The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-07-27
Bolshevism Holds
Russ STA Outside
the Pale of Cap
italistic Consider
ation-New Ma
tons Must Await
Recognition

liabilities; and borrowers at least do
not keep clearly in mind that the
banks are the greatest borrowers OF
all, and that they owe all of their re-
sources, except the modest percentage
that represents their capital; and,
more than that, stand committed to
the repayment of their debt on DE-
mand. All this means that wise bank
'ers will not tie up In long term credits
the funds that they owe to depositors
on demand. The credit that represents
goods in transit. raw material in proc
ess OF manufacture, products moving
directly into consumption is the ideal
form of credit for bank loans. All
credits that inherently have in them
! the power of self-liquidation is the
proper use for bank resources
When bank begins to loan against
commodity in transit and further
agrees to renew those loans for a pc
riod of year or two after the com
modify that formed the original basis
of the loan has passed into consump-
ton, the bank has engaged In f1nan-
cling rather than banking. If 1t takes
on much of this character of bust
! ness 1t is on dangerous ground. Per-
sonally, l believe one of the few
serious errors, in disregard OF the
sound principles of banking which
| the Federal Reserve Board has made
has been to permit the rediscounting
of bills that have been drawn under
agreements to renew. Such bills cease
to have any self-liquidating character,
after the goods against which they
were drawn passed into consumption
while the payment of the original bill
is extended.
Opportunity for American Ba nLs.
The role that American banks can
play in the credit situation in Europe
is of vast Importance, and If they will
hold firmly to the lines of sound com
mercial banking 1t is role which they
can play with security and profit.
Never was there greater need, how
ever, for firm grip by bankers on
the fundamental principles of sound
banking. There will be presented most
attractive opportunities to make bank
loans under conditions and for terms
that will take the loan out of the
category of proper banking and put
ii into the form of financing. II
bankers are firm in adhering to prin-
ciples they will leave such loans to be
worked out in other ways and will
perform their true function by max
ing loans that have within themselves
the inherent power of standardization.
| am quite aware that great and
apparently successful systems of bank
ing have been built up on the con-
tinent in apparent disregard of the
principles which I have here been
emphasizing. The German banks were
deeply interested in German indus
try. The same is true in a measure
of italian banks to-day. In France
too little encouragement has been
given to industry by the banks and
too much emphasis has been laid
upon the profits made by floating
securities. II some OF the billions OF
French capital, which under the stimu
lation OF banking propaganda found
its way into Russian and Turkish loans.
had been invested in French industry.
the present position of France would
be less unhappy, In England the
sound traditions of commercial bank
ing have BEEN much more closely
adhered to than on the continent, but
England is now off the gold basis and
her banks are encounterlng obstacles
in the field of world banking which
seemed very difficult to surmount.
American bankers have an oppor-
tunity in the field of world banking
brilliant beyond any conception which
they have heretofore had. II they
Will rise above the provincialism in
which they have been trained ana stiu
Continued on FoHopin0 PaSs