Evening star., 1934-02-11
BANKS CONFUSED
BY CONFLICTS IN
LOAN REGULATION
Jones Address Emphasizes
Differences Between
Control Agencies.
Special Dispatch TO The Star.

Special Dispatch 10 The Star.
NEW YORK, February 10.-The
speech made by Jesse H. Jones, chair
man of the Reconstruction Finance
Corporation. before the New York
State Bankers Association will be
discussed for months in most of the
financial institutions Of the country.
The New York Herald Tribune refers
to it editorially as marked by "boor-
shness and stupidity" To its hear
ers and the wider audience that has
since read it in print it was signifi-
cant for its implications and the open
threat of Government competition
with the banks if they did not loosen
their purse strings and provide the
credit needed to stimulate national
recovery.
1t is not too much to say that, in
spite of the satisfaction of depositors
today with the status of their banks,
the bankers of the United States are
In dazed state of mind. This is
primarily due to the fact that they
apparently have so many masters,
each with his own notion of how they
should conduct their business. They
are weary of trying to accommodate
themselves to the different policies
that emanate from Washington, from
their Federal Reserve district or from
their State banking commissioner.
Judgments Conflict.
Under the old regime, or before the
r. F. c. entered the banking situa-
ton, a member of the Federal Reserve
had to deal both with the examiner
of this organization and with the rep
resentative of the controller of the
currency. Even then there was con-
siderable amount of friction and a
these two bodies to the same banking
problem. One might regard a loan
as satisfactory, the other might con-
denim it. There was striking breach
in their judgment on the subject of
securities during the trying days of
1882 and 1888.
For nearly a year it has been evi-
dent that the Federal Reserve Board
has been superseded by the R. F. c.
as the master of the banks. The dis
trict managers have gradually faded
out of the picture when questions OF
major importance in banking have
been under discussion. The member
banks had so much money they did
not need to make use Of the discount
ing privileges of the Federal Reserve.
At the same time they were persuaded
to take from the r. F. G. new capital
which was superfluous and which
usually they would be compelled to
carry at loss. for they had to pay
either per cent interest on 1t, if
capital notes or debentures, or per
cent dividends if in the form of pre-
ferred stock. and they could not safely
reinvest it at better than 31a or 4
per cent.
The banks have gone along with
the r. F. c., however, and taken ST.
600, 100000 of its funds and will take
more before next July, when the per-
manent deposit insurance law goes
into effect.
System Complicated.
There is considerable justification
for the feeling among bankers that
the right hand of the r. F. c. fire.
ouently does not appear to know what
Jne leIU flGilG is OOlIlS. lnlS Is per
haps due to the complicated system
of duplicate or triplicate supervision
of the banks. For instance, Mr..
Jones has often urged the banks to
lend more of their capital There is
reason for this, for in spite Of Federal
Reserve statistics material evidence is
at hand to prove that good borrowers
have been turned down so that
banks might preserve their liquidity.
However, the urge from the r. F. c.
to lend collides with the command of
the national or State bank examiner
to write off and charge to loss loans
Of the same nature that are now being
recommended In the interest of re-
covery.
This is what makes the banker
gloomy and apprehensive. The exam
liner has just been going over his
books. He has arbitrarily classed as
of no account the loan Of a borrower
who in good times has enjoyed high
credit, and, like some millions more
of Americans, is now having trouble
in meeting his obligations.