Evening star., 1933-10-17
Nquidating Bank Deposits.

gone-for good.
Under the plan announced yesterday
the newly created Deposit Liquidation
Board Is ready to advance billion
dollars of r. F. c. money in the iqui-
dation of assets of closed banks. The
release Of that much money to de-
positors, and its release In a relatively
short time, will of course represent a
boon to depositors. even though they
will receive only a portion of their
actual deposits. But while getting
money into the hands of depositors, and
getting 1t there as quickly as possible,
has been emphasized as a predominant
factor in the new plans, certain to
facilitate recovery, there are other
important elements. The closed bank
represents a greater liability to the
community than the loss Of the de-
positors' money. The process Of liqui-
dation under receivership Is usually
slow and usually ruthless. Assets are
liquidated under conditions which tend
further to depress value. Credit ma
chinery is paralyzed. There is uncer-
tainty and doubt. and forced sales to
liquefy assets add to the hardships al
ready imposed.
There Is the hope that the release of
percentage Of frozen deposits, under
the Presidents plan. will not only get
money into the hands Of depositors, but
will tend to lessen the hardships imposed
under normal receiverships. BY jan
uary / the administration has an
nounced that banks will be reorganized,
or in the process of reorganization, or
placed in receivership. That IS q nee
essary phase Of the deposit guarantee
law, which becomes effective, up to
A2,500, on the first of the year. And
the extension of credit by the r. F. c.
to aid and to expedite the liquidation of
frozen assets is doubtless intended to
soften the blow Of receivership.
The Presidents statement outlined q
plan for the creation throughout the
country Of special advisory and ap-
praisal committees, and the members
of these committees will be chosen from
local bankers, business men and farm
ers. In itself, this plan promises more
to depositors than would be expected
under the routine process Of the normal
receivership, which becomes q rather
arbitrary undertaking. Chairman Jones
of the Reconstruction Finance Corpora
ton amplifies the Presidents outline by
explaining that the Deposit Liquidation
Committees selected for each Federal
Reserve district are to assume respon-
sibility for appraising and certifying
as to the value of the assets Of banks in
(the chairman's) district" and the COM
mittees are also directed to urge State
banking commissioners and the con-
troller Of the currency "to have their
receivers make application for loans to
the r. r. G. with as little delay as pos
sible."
Nothing has been said in any of the
announcements as to the type of assets
that will be classified as acceptable or
not acceptable for Reconstruction FL
nance Commission loans. 1t goes with
out saying that those who assume re-
sponsibility for appraisal of assets for
loan value determination will be cau-
tious. But there is a great difference of
opinion today over the classification Of
assets. Some banks that have been re-
fused licenses to reopen have complained
bitterly that their assets are sound
enough to warrant claim of solvency,
but the Government. on the other hand,
examining the same assets, refused to
license them. That is, Of course,
the result in part Of the extraor-
dinary depth to which the depression
has plunged values, such as real estate
And If there is leniency shown In ap-
praising loanable value Of assets, it pre-
sumably will take into account the fact
that the r. F. G. is better able to hold
the bag" in the interest of depositors
than would be the credit available to
the bank receiver engaged in lquidating
assets under normal procedure.
In this connection Chairman Jones
mentions five years as "the probable
period for orderly liquidation" That is
as long as If not little longer than the
average period Of liquidation. and re-
poses q permissible degree of confidence
in the prospects Of recovery which
would appreciate value Of bank assets.