. That such a propose