The Birmingham age-herald., 1921-09-25

II HE BlKMlC cline an application for a loan in a way which leaves no sting, but which, on the contrary, gives the applicant the impression that the rejection of his application Is favor to him. But not all bank officers have such tact. Some are frank enough but their bluntness hurts the feelings of the would-be borrower. It Is not un- usual, therefore, for bank officers n declining loans to look for a buffer, or someone to whom they can pass the buck" In the old days, the board of directors was made useful in this capacity. By way of illustration, I am going to tell You a story which was told me by native of North Carolina, and who by the way, was one of the best citizens that the old North State ever gave to Alabama, the Hon. Joseph F. Johnston, who was governor of Alabama for, two terms, and who died some years ago while he was senator of the United States.
 He was formerly president If a bank in Birmingham and he used to enjoy telling this joke on himself. It seems that one day a man, whom I shall call Jones, who had no credit responsibility and no visible means of support, but who was an all- around good fellow and had some little political influence in local cleo tions, came into the bank and wanted to borrow s200. Governor Johnston asked him what collateral he had.
 "'Wells said Jones. T haven't any. If l had collateral I would sell it and l would not want to borrow any money.
 We'll Governor Johnston said, Who is going to indorse your paper. for you?
 Jones replied, T don't know any body who will indorse my >aper. want to borrow 1t on my own name'
 Governor Johnston was Anxi ous not to offend the fellow, so he said: I will tell Xou what I will do. cannot promise off-hand to let YOU have the money, but l will see our di- rectors about it and if they approve the loan l will be very glad to make it for you There were only seven directors and they all had offices in the business section of the town, so Jones got busy and went around and saw each one of the directors of the bank and he ascertalned also when the next directors meeting would be held. The day following the direc- tors meeting Jones came in with his note all filled out and said:
 All right, here is my note. Let me have the money
 Governor Johnston said: I am very sorry, my friend, I cannot make the loan. the directors turned it down.
 What Jones exclaimed, did they turn that loan down?
 Yes, they did.'
 We'll said Jones, that is very queer; l saw MT. A. and MT. B.; saw everyone of the directors, and they all said could have the money. All of them were in favor of it.
 We'll Governor Johnston said, I cannot help what they told you. I brought the matter up at the direc- tors meeting and they all voted to turn it down.
 Well, Jones replied, all I have to say Governor Johnston, is that and separately your. di- rectors are very clever set of men, but collectively they are the biggest liars in Birmingham.'
 Tn these days, however, bank of f1cers find in the federal reserve board of the federal reserve bank a much more satisfactory buffer than a local board of directors know or many cases where banks have round 1t very convenient to pass the buck to the federal reserve bank or the federal reserve board, and have stated to borrower or would-be borrower that they would like to grant the extension asked for or make the loan desired, but the fed eral reserve would not permit it. Such procedure has a tendency to relieve the situation as far as the local bank is concerned but 1t is certainly unfair to the federal re- serve system. This evasion of re- sponsibility has subjected the fed eral reserve banks to a great amount of unjust criticism and has given the wrong impression of the au- thority and attitude of the federal reserve banks and the federal re- serve, board. It has aroused indigna- tion which is entirely natural in the circumstances and has caused much with the federal re- serve board direct and with con gressmen and United States senators, whose ire has been aroused because of these alleged arbitrary methods.
 Tt is entirely true that a federal reserve bank mindful of it's respon- sibility under the law and acting in accordance with the dictates of or dinary banking prudence, may have had occasion to call the attention of some of it's larger borrowing banks to their large discount lines, which have run in some cases over a pe- riod of years. without being reduced, and have called the attention of the borrowing banks to the necessity of working themselves into a stronger