Evening star., 1934-07-22

dealers real estate operators, estate
executors, income tax lawyers and
bond statesmen. The country banks
nobly assisted. They became security
minded" not only investing an in
creasing proportion of their assets in
the securities business but learning
the art of helping small-town specu-
lators to buy America" long on slim
margins
But to hold the banks responsible
for the depression is absurd. The
whole country was responsible. The
banks merely executed the orders of
a Nation gone prosperity and easy
money mad. When in 1920 banks lent
l8 cents on pound of sugar whose
natural value was cents and later
charged off 6 cents to profit and loss.
they learned a lesson. But in 1929
they were lending $3.50 on a share of
stock whose basic value was $50 and
$l0O on an acre of land whose natural
value was $50. 1t is in the nature of
banking to do these things, and the
fault lies not in the banker but in the
banking system and back of that in an
economic system which permits such
unwholesome developments. The banks
were not responsible for the depression
here or in any other country.
Banks Hit by Depression.
From September. 1929. to January,
1888, the depression worked havoc
with the $4,000 banks of the country.
In the defationary process the false
valuations melted away cutting down
resources, surplus and, finally, capital.
That 1000 of them disappeared is evi-
dence of the brutal pressure. but that
$4,000 of them had stood this strain
from 1929 to the end of 1882 without
failure, liquidation or absorption is
testimony to the strength and efficiency
Of the management of Our banks. II
we consider the wretched system they
work under and the inadequate regula-
ton they have, we can have only COM
mendation for the skillful management
that saved these 18, 900
In February, 1888. the bottom pit
was reached. The collapse of the banks
in Detroit, the Michigan moratorium
and suspension in other States were
followed by a general panic and
complete closure. 1t is the opinion of
this writer that the Nation wide COL
lapse in March should have beeS
avoided 1t was due in part to the
failure Of the Hoover banking admins
tration to take efficient action, in part
to the clumsy handling of the emer-
gency by State authority, and in part
to the failure of the incoming RooSe-
velt administration to give assurance
of its intent to safeguard the country's
monetary integrity.
Only one observation can be madS
here about the methods adopted for
the restoration of banking operations.
One is that the losses, privation and
hesrtache accruing from what with
grisly humor the Government calls the
bank holiday are incalculable. The
method Of reopening the closed banks,
undoubtedly courageous and effective
in restoring confidence. was none ths
less an agonizing process.
$4,000 Banks Survive
At the present writing something
less than $4,000 banks have survived
all vicissitudes and are in normal op-
Grafton. About $500 Of these are ma
tional banks. The remainder are State
banks. less than 900 Of them members
of the Federal Reserve System. About
a thousand banks are still closed
nearly a year and a half after the
moratorium OF the $4,000 banks that
are open the ma jority are in excellent
condition But many of them still
suffer from frozen assets and made
ouate capital
Long before the crisis of 1888 the
Government had been lending money
to Strengthened banks through the R
F. c. Some 5000 ,000. 900 had been
given out before 1888 In pursuance of
its policy of opening the closed banks
after the moratorium many additional
millions were lent, and a plan was
devised to make the r. F. c. a partner
in the banking business Of the coun-
try. The corporation was to buy pre-
ferred stock or capital notes" in in
dividual banks.
Even banks in sore difficulties SHE'D
at the novel plan for a temporary.
emergency government bureau to be-
come a partner in village banks from
Maine to California The banks have
slowly accepted, some from need