New-York tribune., 1920-12-27

were frequent, there was greater par
ticularism in banking and less Of a
desire to cooperate. In the present
situation the guardians of the banks,
linked together by the Federal Re-
serve, ind joint effort more natural
the unusual number Of bankers COM
mttees.
When bankers committee is formed
by banks which are unable to collect
their commercial loans to given busi-
ness organization, the banks often
designated representatives to partici-
pate in the management of the COM
pany. The banks are usually able to
get the business enterprise to accept
their plans, because it is always pref
cradle to the alternative of bankruptcy,
which is costly in respect to court and
lawyers fees. Moreover, receiver
ship involves the forced sale of as
sets, which usually means liquidation
at the expense Of values. Then, too,
even In times of severe depression,
bankruptcy adds nothing to the repu-
tation of a business, but often impars
not only its credit in trade circles, but
also tho value of it's trademark with
the consuming public.
Where bankers committee is
formed the banks involved usually
agree not only to extend maturing
loans, but often put additional money
into the enterprise to permit it to
carry on its activities. Such an ar
rangement is possible only where q
by frozen condition, usually where
Its inventory Is too heavy in proper
ton TO It's liquid funds. Where a con-
Germ Is not in this congested condition,
but really insolvent-that is, where as
sets. realizable and deferred, are
smaller than iabilties-there is no
safe alternative to bankruptcy The
essence of the bankers committee idea,
in a sense, is informality, and usually
little or no publicity is given to the
arrangements.~ In the fur industry
and the raw silk industry the rescuing
squads from che banks have been es-
pecially active.
Out of the rapid changes in business
activity the economic theorists find
the material for their endless wrangles
about cause and effect. The foes Of
the quantity theory of money, which
attributes high prices to dispropor-
tionate increase in currency Cor, more
strictly, purchasing power), have seized
on the debating point that COM
modify prices in the wholesale mar
ket have tumbled from 35 to 40 per
cent from the peak this year, without
any corresponding decrease in cur
rency and bank loans. This argument
has shaken the faith Of many of the
quantity theories. But the obstacle is
not insurmountable. Although bank
loans and currency have not decreased
in manner that corresponds with the
falling of wholesale prices, there has
been real shrinkage of effective pur-
chasing power. The stoppage Of con-
sumer buying halted the processes of
trade and loans became CONCEALED and
frozen. Although the credit still exists
on paper, in Its present icy state it is
ineffective, and for practical effect on
prices is virtually non-existent.
In the stock market last wee}. tech
nical factors so completely eclipssd
economic developments that it would
be futile to rationalize about the fuc.
tuations. On Tuesday liquidation was
on greater scale than on any other
, day in the year. The number of securi
ties bought and sold was the largest or
record and the volume of activity was
the greatest since the spring. With dra-
matte swiftness on this day values were
e1aced and tho lowest prices of the yeal
were quoted on most industrial stocks
Railroad securities were sacrificed too
in the excited rush to dump securities
on to the marketplace and conver
them into cash. Evidently the i'm
| c,,1sa for tho dowpyyard ewear or;o,