Evening star., 1934-06-27
JONES REASSURES
BANK DEPOS|TORS
Forum Speaker Says Pay
OFF Will Be at 65 Per
Cent Rate.

Depositors in banks that have
closed in the past three years are ex-
pected to get about IS per cent of
their funds back, Jesse H. Jones.
chairman of the Reconstruction FL
nance Corporation. said last night in
speech in the National Radio
Forum.
The forum. arranged by The Star.
goes over a coast-to-coaSt network OF
the National BroadcaSting Co.
Jones speech dealt with the loan
ine activities of the R. F. C. in rela-
ton to industry. in which it CO.
operates with the Federal Reserve
system, as we'll as to closed banks.
Beats Average Mark.
OF $4,000, 100000 in banks closed in
1898. Jones said, about one-half
has been distributed to depoSitorS.
In comparison to the 65 per cent he
expects eventually to be returned. he
said that for the IS years previous to
the depression era. closed banks re-
turned about So per cent.
Jones emphasized that the corpo-
ration will not advance money to pay
off all deposits. pointing out that
some bank assets are not frozen
but are losses" and regardless of
recovery. will still be losses"
Jones said he expected the R. F. c.
authorization for loans to industry to
run anywhere from $500 900 900 to
$1,000, 900 600
Text of Address.
The text of Mr.. Jones address fol-
lows:
The Washington Star has very
kindly asked me to discuss on its Ma
tional Radio Forum-industrial loans
and closed bank depoSits-both of
which were the subject of legislation
in the closing session of Congress. l
appreciate the opportunity thus af-
forded me by The Star and the Ma
tional Broadcastng Co because of the
Nationwide interest in these sub
jects.
1t became apparent months ago that
many small and medium sized indus
tries we're without working capital or
credit. and that recovery was being
retarded to some extent because OF
this fact A great many such indus
tries have lived up their working capt.
tai and have neither available funds
nor credit with which to buy materials
and pay labor and processing taxes,
even when they have orders from re-
sponsible purchasers.
Under the law. the Reconstruction
Finance Corpora ton could not lend
direct to industry, but endeavored to
be helpful by permitting groups of in
dustries to organize mortgage COM
panies through which to borrow from
the R F. C.
Plan Proves UnSa satisfactory.
This plan proved unsatisfactory. and
while We have approved, as to credit
risk. a good many such loans-$2O,-
900 0OO-very few of them have ac-
tuallv been disbursed. Under the law.
as recently amended. we hope now to be
able to complete most OF these loans
direct. instead of through the mortgage
companies, and not require the appl-
cart to make new applications under
new regulations.
Wnen it became evident that the
demand for industrial loans could not
be adequately met under the existent
law. the matter was brought to the
attention of the President and he re-
&
the governor of the Federal Reserve
Board. and myself. to study the ques-
ton and make suggestions. This was
done and the result is that the Con-
gress authorized both the R. F. G. and
the Federal Reserve Banks to lend dl-
rect to industry in exceptional cases
where credit was not available at
banks
Undoubtedly there is a need for in
dustrial loans which banks are un-
able or unwilling to make, and II the
Federal Reserve, the r. F. c. ana 10
cal banks will Fundamentally CO.
operate. the need can be met.
Authorized to Make Loans.
The Federal Reserve is authorized
IN devote its entire surplus OF approx
matelv s139 900 900 to such loans, and,
IN the discretion of the Secretary OF
the Treasury, an additional Sl4O,OOO.-
600 to be furnished by the Treasury.
The r. F. C. is authorized to lend
up to $500 100000 to this class OF oor-
rowers. All of these amounts are, IN
fact. revolving funds, and when taken
with participations by local banks, We
will have available for industry loan
able funds aggrega ting. 1 should say
anywhere from $500 100000 to ST.
O00, 100000 -,
A great majority of these loans Will
he small. but some industries will need
more than the R. F. G. can lend 10
snv one borrower-namely S5OO,0OU-
limited by law: but if the Federal Re-
serve Banks. the R. F. c. and local
banks will cooperate. each partlcl-
mating in such loans, these applicants
can be accommodated.
7 want especially to call attention to
the fact that Congress also auCnorl1eu
the Federal Reserve Banks 10 olscouhI
this character of loans, with maturlties
running as long as five years, ana this
amendment to the Federal Reserve law
should enable and encourage local
hanks to make many of these loans
or at least to participate suostantlaily
in cooperation with the Feoeral Fe-
serve and the R. F. c.
Urges Financing by Banks
The current requirements of busi-
cess and industry should be
financed by the banks, and we
should all work to that emo
that is. to the re-establlSnment
of private credit. The R. F. G. WILL
cooperate with the Federal Reserve
Banks and local banks wherever Sit
uated. in providing credit needed 10
meet the present emergency. including
loans of the character we are now dis
cussing. but we want to do it in sucn
way as to be able to pass this credit
fIInHt1nn
channels at the earliest possible mo-
ment. I want to make perfectly clear,
however. that until credit is actually
being extended to deserving borrow
ers the resources of the Reconstruction
Finance Corporatio will be available
to al lthose to whom we are au-
thorized to lend.
It is perhaps not generally under
stood that the Federal Reserve Bank
ing System is not owned by the Gov