Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1921-11-21
CONTROL OF CREDIT.

occasion OF any sort without saying anything.
CONTROL OF CREDIT.
Extreme socialism would dispense entirely with
credit because it maintains as one Of its principles
the abolition of private property. If there were nc
private property there could be no such thing as
personal credit; hence, in a completely socialized
state, the element of credit would be lacking
entirely.
There are however numerous socialistic plans
which stop short of the complete and immediate
abolition of private property, and these undertake to
provide for the handling of credit by means of the
creation. OF publicly owned and operated banks, of
which the Bank of North Dakota Was intended to
be a sample. Had the Bank of North Dakota plan
been permitted to be worked out, it would have re-
suited and was intended to result in the abolition of
the private bank and the establishment instead there
OF a string of branches or subsidiaries of the cen
trail state bank. These local agencies, cooperating
with the central body, would control and handle the
credit of the state; would be the custodians of its
funds, public and private; and would transact, in
general, all the business that is now transacted by
private banks.
The ideal sought by the promoters of this
scheme is the national bank with subordinate agen-
cles throughout the entire country by means of
which the whole credit of the country would be con-
trolled by one concern. It is difficult to conceive ot
a more dangerous power than this placed in a few
hands. The public institution so organized would
be controlled by whatever political group happened
" NC III NlldlSC VI LIS 1ldIlOHdl OF state aQHnlnlStra-
ton for the time being. There would be the con-
slant temptation to use the power thus created for
the promotion of political schemes, for the extern
sion of official terms of office, and in general for the
private or factonal advantage of the party in power.
There would be lacking also the element of COM
lpet1t1on, which, as matters now are arranged, tends
to bring about a distribution of capital where capital
is most needed; to fix interest rates in accordance
with supply and demand of capital, and he hazard
in handling it, and to enable persons who are really
V%S$1o ~ ~o1s4 ~. s~A-. e
condition to obtain that credit regardless of person
al or political enmitres which are sought to be used
against them.
The banking business, as at present organized,
while it necessarily tends to centralize itself here
and there, is absolutely devoid of a general central
%ization. Banks are organized, either formally or
practically, into groups according to the business
affiliations of those interested in them, and there is
among the several groups competition for deposits.
lcompetition in the distribution of loans. competition
IN every element OF business. The prospective Dor
'rower may not be on good terms with the people
| managing one of the banks in his town, but if he is
really entitled to credit, he can go to the rival bank
and make satisfactory arrangements with it, and
there is thus throughout the entire system an e]e-
nent of competition which prevents the individual
from beng frozen out and deprived of the credit
which he is normally entitled to.
lhe private banking system is sub jected to the
influence of competition in the fixing of interest
rates as the publicly owned bank would not be. If
the banking business OF the country were entirely in
government hands, interest rates would be fixed ar
bitrarlly. The could not be fixed in any other way
because there would be no element of competition to
determine what interest rates were warranted in
particular localities. AS it is, rates of interest are
governed by a number Of conditions arising out Of
private competition. Borrowers are in competition
among each other for loans investors compete with
each other for loans of the most desirable character /:
and out of this general competition, there is reached
an equaslon which establishes interest rates and
causes capital to flow into the localities where there
exists the greatest legitimate need for it.
Under a public banking business, this element
would be entirely destroyed. All the work would
be arbitrarily done, and subjected to political con-
sion of the handling of credits from its proper f1,nc-
ton of promoting the economic welfare Of the coun-
try to that of promoting the political interest of
those who happened to be monentarily in charge.