Evening star., 1933-10-02
R.E.C. LOAN CHARGE.
TO BANKS REDUCED
Roosevelt Tells Jones Normal
Credit Requirements Should
Be Provided.
BY the Associated Press.

BY the Associated Press
President Roosevelt believes banks
should provide the normal credit re-
quirements for business" for otherwise
the recovery program must suffer"
He presented his views in letter to
Jesse Jones, Reconstruction Finance
Corporation chairman, approving a re-
duction from S to 4 per cent in the
charge for r. F. c. funds to banks
through preferred stock purchases.
Jones made the letter public
simultaneously. the National Recov-
cry Administration set October 9 for
starting Nationwide Buy Now" cam
paign, in another contribution to the
concerted Federal effort toward credit
expansion.
"On this basis" the President said of
the plan for l per cent cut in interest
or dividend costs, "a bank can afford to
increase its capital by issuing preferred
stock to the R. F. c. or its own stock
holders and if it is found the added
capital cannot be profitably employed,
the stock can be retired"
Mr. Roosevelt said many banks are
more liquid than they would like to be
and that mo one wants them to make
unsound loans" but he added:
Certainly no class of our citizenship
Is more interested in the recovery of
business than the bankers. and We need
their confident cooperation in restoring
settled, uvable conditions for all OF our
people.
Through participation in the R. F.
c. preferred stock plan all banks Will
be aiding in an extra effort to provide
Eooh hanl will he a0uollV -
ognized as cooperating to meet the de-
mands of commerce and industry and
at the same time to establish a strong
Nation wide banking system, capable OF
withstanding any demands that may
be placed upon it."
Mr.. Roosevelt said the Government
had no desire to control the banks
through preferred stock ownership.
The sole purpose" he said, lis to
strengthen our entire bank capital
structure SO that all banks will be in
better position to assist in the recovery
program as well as to qualify for de-
posit insurance as provided in the
Glass -Steagau act of 1888"
Hugh S. johnson made the an
nouncement for the N. R. A. buying
effort. He said:
without the ballyhoo. red fire and
hurrah of the ordinary drive every
available medium will be util-
lied to reiterate that the inevitable re-
suit of successful program to put
men back to work will be higher prices
1T will be shown that now is the
time to buy because hundreds of thou
sands OF men are returning to work
and that the increased cost of every
factor entering into the production OF
every commodity must quickly be re-
fiected in higher prices if the recovery
movement is to be permanent"
The move approved by President
Roosevelt Is one of series being made
by the administration in an effort to
bring about betterment of credit con-
ditionS
The Reconstruction Corporation Fri
day issued rules under which it will sup
ply money to banks at per cent to be
reloaned to business on short-term
notes, for six months or less at not to
exceed per cent interest. These loans
are to be made only to firms complying
fully with National Recovery Admins
tration codes.
The full text of the Presidents letter
to Jones follows:
Dear Chairman:
Il am entirely agreeable to your sug-
gestion that preferred stock or capital
nOleS WHICH CIle ReCOllSITuCClOn FINANCE
Corporation may subscribe for in banks
and trust companies, bearing S per
cent dividend or interest rate, that is
retired within three years, be allowed a
refund of per cent per annum, max
ing net of per cent.
"On this basis. bank can afford to
increase its capital by issuing preferred
stock to the r. F. c. or its own stock
holders and if it is found the added
capital cannot be profitably employed,
the stock can be retired.
Il appreciate that many banks are
much more liquid than they would like
to be, and that they want to make
loans, but for one reason or another
are hesitant. No one wants them to
make unsound loans but they should
provide the normal credit requirements
for business. Otherwise the recovery
program must suffer.
Certainly no class of our citizenship
is more interested in the recovery of
business than the bankers. and We need
their confident cooperation in restor-
ing settled, Hvable conditions for all of
our people. Through participation in
the r. F. c. preferred stock plan. all
banks will be aiding in an extra effort