The Washington times., 1929-05-02
CREDIT CHECKS.
DISCUSSED BY !.
RUkEYSER
BY MERRYLE 8. RUKEYsER
| (CORyrEEht. 1ses. by URivsrsal
Services. Incl


The seemingly academic sug.
gestions of Harry A. Wheeler,
vice chairman OF the First Ma.
tional Bank of Chicago, before
the seventeenth annual meeting
of the Chamber Of Commerce Of
the United States in session here,
for credit conservation in reality,
represents a plea for nation
wide application OF a plan which
has already quietly been adopted
In Chicago.
La Sale street bankers, 1t is
understood, have notified invest.
ment banking firms to desist for
a time-possibly for as long as
six months-from bringing out
new security issues, in which
they have not already made COM
mitments. The banks, which at
the end of the winter when
brokers' loans reached their peak
for all time. were overextended
with loans based partly on un.
digested new local security Is.
sues. AS part of the readjust-
ment program. which has already
restored the ratio Of the Chicago
4 CuGAdl ISG6SENE 1OdAh " "AteNb 40
considered a satisfactory level.
the Chicago banks have closed
down on the underwriting of ad-
ditional new issues for brokers.
Seek Breathing Space
The theory is that a breathing
space Is necessary to enable cur.
rent savings to catch up with the
Overproduction of new security
offerings. Under the stimulus OF
favorable bull markets, Chicago
banks had for months encouraged
closed corporations to sell secur-
tiles to the public. and stimu.
lated other companies to merge
and to add to their cash re-
sources through the sale Of
securities. The banks played
hand in hand with the under
writers, for the activities not
only brought collateral loans to
finance investment purchases, but
also valuable banking business in
the form Of transfer agencies,
registrarships, new corporate
depositors, and also investment
accounts from previous private
owners who sold out to public
investors.
Gradually, as a result of encour-
aging such expansion, the Chicago
banks became heavily indebted to
the Federal Reserve Bank. BY the
outset OF the spring, the Reserve
Bank called a halt and asked the
member banks to cut down their
rediscounts. / am informed that
Srt-s II EfI~.
tually out of debt to the Federal
Reserve Bank. and that the Chi
cago "sore spot" has been relieved.
In liquidating, the banks not only
called loans to brokers, but also
insisted that individual customers
who had let collateral loans run for
q year or more cut down their in.
debtedness. Even where the banks
had themselves originally encour-
aged customers to buy stocks and
carry them in bank loans. the
banks in recent weeks have in
sisted that such loans be paid off
or reduced.
Take Own Medicine
Moreover, the banks also took
some of their own medicine, throw
ing overheard some of their own
investments. Banks have been re-
luctant to sell bonds below the pur-
chase price. Accordingly. some Of
the Chicago banks selected for sale
their best bonds which could be
disposed of without a loss. AS a
matter of fact, such bond losses
ere more apparent than real. They
are a mere offset to the additional
bank earnings resulting from pre-
Vailins abnormally high interest
rates. The same factors which en-