The Brattleboro daily reformer. (Brattleboro, Vt.) 1913-1955, 1922-03-18
BY DAVID LAWRENCE

iioBtGldl DtSpdLCiL " Il ~ ANSANA AAiNA'}
Copyright 1922.
WASHINGTON, March IS.-Small
town and country banks win be hit
hardest if the Fordney bonus plan ever
goes into effect in the opinion OF high
officials of the treasury department.
They believe that the city banks which
ordinarily do not make small loans or
even take small deposits will not bother
with the requests-that the adjusted COM
pensation certificates be exchanged for
cash. The large banks also are in a
strong position to refuse because there
is no legal compulsion on them to honor
the certificates.
The small banks. however. will not be
able as readily TO decline to lend money
because, in small communities, the rela-
ton between the would-De borrower and
the banks is bound to be so intimate
that refusal might prove embarrassing.
This means that the country banks will
have to dig down into their capital and
reserve to meet the loans and while they
can appeal to larger banks to help them
out. this process IS by no means a safe
one to count uDon. The provision has
been inserted III the Fordney bill where
by the banks can rediscount the certit4
Gates at any banks except federal re-
serve banks.
Inasmuch as chairman Fordney has
listed the advantages of the new meas
ure which he has drawn, treasury otl-
cials are listing the disadvantages OF
the bill in the form proposed. These
disadvantages are:
First. the country banks and the
banks in agricultural districts which are
already stTaining to the utmost to meet
the demands for loans by farmers, and
already overloaded with loans, viii find
it hard to get the money to cash the Ger
tiheates of the service men. --.-
Second, the country banks which do
have the money Will have that much less
to lend for productive purposes.
Third, the increase OF at least 5000,
100000 in credits is an imitation which
might be justified if the money were to
be employed in financing agricultural and
manufacturing or other productive en-
tcrprises but will prove mere eNpan-
sion of credit from an economic view
point.
Fourth. the whole transaction is an
indirect government credit and weakens
the government S position by about -FOUR
billions of dollars, for Chairman Ford
ney now admits that the burden by ly45
will amount to that much An addition
of more than,fouF billions. to a war debt
of twenty three billions IS likely to tie
press the value of government securities
Fifth, the Fordney plan does not take
into account the number of men who
may default on their borrowings. Under
the system proposed, a man who Dor
rows one half the total amount OF his
certificates will get the remainder OF the
value of his certificate in three years.
In other words, the treasury department
automatically Will have to redeem the
certificates held by the banks and also
will be required at once to pay the sery-
ice men the remaining sum due rms
means that to get cash quickly. the de
faultiHg process win be resorted to. IL
will not be like defaulting on an ordi-
nary loan but Will merely mean casling
i'm advance a certificate which Is worth
with interest a specified sum depending
uuon the number of DAYS a soldier or
sailor served in war While it Is true
that those who do not default will get a
slightly increased amount in 1913 when
the certificates finally become due, trea-
surv officials exnect that the majority OF
service men will prefer to cash their
certificates at the bank while the banks
in turn will look to the treasury to re-
deem them within three years. There s
the whole criticism in q nutsheli-the
treasury considers the Fordney plan to
be observation-disclosures to the banks during
the next three years and then imposes
heavy burden after that on the govern
meat itself Instead of four billions OF
dollars i'm ~ wears. the experts estimate
that a large part of that amount would
be added TO the public debt IN the next
three wears to meet the certificates that
will be presented by the banks to the
government for redemption. In that
event. the treasury believes increased
taxation would be the only way out.