Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-10-15
POLE RULING AIDS
BANK CREDIT PLAN
Speedy Start of Operations
Expected After Meeting of
Corporation Board.
BY C. b. UPHAM.

Announcement by John w. Pole,
controller of the currency, that ma
tional banks may lawfully invest In the
obligations Of the National Credit Cor
poration is considered here Is a vital
element in the success OF the plan
for mobilizing the banking assets OF
the country. Numerous inquiries OF q
technical nature have been received
by his Office from national banks and
from Clearing House Committees rela-
tive to participation in the activities
of the corporation, some national banks
apparently not understanding the man
ner or extent Of permissible co-opera-
ton.
Situation Cleared.
BY his Endorsement Of the proposal
and his direct statement that the plan
is meritoriouS and should receive the
support Of all national banks, the con-
troller has cleared the situation, and
it Is now thought that the first meet
ing Of the directorate Of the corpora
ton In New Yorw this week will re-
suit In the speedy. initiation OF actual
operations, consisting OF the issuance
of debentures to subscribing banks and
advances of cash to those Offering pa
per for rediscount.
At the same time, the announcement
made by Mr.. Pole limits. to some ex-
tent, the potential magnitude of the
plan as originally devised. The ex-
pectation has been that banks would
subscribe to the fund being collected
by the National Credit Corporation 2
per cent of their time and demand de-
posts. The $3.50, 900 900 pledged by the
clearing house banks Of New York City
was calculated on that basis. The con-
trollers ruling, however, Is that ma
tional banks may invest in the deben-
lures Of the corporation to that ex-
tent only If it does not exceed 10 per
cent Of their unimpaired capital and
surplus.
banks In the United States Is approx
imately $1,200,000,000 and on that basis
the fund subscribed might conceivably
reach that total. However, 10 per cent
Of the capital and surplus of all banks
is only approximately $3.50. ZOO, 600.
This, Of course, leaves an ample mar
gin over and above the $500, ZOO, 900
fund contemplated All banks may be
considered alike in this connection,
since most States have laws and regu-
lations similar to those applicable to
national banks, limiting to 10 per cent
of capital and surplus the amount
which may be extended to any one
borrower.
- Clearing House Pledge.
It has been noted here with con-
siderable satisfaction, also, that the
$150,000,00Q pledge Of the clearing
house banks of New York, representing
2 per cent of their combined deposits,
is within the fixed limit of 10 per cent
of their capital and surplus. The COM
bined capital and surplus of the "a
members of the New York Clearing
House Is In excess Of $1,500, 900, 900.
There is precedent for permitting
national banks to subscribe to deben-
lures of this character. In statement
issued in 1927 by the Flood Credits
Corporation, of which Mortimer N.
Buckner was president, and in the
creation of which Herbert Hoover, as
Secretary Of Commerce, was active, the
following paragraph appears:
In reply to inquiries the controller
Of the currency has advised there Is
no objection to the purchase by nation
al banks of the bonds to be issued as
contemplated by Flood Credits Cor
poration."
The way seems now clear for COM
plete cooperation by the banks and
effective action by the National Credit
Corporation.
(Copyright, 1919