Evening star., 1938-06-22
BANK EXAMINING
RULES REVISED
Five U. S. Agencies Agree
to Modify Procedure,
Squirting Loans.
BACKGROUND

BACKGROUND
Desire OF Federal Reserve Char
man Eccles to stimulate use OF
bank credit led to disagreement
Uith Secretary Morgenthau in
drafting neD bank examination
regulations. Eccles contended in
terest OF public pas fully protected
by deposit insurance, but Treasury
Secretary contended depositors'
money should not be used to e1-
tend credit in contropentton OF
orthodox banking principles.
z! the Associated Press.
Government financial leaders at
tempted today to put some OF the 81
730, 1000, 900 idle bank funds to work for
business recovery by revising bank ex-
animation rules
Settling factional differences, Of
ficials of five agencies which govern
every bank in the country agreed to
modify examining procedure to en-
courage long business loans.
The changes also will permit ma
tional banks to resume purchases Of
bonds of small companies whose Sc
curities are not listed on stock ex-
changes.
The experts agreed that the major
obstacle to business credit expansion
was lack of loan demand from eligible
business men, but one high official
termed the agreement "a constructive
effort which should help promote
credit expansion and recovery"
Others said the compact's main i'm
portance was the achievement. for the
flrst time in the Nations history, of a
uniform basis for bank examination,
which is divided among four Federal
and 48 State banking agencies.
Agreement Is COMPROMISE.
Secretary Morgenthau Of the Treas
ury said that the agreement, reached
in three-hour session, was q COM
promise of give and take" He with
held the details pending submission of
the program to President Roosevelt.
Mr.. Morgenthau and others CLOSED
over evidences of strong personal feel
ing on the banking issue between him.
self and Chairman Mariner S. Eccles
of the Federal Reserve Board. On
Monday, Mr.. Morgenthau had given
Mr.. Eccles 48 hours to approve recon-
mendations of other agencies before
they went to the White House.
v1ya1l -iv,fr al IL
gram was essentially the one sought
by the Controller of the Currency and
the Federal Deposit Insurance Corp,
but they denied vigorously that Mr..
Eccles had been beaten"
Mr.. Eccles' only comment on the
compromise was Il prefer to let the
report speak for ITSELF"
Anti-Speculative Rules.
Other agencies participating in the
agreement were the Reconstruction
Finance Corp. which owns millions of
dollars of bank stock. and the Ma
tional Association of State Bank
Supervisors.
The agencies were understood also
to have adopted anti-speculative rules
to guide appraisal of bank invest
ments.
High-grade bonds are to be valued
at cost, regardless Of temporary mar
ket fluctuations, and profits on the
sales of securities are to be impounded
to pay for losses on securities.
The definition of SLOW" loans will
be clarified and the term "slow" will
be abolished. National bank exam
liners will substitute numbers for the
present classification of loans as good,
slow, doubtful and loss"
The program aims to protect the
capital of banks by impounding profits
from sales Of securities in special
funds to be used only to make up
losses on securities.
The latest estimate of the idle funds
in the Nations banks is 50, 730, 900 900.
Bankers and officials alike agree, how
ever, that the principal reason why
more loans are not made Is that busi-
ness men see no immediate chance to
make profits by utilizing credit.
The differences between the Federal
agencies arose because the controller
Of the F. D. I. c. insisted on utmost
protection of depositors' money, while
the Federal Reserve Board, believing
deposit insurance takes care of the
depoSitorS, wanted credit liberalization