Evening star., 1938-04-19
JONES EXPLAINS
RECOVERY LOANS
R. +. c. Head Urges Banks
to Join in Move to Aid
Business.

Following is the text of an address
on Government lending to aid recov-
cry q delivered last night by Chair
man Jesse Jones Of the Reconstruct
ton Finance Corp. in the National Ra-
do Forum, arranged by The Star and
broadcast over . Nation-w wide network
Of the National Broadcasting Co.:
wish to discuss business and credit
The decline in the purchase Of con-
sumers' goods-the things We need
and use every day-caused an accumu-
lation Of inventories by the merchant
and the manufacturer that has re-
suited in widespread unemployment
The manufacturer cannot continue to
produce what he cannot sell, nor can
the merchant buy unless he sells. So
until these inventories are reduced.
employment will not be likely to
pick up.
In discussing credit have in mind
credit for all purposes-for business.
for industry, for agriculture and for
building. AS you know, the Recon-
struction Finance Corp. WAS created in
1882 for the purpose Of lending to
banks. insurance companies. mortgage
loan companies, Federal land banks,
Joint stock land banks, agriculture,
railroads. etc. March 9, 1888. just five
days after President Roosevelt was in
augurated, our law was amended, and
has been amended about 80 times since
then. expanding the scope OF R. F. C.
operations to meet varying conditions
The March 9, 1888. amendment was
the most important of all. 1t made
1t possible for us to save the banks
by buying preferred stock.
Aside from advances to other xoy-
ernmental agencies by direction Of
Congress. We have authorized So, ,4O4.-
100000 in loans and investments, in
eluding bank capital; 81, ,76O. .000. 900 of
these authorizations were later can
celed, the applicants finding they did
not need the money, or that they could
get 1t elsewhere; $500 ,OO0, 900 has ac-
tually been disbursed and s4.934, 900. :
600. or more than II per cent. repaid.
This vast sum Of money went directly
or indirectly to every class of our citi-
eenshlp and represents hundreds OF
thousands of individual loans.
Direct Loans to Industry.
Industry was aided by direct loans
and through aid to banks that ena-
bled them to extend credit and grant
extensions to their borrowers. Agri-
culture was aided through loans on
commodltles-cotton corn. wool, mo-
halr, tobacco, peanuts. prunes, dates,
ngs. raisins and naval stores. More
than 100000 separate loans have
been made to the producers of farm
commodities. These loans have been
largely through the Commodity Credit
Corp. and average less than $500 to
each borrower. Several hundred mil
lion dollars was loaned through Fed
eral land banks, joint stock land
banks and regional agricultural cred
1t corporations. Probably 10000 900
depcsitors in closed banks were aided
through r. F. c. loans. Almost everv
line OF business has been helped BY
the r. r. c. and We were getting along
dne until last autumn.
Our collections in 1896 and 1897
exceeded our disbursements by almost
q billion dollars. 50 by the latter part
OF 1887 it looked as though we could
withdraw from the lending field. Ac-
eordingly, on the 18th Of last October
President Roosevelt directed that We
accept no more loan applications.
But due to the continued recession
In business, the President authorized
us to start lending again February 18
OF this year. Since that time We have
approved sl2.lsl,716 in industrial
loans. and have applications, definite
and tentative, for approximately S7o.-
100000 more Of this character of loans
With the approval of the President
Congress has just amended our act
again by passing the Glass bill. which
empowers us to lend to public bodies,
States, municipalities and political
subdivisions. for the construction
Of useful public works projects. This
N restoration Of authority which
We had prior to the establishment Of
p. w. A. and under which we have
loaned $500, 0,o00.0 900 in addition to buy-
ing s600,00o,000 Of such loans from
p. w. A.
the Glass bill also broadened our
powers so that We may lend on longer
naturities. This authority will b. mar.
ticularly helpful in industrial loans for
plant construction and new eouipment
In other words. in extending long
time credit to industry.
To Increase Employment.
Inc objective Of the law and of the
President and Congress Is to aid busi-
ness through increasing employment
and our loans will be made With
tnat IN view. The law requires that
nAns must be secured. but may be
upon such terms and conditions and
Tor such length of time as. In the onin-
ION Of our Board of Directors. are an.
propriate to the particular application
While our purpose will be to make
business and industrial loans that will
MAINTAIN or create work, We will not
9eel authorized to make such loans
unless in our opinion the borrower will
be able to pay the money back. Too
much debt and imitation Of values
were the principal causes Of the 1929
collapse, and prudent borrowing is
just As esseIfsi as prudent lending,
II does no good to lend q man or a
business money which he will lose.
IT merely postpones the inevitable re-
adjustment Of his affairs. This does
not mean that we are not making
every effort to lend to deserving bor-
sfovers particularly where employ
ment Will be maintained or increased
We try to md = way to authorize
sVery such loan for which We have
m application.
Apparsntly many people believe the
sscent amendment to our act by the
ooAss-Steagall bill permits Us to lend
"a . different basis OF security than
hsFefore and that billion and q halt
dollars has been especially allocated
w the Congress for this purpose.
The facts are that this amend