Evening star., 1933-10-16
CLOSED BANKS
u ASSETS VALUED
Government Places rs Cents
on Dollar as Figure for
Lending Purposes.
BY DAVID LAWRENCE.

Twenty-Five cents on the dollar
that's the valuation which the Govern
ment places on the assets Of the closed
banks Of the United States for lending
purposes.
TO put it another way. the book as
sets of the closed banks are supposed
to be in the neighborhood of $4,000,-
O00, 900. But there are inevitable losses.
a long period of time, more money could
Of course be obtained than If the as
sets are dumped on the market for
forced sale. The record of so years
shows that closed banks pay back
on an average about 66 cents on the
dollar.
Present indications are that this av-
erage will not be maintained. The
Government has had several months
in which to examine the assets and
appraise the wreckage Of 1929 and the
speculative era. So when it is finally
decided to make available at once Is
cents on the dollar, or approximately
81 ,000, 900 600, it merely means that the
Government has come to the conclusion
that it is safe to lend that amount
and hold the assets for gradual nqui-
dation. If, of course. the assets bring
construction Finance Corporation will
get back its loan and then everything
in excess of the loan will be paid to
the depositors of the closed banks.
Usual Help Diminished.
One of the reasons why the closed
banks Of these days are not going to
get as much money back for their
depositors as in the preceding periods
Of history Is that as a rule stockholders
are compelled to pay double assess
ment on losses sustained by q bank.
But nowadays the stockholders in most
instances are financially unable to meet
such assessments and hence the usual
reservoir Of help for the depositor is
materially diminished.
assets is necessarily accurate, partic-
ularly with respect to loans made on
real estate by some of the banking in
StitutionS now closed. There may be a
considerable appreciation over the next
few years. That's one of the good
points about the Governments plan to
lend 25 cents on the dollar now. A
part of the money Will get into circu-
lation at once and then the Government
will patiently liquidate the balance, the
r. F. C. can afford to wait five or even
ten years for the repayment Of its loan
and will not press for payment in such
way as to imperil the assets re-
naming.
Puts $1,000, 200, 900 to Work.
While s1,O00,OO0,O0O is a relatively
small proportion of the depositors'
money to recover. and there is no telling
whether there will be much more. still
this amount of capital can support four
or five times that much credit. 1t Is
equivalent to putting $4,000. .000,0 to
work For these days It IS the velocity
of money and business transactions
which has more to do with economic
recovery than the quantity of dollar
bills available. Spending is more i'm
portant than excess reserves IN the
bank. Money has to be put to use in
order to be effective.
Putting a billion dollars OF capital
back into trade so it can be multiplied
into commercial and financial uses IS
therefore one of the major steps OF re-
covery. Also it should not be forgotten
that while Sc cents on an average used
to be returned to the depositor, the
amounts were made available gradually
in the first year after a bank closed.
Releasing Is cents on the dollar out OF
all the closed banks within eight months
after closing is believed to be real
financial achievement. It is possible. OF
course. only through the resources OF
the Federal Government.
(Copyright. 1889