South Bend news-times. (South Bend, Ind.) 1913-1938, 1922-09-22
REVEALS PERTLS
OF FINANCING BY
MODERN METHODS
Speaker at Credit Mems Ban
quet Discusses Instability
of Stocks.

Modern Industrial Financing"
one that places industry in a PEE
carious position. was the subject Il
an address given last night ty T.. C.
Beerce. general secretary of The As
sociauon Of Commerce. Grand Rap
IDS Mich. al the first banquet OF
the season of the South Bend Asso
citation Of -redi- Men al the Oliver
hotel With HIM on the program.
was Col c. Seymour Bullock. muui-
clpal recreation director. who spoke
on "Facts and Fun on Figures
In the opinion OF Mr. Beerce
modern industry faces a porlous
situation because OF the methods
used In financing corporations dus-
-ng the past two years The lack
OF stability IN the method of fiGanc-
ing, the speaker pointed out. placed
these industries which when forced
20 compete in normal times with
such industries which have not been
financed al a peak era VII impair
the ability of such industries TO do
business.
The speaker particularly stressed
expanding corporations which bor-
rowed 10 the limit from banks aid
then sought further extension Iy
borrowing from the public through
ihe sale OF preferred stock There
is probably today more green and
yellow paper in the hands OF the.
private investor which is worth ess
Than ever before in history. Mr.
Beerce said.
Evils of High Financing.
For instance take concern
which sells It's preferred stock and
pays 25 percent TO selling agency
FOR dispos.ng Of it's paper. Then
further a bonus OF common stock
may be thrown in. Third a high
interest rate, probably eight percent
10 make the issue attractive. - OF
Tered. Then when normal times
come, the competing firm which
borrows at the bank at the usual
rate may sell for less than the ore
which financed during peak prices
and paid peak costs for such financ-
ing"
In tracing the preferred stock
sales. Mr.. Beerce called attention
10 tho banking history OF the past
few years. The banks. he said.
found that during 1917 they had 20
cal in their reserve funds from
New York 10 meet he demands OF
home town business men. anxious
20 keep a pace with increased turn
overs, increased merchandise values
old established banks found they
were below the legal reserve limit
80 they had to do one Of two things.
either raise interest rates or curtau
credit. They did both.
Well, then business men going
10 the bank found they could not
have the credit they had before. so
II they couldn't borrow money
from the banks. they borrowed Il
from the public Then came the pre-
ferred stocks swee.ened with all
kinds Of attractive features. which
IN normal times viii operate agasns-
the continued prosperity OF the
manufacturing establishment hnan-
ced under abnormal conditions.
Financing and Competition.
In other words these concerns
which financed a. heavy cost. sold
preferred stock with high interest
rates. must compete with those con
Germs which retrenched or had
reserve depreciation fund. and
which in normal times viii be able
20 borrow al established rates from
banks. Cost Of financing must com
pei the manufacture or business
man 20 sell a. an rice which VIII
enable him 10 meet Obligations. and