Evening star., 1934-12-19
NEW DEAL TURNS
SCRUTINY ON SELF
Treasury Issues Report OF
Viner.Hardy Survey of
Credit Needs.
BY DAVID LAWRENCE.

Secretary Morgenthau, who doesn't
pose as a financial genius or none
tary expert, but is, nevertheless. prov
ing to be about the best organizer
and administrator the Treasury De-
partment has had In many year,
called in the reporters the other day
and gave them each batch of 100
mimeographed pages.
The reporters took the summary and
the public today knows in a general
way what the experience Of the Fed
eral Government has been in the max
ing of direct loans to industry. But
there's a significance far beyond the
contents Of the document. 1t is that
the New Deal turned the searchlight
on itself in most penetrating fashion.
and, with a technique that might well
be copied elsewhere, turned out just
about the most valuable piece of in
formation that has come out Of the
perennial controversy as to whether
the pump should be primed indefi-
nitely with public funds or given q
chance to get going with private funds.
Survey by Brain -Trusters."
It so happens that two men who
presumably would be called brain
trusters," if that term Is carelessly
used to apply to all college men. made
the surveyor. Jacob Viner OF the
University of Chicago and Charles o.
Hardy of the Brookings Institution in
Washington-but, if all the college
professors who come here were to ap-
ply the same searching technique and
frankness and realism that these men
and their corps of go assistants applied
to their job, there would hardly be
, the same criticism of the brain trust
as we have heard before.
The survey, 1t is true, was made IN
the seventh Federal Reserve district.
which includes the Middle West, but
undoubtedly the findings would have
been the same in other parts OF the
country.
The purpose was to find out whether
the commercial bankers were all the
things the critics inside and outside
the administration we're saying they
were, whether the Government itself
was really helping by the extension
of credit to clear away red tape and
get business going, and whether the
small business man was being showed
to the wall by inability to get credit
for working capital, for fixed capital
and for general plant needs.
N. n-s-x~I
Anybody who reads the report
through from beginning to end-and
1t will be printed as public docu-
ment soon-cannot but get the i'm
preston that there Is a piece of con-
structive work, free from the usual
efforts to whitewash governmental
agencies or from the usual approach
which damns the private agency be-
fore there's a chance to find out the
facts.
Summed up, one comes to the con-
clusion that banks and bankers have
narrow-visioned and broad -visioned
credit officers, but that Government
supervision by bank examiners, who
follow rules of thumb, can raise more
cain in a credit system than all the
inhibitions imposed by bankers on
themselves in the era following the
bank holiday. ~- E
When we find In the report criti-
cism of the Reconstruction Finance
Corp. for being stricter in some re-
spects than commercial banks and q
pointed comment on the present law
which makes the Federal Reserve
Banks extend credit that commercial
member banks would not extend or
feel ought not be given, there is GER
tainly a beginning made toward an
understanding of why recovery has
been delayed through the clogging OF
the credit machinery.
The Treasury investigators were not
content to talk to the bankers about
the loans they didn't make, but
sought out many business men who
had been denied credit and asked
them to tell their stories. There can
be no doubt that need exists for an
intermediate credit system-every bit
of evidence points that way. 1t was
revealed in 1882 by study made by
the National Industrial Conference
Board, which examined the applica-
tions for loans in several Federal Re-
serve districts and came almost to
the same conclusions as the Viner-
Hardy survey.
Attacks Present Laws.
But the latest survey goes deeper
than merely a recommendation for
capital credit for the small business
man. It attacks the cumbersomeness
iof present laws and the financial ma
achtnery and tells how business men
took one look at the complicated ap-
plication blank and gave up all hope
of getting loans.
Not only this, but the awkwardness
of a procedure which required an
applicant to climb three different
hurdles Of official boards, only to find
that Washington turned down appli-
cations arbitrarily, is emphasized in
o picture Of present credit conditions
which is as fascinating as it is dis
heartening.
1t all comes down to this: Banks are
being asked to take risks with demand
deposits. They did so before 1929, and
the boom came to a sorry end. Today
the pendulum has swung to the other
extreme. The banks are conservative
and cautious.
But-and here's the new angle-the
Government has now stepped in with q
system for insuring deposits. Also, the
Government is spending billions for
public works projects that will never
get the recovery machine properly
started. Private capital hesitates. Can
the Government, which is the creator
Of most of the uncertainty nowadays
by its attempts to regulate the eco
homie system, find a way to insure
the risks the banks would have to
stake in making capital loans?
- Mortgages Insured.
The Federal Hnilsiac Administra.