The Kennewick courier-reporter. [volume] (Kennewick, Wash.) 1939-1949, 1939-06-22
ECONOMIC HIGIMIGHTS


ECONOMIC HIGHILGHTS
q The possibility Of aiding small
business with government loans has
long been an active, though quiet,
political issue. Back in Hoover's
day the RFC began providing GER
tain kinds of large business with
help when needed principally those
in which the public's financial in
terest was widespread. A very
large part of these loans have been
repaid, and the probability IS that
all but microscopic percentage Of
loans still outstanding will event.
ually be met.
Making safe loans to small bust
ness is q horse of a different color.
Very often a small business without
sufficient credit to obtain bank
loans is on the ragged edge of fail
ure, due to poor management, COM
petitive conditions or some other
cause, and to lend to it would sim
ply amount to futilely pouring good
money after bad. Inasmuch as the
loans in each case would necessar-
lily be confined to relatively small
amounts, the cost of overhead and
supervision might be outrageously
high. And, once the principle OF
government flood of applications,
reasonable and unreasonable, hon
est and dishonest, would flow in.
Five years ago congress authori-
red the RFC to make loans to lit
tie business under certain circum-
stances, and last year this body's
Lending powers were further
broadened. But little happened. Bulk
Of the business men applying for
money reported that. in their view.
the RIGS standards were too high.
and that any concern which could
qualify could get money from the
banks with less red tape. Upshot
Of all this is q new act, the Mead
Bin, which proposes that the gov
eminent shoot the works In provid-
ing money for little business.
The Mead Bill is more or less
similar to the FILA plan. It would
authorize the RFC to insure banks
against loss to the extent Of 80
percent of any business loan. Maxi
mum individual loan would be ST.
100000. Maximum time Of repay
ment would be 10 years. Maximum
annual interest would be 4 percent. |
In payment for the insurance, the
RIG would receive portion Of the
interest, ranging from n Of one
per cent to q maximum Of percent,
q conditions warrant. The RFC Is
given authority to decide whether
loan can or cannot be classified as |
for q commercial purpose, and so
come within the intent Of the law. |
Apparently 1t would be up to the |
banks in each case to decide wheth-
er or not a loan was safe.
To many economists, the Mead
Bill seems q nightmare. They feel
It would encourage an avalance Of
unsound loans, and inevitably re-
suit in terrific losses to the gov
eminent. And ON the other hand,
they say, if this potential disaster
were prevented by stiff RFC and
hank requirements, little business
men in search Of capital would be
no better off than they are at pres
ent.
Best friends of the bill are the
spending advocates, who would like
to see more money put into circula-
ton, irrespective of method. Some
Federal Reserve Board members,
among other government officials,
have spoken in its favor. There
seems to be little enthusiasm for it
among high Treasury officials (who,
under Mr.. Morgenthau's leadership,
seem to be becoming constantly
more conservative in fiscal mat
erst) but 1t is not expected that they
win make strenuous effort in op-
position.
Most banks are against the Mead
Bill, ON the grounds that it would
unnecessarily extend government
authority over the nations stored
capital, and that legitimate credit
needs Of small business can be
easily met now. Chances Of the bills
passing, according to Washington
experts who have been sounding
the views Of congressman, is about
$3.50.
MCKEE SAYS