The Columbus dispatch. (Columbus, Miss.) 19??-1922, 1920-05-26
FEDERAL BANK CUTS
AUTOMOBILE CREDITS
Action OF Kansas City Reserve Bank
on Passenger Cars ArOuses
Industry.

Kansas City, Mo-, May 24.-The
Federal Reserve Bank Of Kansas City
has decreed that passenger automo-
bile paper is undesirable for re-
discounting. In less than week the
bank has declined approximately three
million dollars of this class Of credit
In the same period however, other
Kansas City banks have loaned in ex-
cess of one million dollars to motor
car dealers and distributors, while the
banks in the territory of which this
city Is the center loaned probably as
much more.
/ Trucks have not come under the
ban and the Reserve Bank has decreed
that ANY paper based solely on
trucks is acceptableS The exclusive
truck dealer can get credit when the
one who deals both in passenger cars
and commercial vehicles cannot. The
latter must depend solely on his own
banker, and the attitude Of the Re
serve Bank is finding reflection in
other institutions. This is the chief
menace Of the situation. State banks
not connected with the Federal Re-
serve System, which have hitherto
taken automobile paper without ques-
tion, now are becoming afraid of it.
The position Of the Federal Reserve
Bank was thus expressed by Carroll
A. Worthington, deputy governor:
Withdrawal of Man-Power.
"A certain percentage of passenger
cars are bought and used for pleasure
purposes. If it were possible to dis
criminate in favor of cars to be used
for utility, the bank would do so and
re-discount paper on cars to be so
used. But this cannot be done, obvi-
ously, since the dealer doesn't know
what use is to be made of the cars he
/ is receiving. We do know that the
passenger car industry is using an
enormous amount Of money and man
power at a time when money and
man-power are urgently needed for
essentials-such use by the motor in
dustry tending to increase wages be-
cause Of withdrawal of man-power
from other essential production.
Object to Maintenance Cost.
"We see right in Kansas City the
enormous sums spent on motor cars
offering a definite objective for cur
tailment of spending. Some of this
spending is essential, but we cannot
discriminate very well, and so have
to make the effort at curtailing the
entire industry. There are 10000
cars here, and 10000 of them perhaps
are used largely for pleasure-at an
average maintenance cost Of $500 a
year, or a total Of $15,0OO,0O0 per
annum.
Mr.. A. B. Eisenhower, assistant
cashier of the National Bank of Com
merce, who has kept in particularly
close touch with the motor industry,
said today:
Banks win continue to make loans
on cars to dealers who have we'll
established places Of business, they
will protect their customers. But
there will be curtailment. Fortu-
nately, few cars are being received
now, so that the issue is not we'll
defined as yet. But the next thirty
days will probably show unmarked de-
cline in the motor car business, I'M
less turn comes in the money stu
alton. The most important effect of
the Federal Reserve order is its moral
effect on bankers, dealers, real estate
men, and the public. II seems to me
that a mistaken impression is being
created as to the utility of the motor
car, and that perhaps an unjust ham
dicap may eventually be placed on the
industry. This may partly be the
fault of the industry itself and some
of the elements involved in its
financing"
The dealers in Kansas City are
awake to the perils of the situation,
and the board Of directors of the
Kansas City Association will take
immediate action, cooperating with
the national association.
Urges Dealers to Unite on Issue.
"The dealers must stand together
on this issue said W. J. Brace, pres
ident of the Hudson. Brace Motor CO.,
although it happens that his company