Evening star., 1938-06-10

1HIS appucant wants 10 borrow
s1.5oo. As depositor Of any bank,
would you be willing to have that
bank lend $3.50 Of its money and
$3.50 of your money to this business?
If it were not paid, would you be
willing to say that you would wait
until the bank. was able to collect it
and If it could not, you take your part
Of the loss? Certainly the bank gets
the interest, but it pays for your
money too, either in interest or in
service.
Some Of this may sound somewhat
complicated to you, but now that you
have started something, you ought to
be fair enough to finish it. Analysing
this statement, we find that the appu-
cant has $4,000 in what is termed
quick assets" and $4,000 in iabil-
tiles. Some Of his accounts are almost
sure to be bad and some of his in
ventory not worth his figures. Ger
tainly they would not be worth it on
liquidation. We have no way to check
his inventory, but must accept his
figures. II we allow a mere 10 per
cent of his assets, to take care of
bad accounts and deprecated inven-
tory, his quick assets are no more than
his liabilities. That brings us to
where we must look at his equipment
and trucks, which he values at $4,000,
to take care Of the loan. True, he will
have the $500 he wants to borrow,
but after he receives 1t, he would have,
let us say, $16,500 quick assets and
$4,000 liabilities, plus equipment and
trucks.
That man needs capital invested or
. partner who will take the risk for
q share Of possible profits that may
bring more than 6 per cent to COM
pensate for the risk; banks cannot
make permanent investments in busi-
nesses.
This man has q net worth Of $1,000.
Your man says he has . net worth Of
$1,000. I wonder If your mans state
ment Is not like the one have quoted,
or worse. Furthermore, will tell you
that, beyond any question Of doubt,
neither applicant could borrow a
nickel from the r. F. c., no matter
how many people they could put to
work. II you don't believe 1t, ask
Chairman Jesse Jones.
The only way such person can pay
back q loan is by borrowing from some
one else to pay the bank or by defer
ring payment for his new merchan-
disc.
can also tell you that notwith-
standing pressure or criticism, the
sane and sound bankers Of this or
any other country are not going to
lend their stockholders money, and
that which is intrusted with them, on
any such himsy showing as Is here
considered. When they do, it will not
be long until they have no money on
deposit to lend. Despite the generally
prevailing idea, banking is highly
competitive business and not highly
profitable. The profits are not so
great as to be able to absorb the losses
Of these "take-a-chance" loans.
Any bank could lend every dollar
Of its depositors' money to such apph-
cants within so days. Hundreds Of
applicants would be at the door clam
oring for such loans just as they were
recently at the r. r. c. ofices; aud
they will get very little more from
the r. r. c. than they can get from
the bankers.
I tire Of hearing people say that
banks will not lend except on Gov
ernment bonds. Such statements
usually come from people Unable to
qualify as borrowers. The ranks have
millions upon millions loaned merely
on signatures and the character and
standing Of the borrowers. but they
are not going to break themselves or
their depositors by making bad loans
in order to avoid passing criticism.
The critics can pass too quickly to
the other side when trouble comes.
Bankers are human beings despite
all the funny stories related Of them.
They are just persons like yourself
and not species set apart Few cwn
any considerable portion of the banks
In which they are officers They are
responsible, not alone to their depos-
itors, but to their own stockholders.
The layman seldom, II ever. thinks OF
this 70 him the banker Is the bank.
They can and do make mistakes and