Evening star., 1934-10-24
EASING Of CREDIT
IS URGED BY JONES
R. F. c. Head Tells Bankers
They Demand 700 Much
Liquidity.
Continued From First Page.)

value" ne continued. In other words,
banks should not feel that they are
buying the collateral that they are
lending upon, but must have some
faith in the owner working out his
problems and paying his debts.
I'VE are all too prone to liquidity
which in large measure is a myth
We kid ourselves when we think we
could pay our depositors on short
notice-that is, any considerable num-
ber at any one time. We tried that
involuntarily two years ago and wound
up with a Nationwide bank holiday
with all banks, big, little, liquid ano
frozen, equally frightened and crying
for protection, though dare say some
will challenge this statement, now thai
the danger is past.
why not be frank and admit thai
in the very nature of things there car
be only a relatively small percentage
of actual liquidity if everybody run.
at the same time. A few could be
smart and run out If they were willing
selfshly to disregard the general wei
fare.
Borrowers Discouraged.
"Counteracting in large measure an.
willingness to make new loans IS th'
fact that most banks are still trying
to collect the slow loans with which
they were caught at the beginning o
the depression, even though, in man.
instances, interest is being currentl,
paid, and periodical reductions made
From the bankers point of viev
this Is q natural course, but 1t dis
courages new borrowers and makes !
impossible for the old ones to hell
in the recovery program. A continua
tion of forced liquidation will put tn
Government further into the lending
business"
Amplifying, Jones emphasized tina
it is going to be necessary Ito shov
leniency- and display an attitude o
friendliness toward deserving an,
honest debtors until conditions i'm
prove"
You may think that you are doin
this" he continued, but one thing tina
is retarding recovery is that peopl
want to get out of debt, and unit
they can be made to feel comfortabl
about their debts, including what the
owe the bank, they will be slow t
undertake any new obligations.
"One way to help in creating EN-
ployment is to encourage borrowing b.
people who have demonstrated theil
ability to use borrowed money profit
ably, under normal conditions.
Would stake" Him.
ut Is the money borrower, indi
vidual and corporate, who buys anc
hires and makes for business. So LETT
stake him again-hold him in check
yes-but let's rebuild his morale ant
start him working again.
| There is no longer danger of banl
Withdrawals, or of anything else be
falling banks that will prevent then
from taking the lead in rebuilding th'
business of the country, and the gen
eral morale of their debtors.
LAS a prerequisite to such a cours
by the bankers, it is necessary that W
reorganize or reform bank examina
tions and bank supervision. One ex
animation a year should be enough
for a well-managed bank with ampl
capital to protect its deposits. Fewe
examinations of all banks and Strlc
enforcement of bank laws, is desirabl
and would serve the purpose.
Furthermore there should be on
examination-a joint examination
when necessary-for all governmental
agencies having to do with banks.
| ~ hn
! its preferred stock and capital not
investments, to examine banks once
year. We are willing, where it ap
pears that banks are being honestl
and efficiently managed, to rely upol
the examination of the supervising
authority, State or national.
The Federal Reserve, the F. D. I. c
and the r. F. C. could, if necessary o
advisable, have representative will
the national or State bank examiner
at each examination. This would b
a joint examination and accomplish
the desired result.
Live OF Slow Loans.
| Bankers will not willingly max
loans that they know from experienc
are likely to be criticized if found Il
the bank after a few examinations
and vet most banks are now living OF
their slow loans.
With a great abundance Of credi
and credit facilities available-bank
chock full of money: the right to dis
count long time paper with the Fed
eral: to borrow from the Federal o.
all kinds of collateral: access to CORE
spondents anxious to lend, and the F
F. C. ready to lend on favorable term!
or to furnish capital stock at 312 pc
cent for five years and per cen
thereafter until retired from profits
banks should make loans that the
are willing to carry for several years.
In this connection, We would nE
YOUR cooperation in making lnous
trial loans. We would greatly prefe
to participate in these loans wit
the local bank and have the ban
service the loan, sharing with tn
r, F. C. in the security and repay
ments. 1t would be generally helpf'
If the banks. the Federal Reserve an
he r. F. C. would work together
making these loans. Congress al
thorized the r. F.. c. and the FEEDER
Reserve Banks to make them, an
under the law any loan that the
F. C. can make can very proper
be shared in by any bank. The col
troller of the currency has recent
ruled that industrial loans secure
by mortgages are acceptable inves
ments for national banks. The
F. C. only wants to make these loal
where the credit is not otherwi
available, and to that end we solic
your cooperation"
Taking up the problem Of adequa
bank capital, which was stressed ye
terday by Chairman Leo T. Crowl'
Of the Federal Deposit Insuran'
Corp, Jones proposed that bankiI
, laws should be amended to limit Il
amount of deposits that any bar
: may accept. to fixed proportion
7 it's sound capital.