New-York tribune., 1918-08-27
Banks Urged to
Frown on Loans
For Non-War Use
N. Y. Federal Reserve Insti.
tuition Aims to Con-
serve Credit

III OIOcI " 1uTHlSN Inc ONlCcQ
States government with the increasing
volume Of credit it requires to finance
the war the Federal Reserve Bank of
New York announced yesterday it had
sent a letter to banking institutions
throughout its jurisdiction urging the
necessity of conserving resources.
Each bank is urged to do it's share
and to obtain the cooperation of bor-
rowers. Careful buying, small stocks,
postponement of new construction or
expansion and general economy by
business interests are policies suggest
ed by the Federal Reserve Bank as
proper for producers, manufacturers
and merchants. Their education in
these respects by banks is suggested.
The letter to banks reads mainly as
follows:
'"l'he Federal Reserve Board wrote
you on July relative to the necessity
OF conserving credit in order to fur
nish the government the increasing
volume Of credit it requires to finance
the war, and the directors Of this bank
have instructed its officers to discuss
the subject further with every bank
in the district. While no general rules
or programme for the conservation Of
credit can be laid down, the duty of
each bank is to do it's share in secur-
Ing the desired results, acting reason
ably and judlciously in such ways as
its own conditions make practicable
and as we'll spare borrowers undue erf-
barrassment.
Suggestions for Borrowers
1--WE have no doubt that, like most
bankers, you have already made some
progress toward conserving credit, and
our directors wish to supplement the
Federal Reserve Boards letter by ask
ing you now to take up this necessary
work systematically and conscientious
ly. Saving of credit by banks in order
to help the situation as whole must
be the result of saving on the part
Of borrowers. Shifting loans from one
lateral which merely throw the burden
upon other shoulders save no credit.
Credit conservation can only be ac-
complished by business or personal
economies, and requires cooperation
between banks and their borrowers
and education of borrowers by their
banks. Producers, manufacturers and
merchants may do their part and re-
duce their credit requirements.
by not OVeTDuylnG,
"By carrying as small stocks as prac-
ticable;
"By postponing new construction or
expansion of their business;
"By effccting business economies.
"Individuals may do their part by
studying their personal expenses and
effecting economies which will enable
them gradually to pay off their loans.
Urge Analysis of Loans
MAY we suggest that you make
careful analysis of your loans
and lines of discount in order to
determine definitely what credit
now in use is not directly connected
with government financing or the
production or distribution of things
necessary to maintain the health
and our civilian population? While
the majority of bank loans will
prove to be for these purposes,
most institutions also have a con-
siderable volume of loans to in
dividuals made for other purposes,
many of them of long standing. 1t
is to loans of this character, as we'll
as to the less necessary commercial
borrowings, that credit conserva-
tion should first be applied.
"New commercial or new loans
W acquire VI IMPROVE property, VI
for productive purposes, will
rarely be justified, unless they are
to aid directly in the prosecution of
the war.
"a spirit Of saving IN the use Of
credit will naturally lead the banks
themselves to exercise restraint in
offering new or additional lines of
credit in competing for business.
"A frank discussion of the prin-
ciples and the necessity of credit
conservation with a borrower will
usually gain his cooperation, and
where borrower is asked to reduce
loan having securities or commod-
tiles as collateral, emphasis should
be laid on the necessity of gradual
and steady reduction by personal
economies, rather than by selling the
collateral.
Several of our member banks,
wishing to discuss the matter with
their borrowers, have asked US to
prepare a brief statement on the
subject. We have prepared such a
statement, which banks, if they so
desire, may either use as a form
letter or inclose with letter of
their own.
"We suggest that one most ef-
fectivc step would be for all banks
in your city or county to reach an
agreement for common action"