Evening star., 1932-02-14
BY CLAUDE A. JAEGER,
Associated Press Financial Editor


| NEW YORK, February 13.-It is not
only the poor man who hides his thin
| bank roll in his mattress, nor alone the
rich man who stores away bundles Of
yellowbacks in his safe deposit box to
| whom the stigma of "hoarder" attaches,
says DR.. Warren M. Persons, prominent
economist.
Our largest corporations and our
strongest and most powerful banks" he
said in an interview today. are also
hoarders-surely not willful hoarders,
but hoarders in the sense that they are
piling up huge balances of cash. They
too. unwillingly, are choking of the
energizing breath of trade"
Urges Anti Hoarding Council
Dr. Persons urged the formation of
a council of industrialists and bankers
for the purpose of decreasing this
boarding and thus exerting pressure to-
ward initiating business recovery. He
saio the efforts of such council would
effectively tie in with the adninistra-
tion's reconstruction program.
He felt that the work of the Recon-
struction Finance Corporation and the
proposed liberalizing Of the Federal Re-
serve system should check bank sus-
pensions and 60 far toward restoring
that big business" must take aggres-
sive action toward initiating a normal
flow of credit. I'VE cannot sit back
and wait for business recovery" he
said Business must start it,
"InduStrialiSts have indicated to me-"
he continued. that they can put $780,
100000 of prime commercial paper into
the market within very short time.
Numerous leading industrialists have
expressed their willingness to do every
thing possible to initiate business re-
covery, but none of them feels inclined
to put himself forward and call to-
gether a group to suggest specific ac-
ton. If, however, an important Gov
eminent official would ask them to CO.
operate. 1 am sure the Government
would find ready response and inval
liable aid"
Importance Of Credit.
In order to get background to the
present paralysis of credit, and conse-
quently of business, he continued, the
layman should realize the fundamental
| importance Of the part played by credit
| in our everyday business transactions.
Money is but a small item in nor
NAL times Less than 10 per cent of
ordinary business transactions are set
| tied by hand money. We have some
| $50, 600, 100000 in bank deposits and
only about tenth of that in outstand-
ing currency. Bank deposits are about
80 per cent built up through credit.
| The banking system normally permits
our huge volume of business, or inter-
change of goods, to flow freely through
mere bookkeeping transactions, the bal
ancing off of credits and debts. But
| when we repudiate that time-tried sys-
| tenn and begin to scramble for that
10 per cent of money, then the ma
chine stalls.
"Our large corporations. in self-de-
fense. have been taking their deposits
out of smaller banks and piling them
up in the largest banks. The banks, in
turn. have been refusing to make loans
and have been selling securities to
maintain unusual liquidity.
Now, if large corporations many
of which have huge bank balances,
would leave their funds on deposit with
banks In localities where they do busi-
ness throughout the country and pay
for their purchases Of materials with
go and 80 day notes. which are in turn
rediscount at the Federal Reserve
banks, where they may be used as
backing for Federal Reserve currency,
an important start would be made
toward a resumption of the normal
flow of credit. Once start were made,
there would be q steady flow into the
banking system of these notes.
Bankers' Position.
Bankers are only too anxious to get
prime commercial paper Of this char
acter. The strongest corporations have
not been Issuing it because they could
v,av IN rasI, and the hankera havA not
wanted the noteS 'of weaker corpora