Evening star., 1938-06-10
An Open Letter to Mr.. jay Franklin;


Your comments on the letter quoted
therein indicate that you seem sure
that there is a "sit-down" strike by
banks; that what you term rs facts, |"
as set forth In the quoted letter, "seen,
to be strange, but they are not-un-
fortunately - unusual" You state.
"Why banks should follow this peculiar
policy Is one Of the political mysteries
of our times. think q proper ex-
PLANTATION to the American people is
in order"
I confess that I know little or
nothing Of the art of writing for pub
lication, just as can well realize that
probably you know little or nothing
of the art Of lending money-and it
can be more than q mere profession
Therefore, have little hope that this
will reach even q small portion of
those who read your column.
I am inclined to believe your article,
which consider most unfair, was
written without thorough investiga-
ton and due consideration of facts
easily obtainable from any reputable
bank. I cannot agree that the letter
you quote contains facts" as you
term 1t: at best, 1t is merely a sketchy
basis for criticism. Since 1898 1t has
been extremely popular to malign
banks and bankers. However, bank
ing Is a big business as whole, en-
ploying many thousands of persons,
and 50 near to the very heart of bust.
ness in general and of public welfare
that responsible persons and publica-
tions should not take pot shots" at
it just to gain applause.
The letter you quote Is quite In
teresting and I agree with you that
similar thousands are pouring in,
mostly to the r. F. c. However, II you
will make close inquiry at the r. F. c.,
you will find that an extremely large
percentage Of them are cast aside as
unworthy of consideration. I should
not be surprised If those rejected
would exceed 90 per cent of total ap-
plications. recently presented to
the r. F. c. the case Of one of our
customers and I was told that the
requirements Of the R.. F. c. were
very little, If any, less than those oi
the banks. The reason Is perfectly
plain to any one familiar even with
elemental banking. Those being re-
jected constitute portion Of the thou
sands who would like to borrow, but
who have not sufficient assets of Their
own to give reasonable support to a
loan; or records Of past performance
that would justify lender in expect.
ing repayment. Many thousands OF
such persons want to borrow but can
not on their record do so; and it Is
they who are the disgruntled. highly
audible critics. Neither banks, the
Government nor individuals are going
to give money to such applicants or
become partners in unstable enter
prises under the pretext of it being a
loan. There are thousands of people
who want the other mans money and
complain when they cannot get it.
It Is difficult for the banker, but
easy for others, to forget the violen,
criticism Of the banks, around the
time of the bank holiday, for having
frozen loans; and the word frozen
in banking does not mean bad, bu,
loans slow and diflcult of collection
Depositors wanted their money and
they wanted 1t Immediately, and nc
excuses were accepted. One deposito,
turned down started a run, and the
bank closed. Now, every one seems tc
have had change Of heart and wants
the banker to loosen up to make
slow or doubtful loans and take a
chance" Just when are they going
to switch back again?
Apparently 1t never occurs to the
public that out Of an average banks
total resources per cent is capital
S per cent surplus and 80 per cent
deposits borrowed from the public
that losses Of per cent of resources
will impair capital so that the bank
must find new capital or liquidate
The formula set up by supervising
authorities Is that bank should have
approximately 81 in capital for each
SO Of deposits. Some have more, but
= few have less. However, on the
average 1t means that the bank loan,
consist Of $40 Of depoSitors' money
due on demand-to 81 of the banks
own capital. How many depositors
do you think would be willing to have
their portion tied up in slow or semi
doubtful loans and would be willing tt
wait for their money until the loans
are collected? How many depositors
do you think would be entirely salts.
fed II the bank assumed the first
losses on frozen loans out Of its por.
ton and asked the depositor to take
care Of the rest by waiting ane
hoping? It was not men like you
who sat in their Offices in the banking
crisis, losing their hair that was fast
turning gray, trying to dig up green
backs 50 that the depositors could hide
them In safe deposit boxes or mat
tresses. One bank In Washington
borrowed from the Federal Reserve
Bank Of Richmond on Government
bonds, some of which declined to 80
and the Federal Reserve forced then
to keep putting up margin to meet
the decline The Federal sReserv<
would not even take a chance or
Governments coming back! There L
no law today to stop them from max
ing the same requirement.
To get down to the letter you have
quoted, see no reason why you or
should accept the statements con.
tanned therein as "facts" without in.
vestigation; personally, I do not be-
lieve half of it. To be fair, it wa.
your duty to investigate before label
ing it as a "fact" for public consump.
ton. II you will give me the name
Of the writer, will do it myself
Aside from the question Of whether
or not the firm was entitled to q loan
I offer no excuses for any bank thaI
would treat q customer as was de.
scribed In that letter. but 1t Is hardly
fair to indict and condemn the banl
on one mans statement that such wa.
the case. Frankly, do not believe it
do not know Of any bank that woult
- a. 4