The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1922-08-28
TOPEKA STATE JOURNAL
Information Bureau
FREDERIC ,. HAsKIN. Direcssr,
Washington, ID. Q.
BANKERs GO INTO TRADE.

BANKERS GO INTO TRADE.
Washington, d. c., Aug. 25.-Now
that the business depression is over
and the settlement of the strikes
promises to bring the United States
back to the path of normal CONNER
cial and industrial activity. the expert
ences of the last two years are being
recalled by business men and finan-
ciers with much interest These ex-
periences are being studied in many
aspects for the benefits which they
may bring in the meeting of the next
business crisis.
One of the curious examples of the
by-products of the two years depres-
sion has been the extent to which il
has thrust American banks into indus
trial and commerciaY activities.
A bank is a dealer in money and
credit-especia1ly in credit 1t is not
normally equipped to deal in goods
and heartily dislikes to do so. Good.
crisp banknotes and neatly catalogued
portfolios of bills, drafts and checks
are the things the banker is trained
to handle. For this purpose he uses n
handsome edifice with such acces-
series as a cleaning steel safe and
polished brass bars. He is thankful
that he does not have to handle gross
and unpleasant objects such as the
wares of the dealer in fish or pota-
toes.
But the last two years changed
remembered that when the end of
the war brought about economic con-
ditions thruout the world which
caused contraction of credit first in
JapanH then in the United States and
South America and. then in Europe,
many merchants and producers and
middlemen were caught with high
priced goods on their shelves which
they had bought with borrowed
money. The fall in prices prevented
them from selling at a profit, or even
at cost The unwillingness of the
public longer to pay war prices for
anything-the economic phenomenon
which was known as the buyers strike
and resulted in such manifestations as
the overall movement - prevented
many of them from selling anything
at any price
When bankers lend money to mer-
chants, goods are assigned as the Sc
curity In normal times it is rare in
deed that the security is called for by
the bank. In the first place, 1t usually
is worked off on the public and the
lean it secured is paid. Even in case
of mercantile bankruptcy, the security
consisting of goods is juggled around
thru connections of the bank in some
way so that the bank gets cash and
the goods are handled by some one
else.
Bankers Become Merchants.
But where business from one end
to another of a great country is stag
nant and the public will not buy, there
is no one who will take the goods
readily. This was the condition in
which American banks found them
selves up to a few months ago There
were thousands of failures of store
keepers who owed money to the banks
and there was no one on whom the
goods securing the loans could be I'M
loaded. The banks had to take the
goods.
The story is told of fur merchant
in Chicago who had borrowed large
sums on a stock of furs. He had
bought before the price fell, in the
expectation of selling in a few weeks
and paying his bank loans. The de-
preston came, business fell away to
nothing, his notes came due and the
president of the bank for a renewal
of his notes. The banker said this
was impossible. The fur merchant
thought the matter over for a few
moments and then said to the banker:
Have you ever been in the fur
business ?"
of course. the banker answered,
NO"
well. you are now" said the bank
rupt merchant.
could not pay the loans, so the bank
had to take the security, which was
a stock of furs.
This has been repeated in all lines
of business, and banks in every state
have found themselves in actual pos
session of goods because the notes
which the goods secured could not be
paid.
The great New York banks have
even found it necessary to establish
separate merchandising departments
and at least one New York banking
institution has what almost amounts
to a department store, so many kinds
of goods has it come into possession of
49, \ Co. -A,s
staff of statesmen to sell shoes, auto
hairpins, steam shovels, chem
icals and a wide variety of other
commodities.
A notably curious example of this
bank merchandising took place in
New York when the depression was at
its worst. One of the larger manufac-
turers of sweet chocolate was forced
by the business situation into a posi-
ton where it could not meet promptly
a note for some 100000 which was
secured by the product of the plant.
When the loan was made, the bank
merely named the product as a mat
ter of form. The result was that when
the manufacturing company could not
pay, this bank found itself in the
possession of what to any American
small boy would seem the greatest
treasure of which the human mind
savory and succulent sweet chocolate,
all done up in tin foil packages of 5
and 10 cent sizes.
Unloading Candy.
In the slang of trade, the bank was
stuck if ever a bank was What
bank could do with 100000 worth
of sweet chocolate was too much for
the staff of competent financiers at
the head of the institution. First they
turned to the usual channels of trade, |
the jobbers and wholesalers. There
was no market; the stores were not
buying chocolate. They were stocked
up.
executive of the bank conceived an
idea. He thought of the army of the
concerning which. there
l,nd han much hlirif1, q realized |