The midland journal. (Rising Sun, Md.) 1885-1947, 1934-10-26
FINDS BANKS WILLING,
BORROWERS CAUTIOUS
Prominent Writer Refutes
Statements Bankers Are Re-
fusing Sound Loans - De-
scribes Reasons for Reduced
Volume of Credit.

FIGURES supplied by typical. we'll
managed banks in different parts of
the country show that high proper
ton of all applications for loans have
been granted In the past year or two.
says Albert w. Atwood In recent arti-l
Gle in The Saturday EUenfn0 Post on
1.-THE Idle Dollar" Excerpts from Mr..
Atwoods article follow:
Frequently banks state that as high
as 80 per cent of all such applications
are granted and for from 60 to rs per
cent Of the amount asked for. Allow
ing that the bankers make these figures
as favorable to their own case as pos
sible, 1t seems strange that we are told
again and again that banks are not
lending at all.
"If we take into account the whole
class of regular bank borrowers, the
plain fact is very few want to borrow
yet. For the word borrow is merely an
other name for the word debt, and we
face great worldwide drive to get out
OF debt.
IAN experienced small-city banker,
asked If banks were lending freely
enough, wisely replied: The really
good borrower does not wish to borrow
now. In fact, think our customers are
making a remarkably fine showing in
paying off their loans, especially loans
Of long standing
The Shrinkaee of Credit
"Or II we think of business concerns
rather than of individuals, 1t is con-
sentative to say that those able to main
tain high credit ratings have been most
ly the ones able to maintain ample cash
resources and. therefore. least in need
of credit. AS prices and COST fell, many
concerns found themselves with plenty
of cash because OF the shrinkage In
operations Cash resources were still
further swollen by reduced dividends.
and smaller inventories made bank Dor.
rowings still less ne"crGlry
Expressed in another way. banks
cannot expand credit, they cannot make
loans, unless there is demand for the
same. Fundamentally, the business
transaction makes the loan, the loan
does not make the transaction. 1t Is a
mistake to try to force upon business
organizations FUNDS which they do not
need. Under the circumstances the
idle dollar is a natural and proper
enough phenomenon. A demand for
credit is difficult to create arti6cially.
and there is always danger In so doing.
"Banks must be liquid enough at all
times TO pay depositors. The idea OF
commercial loan is that 1t represents
seif-liquidating process in business II
the banker makes only those advances
: that are inherently sound. and selects
his maturities wisely, he will have in.
coming funds to meet demands.
Government Lending
"As everybody knows, the Govern
ment has vast lending agencies, for
home owners, farmers, and the like.
These have nothing to do with the sub
ject of this article, except that all such
Government operations would be i'm.
possible IL the banks did not lend the
Government money for the purpose.
mo one can set time when borrow
ing will be resumed. But it will come
when men once more feel that condi-
tions are sufficiently settled to warrant
them in taking chances, in entering
upon deals, and in trying to make
money"
Mr. Atwood says that 1t may be that
the banks are oyercautious now, just
as they were oyerconfident in 1929, but
calls attention to the fact that until
little more than year ago banks
were failing partly because they had
loaned too freely, and were being
criticized right and left for precisely
that fault" He adds:
"Indeed, the banks which had been
cautious in their lending policy came
through the crisis safely. Under such
conditions it is utterly useless to criti.
CHE banks for not making loans. After
the experience they had for several
years, especially in 1882 and 1888. 1t IL
only natural that they should relax
their requirements very slowly and
gradually.
Unfortunately, many Of the applica.
lions for loans are not from people who
want temporary banking accommodas
ton for three or six months and are
quite able to meet their maturity dates,
but are from those who really need per.
manent capital. They are busted and
they want someone to stake them to a
new start. What they really seek is a
partner to furnish them with longtime
capital But depositors insist upon be.
ing paid on demand. and. therefore. 1t
is a grave question whether banks
should tie up their funds for any length
Of time"