Evening star., 1939-12-13
Large Bank Reserves
Ready 10 Assist
Trade Expansion
New York Trust Sees
Most Institutions
In Strong Position
Special Dispatch to The Star.

| 0peClAi OlSpAtCIl 10 j nc otAl.
NEW YORK, Dec. 12.-Because of
their highly liquid condition, most
banks in this country are in a strong
position to meet demands that may
be made upon them and to fulfill,
efficiently and at reasonable cost,
the enlarged credit needs of the
country resulting from further bus
mess expansion, according to a sur
vey appearing in the winter issue
of the Index. published by the New
York Trust Co.
Probably never during any COM
parable period has bank manage
ment had to meet and solve as many
or as difficult problems as during
the last 10 years" the Index points
out. That the banking system has
come through these trying times so
well is a tribute to the character
and ability Of the management of
the Nations banks.
1T would be pointless to deny
that many questions of major i'm
portance in the banking business
still remain. In this respect, how
ever, it is no different from other
kinds of economic activity. Low in
terest rates are tied directly to the
| accomplished devaluation of the dol
lar, the Government deficit financ-
ing, the huge gold imports of recent
years and the subnormal demand
for bank credit at the present time.
Also there is no immediate prospect
that any considerable part of the
plethora of bank funds available for
use can be put to work. These facts
are bound to restrict bank earnings
for some time.
Officials Are Alert.
"On the other hand. bank man
agement is alert to the new and
changing conditions, seeking addi-
| tional ways of being of use to
clients and developing other sources
of income, while practicing severe
economy all along the line in the
| interest of more efficient operation.
Support will be lent to the prog
ress already made if the Govern
ment should decide to curtail its
banking activities and no longer
compete with private credit insti-
tutions in the field. The confidence
which would be generated by such
step would contribute not only to
sounder banking system but might
we'll aid the cause of general re-
covery."
Whereas, in 1929, loans of Federal
Reserve member banks amounted to
S26.2 billion, as compared with in
vestments Of S98 billion, the position
had been reversed by the end of
1888, when bank loans totaled only
$13.2 billion, against investments of
$l89 billion, the index states. More
rapid transportation and communi-
cation, faster manufacturing meth
DDS, better control of all phases of
business operation and hand-to-
mouth buying by those engaged in
industry and commerce have COM
bined to lessen the need for bank
credit. Furthermore, during the de-
preston years numerous industrial
companies did not reinvest all of
their depreciation charges in re-
habilitation of plant and equipment
and, as result, were able to build
up their working capital account.
In many instances where this has oc-
CURED the need for bank credit to
finance current operations has been
reduced or eliminated altogether"
Big Changes Cited.
Other reasons for the present
lower level of bank loans, according
to the index, include the decline in
foreign trade, increasing public ac-
tivity in fields once reserved to pri-
vate enterprise, the growing size of
industrial units, many of which have
large banking resources within their
own organizations, and the Treas
ury's policy of keeping large deposits
with the banks.
"One of the most striking changes
in banking has been the active par
ticipation of Government and its
agencies in the business" the study
continues. Government lending
operations and total credit outstand-
ing have become enormous. Figures
issued by the Treasury Department
disclose loans outstanding totaling
$6 038 billion on the part of II Gov
ernment corporations and agencies
May 81, 1889. This was % per cent
of the loans of all active banks in
this country as of June 30, 1888, or
% per cent of the combined total
of Government agency and bank
loans."