The Washington herald., 1920-02-26
BANK CREDITS
AND THE PUBLIC
President Alexander Ex-
plains Relations in
Detail.
PUBLIC CHIEF FACTOR
Banks Must Receive as Well
As Give Public
Aid.

The chief cause of the present
strain on the credit situation in
the United States Is the fact that
the volume of credit has expanded
Until ths gold basis is becoming
inadequate in view of conditions
affecting the liquidity Of credit" is
the opinion expressed by James s.
Alexander, president of the National
bank OF Commerce in New York
ihe statement takes the stand that
because of this situation considera-
tions OF public interest should be
,he determining factor in extending
loans by the banks and that public
interest requires the conservation of
credit so that the needs of essen
.lal enterprises. rather than nom
essential activities. will be provided
ior. The statement is as follows:
credit Expansion Public Coueer,
credit expansion in the limited
states has reached a point where n
must be given earnest thought as
serious public problem. The
banks and the business men Of the
country therefore, have a definite
rpuoiic responsibility in making and
using loans in view of the condi-
tlons and special exigencies that
exist today.
considered individually, the
banks. in extending credit. are in
theory handling private means, but
viewed collectively they are actual
making use of one of the ma
eioh greatest resources. since the
sum total of bank credit const,-
tutes the country's chief instr,,-
nent OF business. The banks and
their total volume of loans must
thus be thought of collectively IN
one is to have a true perspective of
the essential part they plav in the
nations life, just - our coal mines
ana reserves M be considered as
Whole in estimating the nations
natural resources.
The strain under which the cred;t
resources OF the country arc nou
laporlnG is evidenced by the high
money rates in all classes of loans
an analysis of the fundamental far
LOTS IN the situation clearly reveals
.hdt the chief cause of the strain il
'nat the volume of credit has expand-
eu uhtli The gold basis is becoming
inadequate in view of conditions af-
iectlng the liquidity of credit.
Gold Coin and Bullion.
"One index of the basic situation ;s
round in the seriously altered ratio
between the total stock of gold coin
ana bullion in the United States and
,he total volume of other money ana
bank deposits subject to check. Roth
vi these latter items are efficient in
struments of business because of the
uhshaken and unexpressed faith of
'he PUBIC that underlying them is
enough gold for the redemption of all
oollgauons incurred in either of thcm
whlch might be required in the course
OF business. AS long as this faith Is
unshaken there is a relatively small
call for gold, so that a comparatively
small ratio of the metal normally
suffices. Thus. in the last ANALYSIS, the
soundness Of the business situation
requires that the ratio of the gold
base to the credit structure be such
that all practical needs will be easily
met, maintaining unwavering public
faith.
I in no sense mean to imply that
Tie gold ratio is now down to a point
that should unsettle public confidence
or that any fixed ratio is advisable
out nevertheless il is approaching a
point that is lower than experience
shows best serves the credit REQUIRE
ments OF the nation. Evidence of this
Is brought out by the following table
made UP on the basis of figures for
June 30 each year or the nearest
available date: