The news scimitar. (Memphis, Tenn.) 1907-1926, 1920-04-22
MEMPHIS BANKS
ARE CLOSING IN
UPON LUXUR|ES
Interest Rates Advanced to
Meet Federal Reserve In
CreaSe-No More Money
for Speculative Purposes.
MAY BE TURNING POINT
w. IN HIGH LIVING COST
Thousands of Bales of Cotton
in Warehouses and No
Market for Much of 1t at
Quotations.
By GEORGE Williamson

OuUldtlUIiS.
BY GEORGE WILLIAMSON
r.tas tshe9ugh 9g II has been weeks since
iead OF practically everything else and
TEND upward, the advance appears to
nave really arrived. as will be learned
when you undertake to float loan or
renew an old one with your banker here
or elsewhere 1t is becoming daily a
more common subject for discussion
ana is sharing honors with foreign
exchange. which during the past few
months Injected itself into the gabfest
OF the street car and shoeshine parlor
a1ter having so long been only for the
serious thought of the banker and finan-
cial expert.
., Although the legal rate of interest in
Iennessee IS per cent, a large share
OF loans being made by the local banks
cost borrowers or 8 per cent, with
much stricter scrutiny as to the loans
!, than has been exercised for several
= years. The national banks are COM
PEELED by their charters to keep with
in the limits of per cent but it is
said they are confining their business
10 taking care of their regular clientele
and compel borrowers to confine their
demands to absolute necessities.
The policy of the local bankers Is to
undertake to avoid being too conserva-
tive. yet they seem determined to put
on brakes before 1t is too late and II
possible avoid financial breakers
The purpose of every local bank, in
dicated by general discussion of condi-
tions and the situation with their
heads is to do nothing to cripple legi-
innate progress and endeavor but to
help people reef their sails a little be-
fore a possible storm shall burst. Their
slowness in doing so voluntarily and
the elevation Of rates to the banks
themselves has accentuated the atti-
tude of the bankers, who have been UP
to a few months ago confining their
efforts largely to offering advice.
Interest Raised.
Only recently has there been any ap-
preciable change in interests rates to
the average person, although the gov
ernors of the Federal Reserve banks
weeks ago showed them higher for the
announced purpose of putting a check
on living costs, the plan being to elmi-
nate the speculative element from bus
mess and trade as much as possible
and put check on extravaganza of ex-
. penditure. The last raise put the rate
for rediscounting mercantile paper, or
the promises to pay by the ordinary
merchant, dealer or manufacturer, prop
erly secured and indorsed. at 6 per
cent. Wbish-1neant that the member
hasfSs had to pay as much for bor-
rowed money as most of them had been
accustomed to charge their customers.
The policy was much discussed, with
varied opinions as to the wisdom of the
/ action, although all admitted it was de-
sirable to cut speculation in every di-
rection as much as possible, whether
in stocks and securities, real estate,
food necessities or anything else.
Visible effects of the action have
been rather slow in asserting them
selves. although every banker and well
posted business man have known foF
months that tighter money conditions
were ahead and would sooner or later
have widespread influence. Gradually
there has been drawing in of lines and
more talk of the price peak having
been reached in nearly everything.
People have been given concrete rea-
sons for paying more attention to
economy of expenditure and outlay, for
they have seen borrowers forced to pay
higher rates for renewal of loans as
well as many demands refused entire
ly. Much of this recently acquired in
formation has been disseminated quietly
and through mediums that are not to
be gainsaid, holding as they do the
chief supplies of money for satisfying
the requirements of those who borrow
and their number is unprecedented
even while prosperity reigns supreme
in these United States
Warning Sounded.
Rising costs of necessities. to say
nothing of what are denominated lux
uries, another corollary Of higher mon
ev rates, following tremendous infla-
ton and prolonged reduction of pro-
duction, have also helped to focus at
tention on some of the weak spots in
the business and financial fabric. The
warnings have been heard for a long
time, but only recently has the layman
given II much attention, while the
speculative element and those growing
fat from the apparent limitless reign
of prosperity, much of 1t more on pa
per than in actually has apparently
also been slow to realize that some day
would come time of reckoning.
One of the. factors helping to make
other sections of the South has been
the large amount Of cotton being car.
fed, awaiting the time when buyers
would want It. In this market alone
there are about $4,000 bales, worth
probably $50, 900 900, and of this about
two-thirds is unsold in the hands oi
the factors, "A big part of this cotton
is being financed by the local banks
There has been no disposition TO force
the holders to sell at a sacrifice. and
win probably not be. but 1t has resulted
in straining resources and making the
situation anything but comfortable fol
him who would borrow for other needs
The value may be in the cotton, ant
perhaps Is to the extent holders believe
but until 1t is sold to tho mills money
conditions will be very stringent.
Because of the banks having so much
money tied up In cotton and the fact
that they are daily sending large sums
Of money to other sections to gay fol
food and feedstuffs which might have
been grown In the South, they are do.
ing everything in their power to induce
enlarged production at home 50 thai
whatever cotton crop, is raised viii
not have 10 be sacrificed for another
season.
As to tho probable effects OF the
higher cost Of money there are many
theories. but 1t is generally thought
that one OF the first ones will be tC
turn the cost OF living downward. al.
though II can hardly go far without
considerable enlargement of produc.
tion In practically every line. Opinion
among the bankers here " that reduc.
ton In extravagances and more care.
ful regard to expenditures can help
( but the basic need is for more thrift
= greater output of necessities and more
work