The Washington herald., 1921-08-13
EVANS STATES s2%'
OF OUR TRADE IS
DONE ON CREDIT.
Local Bank Official Says
1t Is Life Blood of
Business"
DEFINESEXPANSION
Limit in This Country Set by
Gold Reserves of Federal i,
Reserve Banks.
DEFINESEXPANSION

Credit is the power to obtain pres
ent wealth or the right to it in ex-
change for a promise to pay for It
in the future. according to Joshua
Evans, jr.. vice president Of Riggs
National Bank. in discussing the
Mature cf Credit and Its Uses
With Particular Reference to Loans
and Discounts before officers of
the Supply Corps. U. S. n. Credit
tills the soil, harvests crops and
transports them to market. draws
raw materials from the earth and
carries them though the various
stages OF manufacture into the fin
ished product, constructs railroads.
homes and highways. thus facilitat-
ing production and advancing civil
iization. While not money, credit
instruments serve all the purposes
Of metallic money except that of
legal tender. and as a rule bank
credit is more desirable than
money.
In modern use, continued Mr..
Evans. credit has developed to, such
a stage that it is estimated that 90
per cent o; the business of the
country Is done on credit. 1t has
been well said that credit is the
life blood of business" Wisely
granted and properly employed,
conditions Of banking are made
happier and a country's develop
ment and progress go on in an or
derby manner. When extended with
out regard for the purposes for
which IL will be used-without a
proper consideration of existing
economic ccnditions-and IL is used
to carry goods over the normal
turnover period or employed in
purely speculative transactions or
reckless expenditures for luXuries,
we have an undue expansion. bring
ing an abnormal advance in prices
with its consequent hardship upon
the community as a whole,
The limit of expansion of credit
in this country is measured by the
gold reserve held by the Federal Re-
This does not mean the maximum
amount should be outstanding at
all times. community is entitled
to all the credit necessary to meet
its legitimate requirements provid-
ing proper protection and security
can be given the grantor but no
more. THE banker should feel the
responsibility of seeing that such
credit is available. yet on the other
nand. he owes the community an
equal responsibility in protecting it
from the evils OF initiation.
We should therefore be at all
times informed as to economic con-
ditions so that a halt can be called
when the danger signals appear.
Kinds of Credit.
Credit may be grouped under two
main heads:
l. Private, when extended to indi-
viduaIs, firms or corporations.
. Public. when extended to ma
;ion. State, city, etc.
Private credit may be divided into
four divisions as follows:
/. Personal or individual.
2. Mercantile or commercial.
,. Banking.
4. Investment or capital.
Banking credit Is closely allied to
commercial and personal credit-in
fact. we NAV say that they are mu-
tually dependent, said Mr.. Evans. IN
conclusion. Through banking credit
the surplus funds Of a community
are gathered together; and mas
r5uch as experience has shown that
all depositors viii not desire their
money at the same time. banks are
able to loan to merchants and other
customers proportion of funds
which they have themselves bor-
rowed. This proportion varies ac-
cording to the character of business
done by the banks, which in turn is
usually influenced by the needs of
the community. As . rule a bank
may safely loan four-fifths of its
deposits.
Usually the borrower from the
bank does not take the actual cash,
hut accepts a credit in his account
on the books of the bank. with
'drawals to be made at will. by check,
II the borrower be a business man,
and the credit obtained for use in
his business, we have the creation
Of a commercial credit II. on the
other hand. the borrower be an in
lividual. using funds to satisfy per-
sonal wants. we have the creation
% a personal or individual credit.
This shows the close connection be-
tween banking. commercial and per-
sonal credit
Local securities.
Bonds occupied the limelight on
the Washington Stock Exchange
yesterday. $1,000 Potomac Electric
first IS selling in 81 900 lots at S91z.
Potomac Electric debenture IS sold
TO the extent of $1,000 at 941A, and
five shares of Federal National
Pank stock sold at 10.
Call money again ruled. 5I5 per
cent bid for 81 per cent fund.-.