The Western news. [volume] (Libby, Mont.) 1933-current, 1933-10-12

more OTCQIt loans or money 10
Demanded those who want to
do business but who
haven't the resources after four years
of the depression to get going again.
Jesse Jones, chairman of the Recon
struction Finance corporation. has
made several speeches urging that the
banks make loans freely to the butch
er, the baker and the candlestick max
er. From elsewhere In the govern
ment, there Is the cry that more credit
shall be provided, credit here, credit
there. and credit otherwise. All of
which has moved observers here to In
quire, whittier goest thou. Uncle
Sam?"
Students of finance and economics
who are regarded as knowing their
oats tell me that there must be liberal
use of credit at any time In this coun-
try. It seems to be the system we
have built up. Now. more than ever,
! am told. Is there a necessity for lib
eral terms to borrowers. They predi-
cate their views ON that which Is the
fact, namely. that In every community
there are businesses that would like
to get going again on something like
a normal basis II they had the re-
sources. These resources. however.
have been depleted by four extremely
difficult years, and consequently the
business men have to proceed slowly.
But the continued shouting that
there must be credit has more to 1t
than Just the fact that money ought
to be loaned. The economists admit
frankly that other factors must be
considered. In the first instance. when
the banker of your community makes
loan, he loans your money that has
been entrusted to his care In the form
of deposits In his bank. In the sec
ond place, the business man who bor-
rows Is taking risk. for he has to
put up collateral security with his note
to the bank. and needless to say that
collateral Is always sufficient to Insure
the bank against loss. So, Ii the bor-
rover fails to make profit on the
money he borrows, or II he makes
bad guess ON the investment OF that
money, and loses, he not only loses
the amount borrowed but his collateral
as well. So. even If he has the re-
sources to put up the required collat-
eraI. he Ia going to think twice before
he borrows.
Summed up. therefore, the question
OF private credit or private loans on
liberal terms Is not limited to the
banks by any means. In other words.
you can lead horse to water. but you
can't make him drink. In this case.
sometimes there Is no horse to lead
to water and sometimes there Is no
water when the horse gets there.
But let us turn to consideration OF
government credit. The government
Is putting out money In dozen differ
ent ways and 1t Is using the semi-gov-
tenn. to put out other money. Yet the
same factors are influencing that stu
alton as those that are at work In the
field of private finance
When the federal reserve system
was created during the administration
OF President Wilson, one OF the dreams
OF Its sponsors was that 1t would make
credit easy, that 1t would provide
money when business needed 1t. This
has been found to be true. Banks that
are members OF the federal reserve
system have the privilege of discount
Ing notes they have taken from their
business-house customers, with the
federal reserve banks. What they do
actually Is sell that note to the reserve
bank and get cash for 1t, but they
agree to take 1t up In a specified time.
1t Is almost like borrowing from q To-
cal bank, except that the transaction
is between two banks instead OF be-
tween an individual or a corporation
and the local bank.
The federal reserve banks are oper-
ating now on what Is known as an
easy money policy.
Easy Money They are loaning
Policy money to the men,
Der. banks on dis
counts at very low rate of interest.
In addition, the reserve banks are en-
gagged In open market operations I'M
der which they are buying United
States bonds and treasury notes at
the rates Of about fifty million dollars
worth week. The theory OF this Is
that the reserve banks, having an elias
tic stock of money, will put ont cash
every time they buy one OF those gov
eminent bonds which are acquired
wherever they can be bought That
has put out cash, but from what the
flnanciers tell me the release OF that
currency has not resulted In banks
loaning additional funds to their Gus
toners for the reasons outlined above.
Since there has been no swarm of Dor
rowers at the bank windows, the cash
that has been put out by the reserve
banks simply has found It's way back
into the banks as deposits. What
then7 The banks have taken that
cash to pay off whatever debts they
have at the reserve banks and have