Nogales international., 1934-10-27
FINDS BANKS WILLING
BORROWERS CAUTIOUS
Prominent Writer Refutes
Statements Bankers Are
Refusing Sound Loans
Describes Reasons for Re-
duced Volume Of Credit.

s
FIGURES supplied by typical, we'll
d managed banks in different parts
Of the country show that high pro-
portion Of all applications for loans
have been granted in the past year
or two, says Albert ". Atwood in a
recent article In The Saturday Fee.
niasg Post On "The Idle Dollar" Eek.
cerpts from Mr.. AtWood's article fol-
low:
Frequently banks state that as
high as so per cent Of all such appli-
cations are granted and for from 60
to Is per cent Of the amoun' asked
for. Allowing that the bankers make
these figures as favorable to their
own case as possible, it seems
strange that we are told again and
again that banks are not lending.
If we take into account the whole
class of regular bank borrowers, the
plain fact is very few want to bor-
row yet. For The word borrow is
merely another nams for the word
debt end We face great world.
wide drive TO get out of debt
/ IAN experienced small-city banker.
| asked if banks were lending freely
enough. wisely replied: The really
good borrower does not wish t Dor.
row now. In fact, think our Gus
toners are making a remarkably
fine shown, In paying of their
loans. especially leans Of long stand.
ing
The Shrinlase of Credit
"Cr il we thiLk of business con-
Germs rather than Of individuals, 1t
is conservative to say that those able
to maintain high credit ratings have
| been mostly the ones able - main
tain ample cash resources and, there
| fore, least il need of credit. AS
lrices and costs fell. many concerns
found themselves with plenty of
cash because Of the shr:nkage in
/ operations. Cash resources were still
further swollen by duced divi.
dends, and smaller inventories made
bank borrowings still less necessary.
Expressed in another way, banks
cannot expand credit, they cannot
make loans. unless there is de-
mand for the same. Fundamentally,
the business transaction makes the
loan, the loan does not make the
transaction. I Is mistake to try to
+ force upon business organizations
, fumes which they do not need. Under
the circumstances, the idle dollar
Is a natural and proper enough phe'
noineaon. A demand for credit is DIFF.
| ficult 10 create artifcially. and there
is always danger IN so doing.
Banks must be liquid enough at
all iimes to pay depositors. The idea
Of commercial loan Is that it rep.
resents a self liCuidating process in
business. If the banker makes only
5 these advances that are inherently
sound, and selects his maturities
wisely. he will have incoming funds
to meet demands.
Government Lending
"As everybody knows the Govern
ment has vast lending agencies. for
home owners, farmers. and the like.
These have nothing to do with the
subject OF this article, except that all
such Government operations would
be impossible ii the banks did not
lead the Government money for the
purpose.
no one can set a time when Dor.
rowing will be resumed. But it will
come when men once more feel that
conditions are sufficiently settled to
warrant them in taking chances. in
entering upon deals. and in trying TO
make money"
Mr.. Atwood says that it may be
that the banks are Ovcrcautious now,
Just as they were overconfident in
1929, but calls attention to the fact
that until tie more thar year
ago banks were failing partly be.
cause they had loaned too freely.
and were being criticized right and
left for precisely that" He adds:
Indeed. the banks which had
been cautious in their lending policy
came through tie crisis safely. Un-
1er such conditions it is utterly use.
less [ criticize banks for not max.
ing loans. After the experience they
had for several years, especially in
1882 and 1888. 1t is only natural that
they should relax their requirements
very slowly and gradually.
unfortunately, many OF the appli-
cations for loans are not from people
who want temporary banking accom-
modations for three or six months
and are quite able to meet their
maturity dates. but are from those
who really need permanent capital
They are busted and they want some
one to stake them to a new start
What they really seek is partner
10 furnish them with longtime capi.
tai. But depositors insist upon being
paid on demand. aud, therefore. ii
is a grave question whether banks
should tie up their funds for any
length Of time"
Banks Reduce r. F. G.. Debts