Evening star., 1934-11-25
What's Ahead for Banking?

field already occupied by private in
dustry, while another private indus
try now dependent on public funds
may have this support withdrawn.
The banks face the problem of ex-
tending credit to enterprises living
at the mercy of experiment and inter-
ference. A bank that undertakes at
this time to lend money to a small
industry must not only be good Judge
of credit risks, but also fortune teller.
And the banks are not clever at mind
reading or soothsaying or political
prophecy. A very keen knowledge of
the individual risks involved is neces-
sary to successful banking, and it is
asking too much to expect the banks
to be able also to anticipate the next
experiment that Senator Elmer
Thomas or the silver bloc or the Amer
ican Federation of Labor or Mr.. Rich
berg Of the A. A. A. will inflict upon
American enterprise It is not un-
natural that some of the banks should
have given up commercial banking
and gone into the business of security
dealing, buying and selling the one
commodity whose production will cer-
tainly not be restricted over the next
decade-namely, United States bonds.
But that is not the only explanation
Of the apathy of bank credit. The
banks now have to meet the require
ments and standards of at least three
different bosses. Nearly all of them
owe money to the r. F. C. in one
way or another. They also belong to
the insurance fund organization. If
they are State banks they still must
submit to State control. If they are
national banks they have the Fed
eral Reserve requirements and the
controller to satisfy. The F. I. D. c.
demands solvency and ample capitali-
Zation. The administration as a whole
demands free credit extension. In the
crossfire the smaller and weaker banks
do not know where they are. 1t has
been said that one may not success
fully serve two masters. There are
some thousands of banks in our coun-
try that would regard the opportunity
to serve only two masters as a great
boon.
Hand Of Amity Offered.
And this is the background of the
now famous entente established at
the Washington meeting. The banks,
buf1eted, bruised and groggy, like a
prize fighter who has been knocked
down in every round by an opponent
on whom not glove has been laid,
offered the hand of amity. Their
spokesmen made it clear that the
banks could not expect the Government
to stop feeding the hungry, that they
realized that it is rather difficult to
balance budget when you are spend
ing great deal more than you have
and that they recognized the difficulty
of establishing a sound currency
when you have once thrown meat to
the wolves of imitation. In other
words, everything is all right just as
1t is, and the bankers like it just this
way
Here are questions the bankers
might have legitimately asked:
/. When are We going to have a
monetary system and what is it to be?
2. Is there any plan to balance the
budget?
5. How many more Government
bonds are We going to be compelled to
absorb?
T. How long is the adulteration of
our currency with silver to continue?
5. Are the suicidal provisions of the
Thomas imitation act to be repealed
or are they to be put into operation
by executive order?
s. How long is the Government to
remain partner of the banks?
Z. Is the Federal Reserve Board to
be restored to its former position or
is it to be abolished?
8. How long is politically ap-
pointed Secretary Of the Treasury to
be permitted to have secret fund of
50 ,000. 100000 for manipulation of
the securities market?
9. What does the administration
plan to do about the temporary and
uncertain guaranty plan?
10. II the temporary guaranty is to
be made permanent, will the provision
compelling State banks to Join the
Federal Reserve be enforced? II so.
why does not the administration state
directly that 1t expects to force a uni
fed system of banking on the coun-
try?
II. What is the prospect that in
dustry will be free from interference. so
that loans to industry can be made
safely?
~. Is the administration going to
fight the inevitable effort in the next
Congress to nationaliZe the banks?
Naturalization Of Banks.
As has been recently pointed out by
James Warburg the naturalization of
banking is the first essential step in
the establishment of Socialism. There
is widespread and powerful move
ment in this country for nationaliza-
ton of all the banks.
The danger of naturalization Is
probably remote. Not so in the case
of central bank Some rather
weighty arguments san be adduced in
favor of such an institution Our
Federal Reserve system, from the
standpoint of international activities.
is badly decentralized, and an eficient
central bank under competent man
agement could be useful instrument
tality in these parlous days of inter-
national juggling with currencies. In
domestic affairs such a bank would
have a degree of control over credit
policies and investment never at
tanned by our politically appointed
Federal Reserve Board with its in
choate rediscount control and feeble
open market activities
Any sort of central bank in this
country, in which the financial poll
cies of the Nation are dictated by pop
ular elections, would face two horns
of dilemma. If it should by some
miracle of organization obtain indie
pendent control of the Nations credit
and adopt sane and conservative pol
icies, it would be destroyed by mob
anger and political demagoguery.
Economic historians are inclined to
the judgment that the one efficient
Federal Government enterprise in the
history of this nation was the Second
United States Bank. And solely be-
cause of this efficiency it vas the most
bitterly hated institution in American
political history. 1t died a tragic
death.
The other and more likely denoue-
L.. L.