New-York tribune., 1920-06-07
l",prored Rail Operation
Needed ia 7ha,u Out Credit
Demys IN Transit Hamper Production as Well as
D1st1butlon OF Finished Goods and Prevent
Normal Expansion of Business. Review Shows

Not summer hest but moro efficient
Tailroad service is needed to enable
s'ai!tona Of dollars Of so-ealled frozen
credit to thaw out. In recent months
nsrsads sf finance have spoken not in
frequently Of CONCEALED credit which
has In effect slumped below 80 degrees
Fahrenheit.
Frozen credit has come into the lam
guaSe ~ common term. It signifies
an abnormal credit situation in which
the normal turnover of banking funds
is delayed. It implies the throwing Of
a monkey wrench into the delicat ate,v
adjusted machinery Of credit. II means
that bank loans. which are designed to
keep factories in motion md goods in
transit, are being unduly protracted by
q breaking of one of the links in the
economic chain of production and dis
tribution.
Specifically. there is. the case of the
Smith (its real name is withheld)
Manufacturing Company, of Bridge
port, makers of cotton beltinRs In huge
quantities. There is an enormous
present demand for their product and
the company is able to sell beltings
Is every inducement to speed up pro-
duction. But the company cannot get
the railroad cars in sufficient numbers
to move the product from the factory
toward the purchasers. As a result its
present inventory amounts to s3,-
100000. whereas it would normally be
S2,000,000. The increase came from
the backing up Of material around the
factory because of insufficient trans
portation facilities.
Loans Are Quadrupled
Normally. the company needs to bor-
row only $500 900 at the banks. Now
it's loans aggregate $4,000, 900. Much
nj the money is borrowed on thirty
day notes, which would be liquidated
at the end Of month out Of funds
received in payment Of current ship
ments. But the goods do not get
shipped, except in relatively small
quantities, and, once on their way,
are subject to interminable trans
rortasion delays. At the end Of thirty
day. the borrower is compelled to
renew, its bank loan, instead Of pay it
oH. The bank must consent to fre-
Qu-n- renewals, unless it desires to
throw its blameless customer into
bankruptcy.
This case is typical. 1t represents
perhaps the most important cause Of
freczing credit. Other loans are made
20 finance a specific shipment, and the
loan often has to be unduly extended
because Of the delays in transporta-
ton. Moreover, the general assump-
tion was that credit was also tied up
In loans against comm odities held for
speculation. Such loans were made
either on warehouse receipts or per-
sonal notes. Bankers always denied
that this kind Of loan was Of as great
Importance as was popularity supposed,
and under present conditions, the
banks are disinclined to continue such
loans.
The National City Bank, in referring
TO frozen credit in its June letter,
says: "ln the Northwest, it - u1xent
that grain be moved, and yet in That
region there are Is per cent fewer
box cars than are needed. As a re-
suit, It has been necessary to extend
paper, which should run only ninety
days, to eight and even ten months,
because the owners of the grain can
not realize on it. In the same way
the tie-up Of transportation has had .
disastrous effect upon our entire in
dustrial and commercial life. Until
this great problem is solved, the busi-
ness life Of the country cannot con-
sinuc to function properly"
No Reduction In Credit
And the Federal Reserve Bank, of
Sex York, in its current monthly let
ter, made public to-day, says: "In the
last thirty days there has been little
or no reduction in the volume Of credit
As reflected either in the loans Of the