Evening star., 1932-02-05
Special Dispatch to The Star.


NEW YORK, February 5.-The
Standard Statistics Co., Inc, has Is
sued the following statement:
At their present prices good bonds
and good stocks have discounted every
major and every minor catastrophe
that can possibly be foreseen excepting
only one. That one is a general col
lapse Of the American credit structure
We do not believe that anything thai
is at all likely to happen in Europe
will bring about further serious defa-
ton of American securities. We do not
believe that anything that is likely tC
happen to American business can bt
sufficiently bad to bring about further
important declines. And If there were
| assurance that a general collapse Ot
credit had been averted we would be
willing to underWrite the proposition
that sound corporate securities are not
only cheap at their current levels but
Girt cheap, and barring minor tech
nical recessionS could go in only one
direction.
There is, then one outstanding ques-
tion the answer to which must be
sought at this time. This is the ques-
ton: Does the Reconstruction Finance
Corporation insure against the credit
| collapse? In other words will its
operations avert major banking diff
culties and wholesale railroad insolv-
encieS2
We believe the answer emphatically
is that it will.
Appropriation Adequate.
The effect of this bill might we'll be
virtual guarantee Of bank deposits
without specifically committing the
| United States Government to such 6
dangerous policy, The act itself has
| been very carefully thought out. The
appropriation provided appears TO BIZ
large enough TO meet any possible re-
| GuirementS.
The Reconstruction Finance Cor
poration can be considered as a huge
| liquid fund available to all the bank;
as need arises, monies loaned to bt
returned to the corporation by each
individual bank Immediately that theil
period Of stress is passed and there
fore available to any other bank.
While it is Of course impossible fol
any one outside of the management
! TO say with positiveness what policies
this corporation will pursue it is pos.
| sible to say what they could do anC
the personnel Of the board is Of such
experience that there can be no doubt
that they will follow similar or better
| policies.
The job Of this corporation is to re.
store the bankers confidence in hi
own banks ability to meet any possible
! demands The corporation may b.
able to give him this assurance with
out the expenditure Of cent, by tell
! ing him that, If and when, the neces'
sity arises those assets which he pos
sesses and which heretofore he has fel
were non liquid will be. in time O
acute stress, good collateral for loan
and have therefore now become liquic
! by the very reason of the formation
! Of this corporation.
! If the *" bank has loaned the Y
/ corporation 100000 which, unde1
normal conditions would be entitled Il
reasonable credit and whose loans arr
! eligible as collateral for the Recon
struction Finance Corporation, it i
reasonable to suppose that the cor
| poration will tell this bank that the,
should renew the loan, and, in fact
| extend further loans. with the full as
surance that if they do so and ar
| so unfortunate as to experience heaE'
| Withdrawals. threatening their posi-
| ton. that the Reconstruction F1nanc
! CORPORATION will be glad to extend t
them all possible aid and will accep
/ this loan and other similar loans Whlcl
/ they possess as collateral.
We do not believe that an attemp
/ will be made to Immediately take owe
| through this corporation loans iron
banks which still have the Confdenc
| Of the public, merely to make Sucl
banks a little more liquid, and tn
worries Of whose officers are NOR
mental than they are actual.
The proper Interpretation Of this bill
bv bankers should be that each il
! effect has a $4,000, 900 900 pool behinC
him which permits the bank to extent
loans. buy securities and operate in
normal way.
The character of the board gives tht
| necessary assurance as to their abllt,
and courage to take whatever action
required to meet the emergencies which
NAV arise. AS a matter Of fact,
rortion of the board have recor(
of having previously. through the me
oium of the War Finance Corporation
done a similar job They not only &C
complished the purposes for which I'M
corporation is designed, but were aoI'
| to report to the American public With
| in a few years that they had operated
at profit. We are justified IN be
Iieving that this corporation VIII oo
tain equally satisfactory results
| The major weaknesses in the credl
| structure at the present moment Whlcl
! the Reconstruction Finance CORPORA
| ton must eliminate are BANK 1alIure
and threats or public fears OF Wlole
sale receivershipS of our major rallroa'
| companies. There can be no DOUBT a
to the ability of the corporation u
| make a definite statement, if they will
| to the effect that the second worry cal
| be eliminated. They can, If they se
| fit. make a definite promise to adVanc
! the necessary funds if they are no
| available through ordinary channels, u
| prevent any major railroad bankrupt
! cies.
Aggressive Action Needed.
The first undertaking, and the on
which is of course most important, l
much more difficult. but can also b.
accomplished if action is aggressive
and courageous enough.
The fact that men of such calibe
| and public standing as Charles 9
| Dawes, Eugene Meyer. Andrew Mellon
| and the other members Of the boart
| have not only sponsored the organlza
ton of this corporation, but are willing
to accept responsibility for its success
| in itself justified the fullest degree o
| public confidence If these gentlemen
| can get over to the public. but particu
! larly to the banker, the idea that the.
! definitely mean to stop bank failures
bank failures will stop before the cor
| STOCK AND r