Evening star., 1931-06-24
FEDERAL RESERVE
GIVES CREDIT AIDS
Low Interest Rates and Open
Market Purchases Make
Money Cheap.
BY C. B. UPHAM.

A new York Representative has made
the serious charge against the Amer1-
can banking system that it is sitting
industry" to the extent of falling TO
provide credit for thousands OF manu-
facturerS and business men throughout
the country. In letter to the gov
ernor of the Federal Reserve Board ne
cites the case of a reputable" and
conservative" manufacturer who has
ordsrs on hand and is ready to employ
q number of men, but who is unable 10
secure the necessary financing at his
bank.
"a more encouraging attitude on the
part of the Federal Reserve System Is
urged upon Gov. Eugene Meyer so
that its assistance may be extended 10
the small manufacturers through their
local banks. The case cited by the
Representative is declared to be "a typi-
cal situation of manufacturers having
orders able to go ahead and unable to
obtain proper seasonal financing.
Discount Rates Low.
1t is difficult to see what the Federal
Reserve System could do more than IL
has dcne to encourage a resumption OF
active business and industry. 1t Is pur-
suing an openly announced policy d.
rected to that very end. The rates 1or
reserve bank accommodations are at un-
precedentedly low levels. Cheap creC-lt
end an abundance of it are being made
available by it's low rates to bank bor-
rowers. and by its operations in the
open market.
There would surely be no serious pro-
posal that the Federal Reserve Board
or banks interfere in the loan policies
of the member banks to specify which
loans should be made and which
refused. Indeed, any blanket statement
to the member banks that they pursue
a policy of leniency in the extension OF
credit in their communities, or, as CAL
win Coolidge put it, show faith and
courage" in business by making capital
available for profitable use, would be
probably both unwiSe and futile.
It is felt by many that the reserve
system should interfere with the credit
policies of member banks to the extent
necessary to protect Federal Reserve
credit from diversion into speculative
channels, but certainly it cannot be ex-
pected to examine the unsuccessful loan
applications of member banks and re-
verse the credit decisions of their Off
GERS. AS matter of fact, business con-
cerns and manufacturers which are good
credit risks and have maintained their
credit rating with sound banking in
stitutionS can get bank credit at the
present time on favorable terms. 1t is
not sufficient, of course, for an appli-
cant for bank credit to be reputable"
and conservative" Neither is it suf1-
cient that he have orders on hand
Those are elements that enter into credit
decisions by lending banks, but they
are not the whole story.
Credit Needs.
Some banks are not in position now
to make substantial loans to even sound
credit risks among their customers. 1t
is perfectly true that some small man
ufacturers, perhaps by no fault Of their
own, have dealt with local banking
houses that have either failed or are
in difficulties and operating on a nee
essarily excessive basis of credit cau-
ton. If such business firms have not
been of sufficient size to maintain out
side banking connections in larger
cities, they may now find themselves
in circumstances of credit need. But If
they are good credit risks, nearby banks
will be glad to receive them as Gus
toners. Bank representatives are look
ing for just such customers every day
in all parts of the country.
(Copyright. 1917