Evening star., 1939-06-13

last five or six A
years, with the 'sSS'
result that in David Lawrence.
stead of getting workable legislation
in which there is wholehearted CO.
operation. drastic measures are
passed which bring into being an
entirely new set of headaches.
Unhappily, many private bankers
are taking an intransigent attitude
toward the help that Government
can give small businessmen in the
field Of credit. 1t is being said that
all who deserve credit are getting it,
that the Government is about to
make series of unsound loans, that
this is but another example of
Government inefficiency, waste, ETC.
Unhappily, too, this is just the
kind of argument which convinces a
majority of Congress that the op-
posite must be true. For some
strange reason. in fighting legisla-
ton, the American conservative is
rarely willing to consider that per-
haps there is some need instead Of
no need. In Britain, the conserva-
tive uses just the opposite approach.
He recognizes the existence of a
need. but then insists that the legis-
lative remedy fit the need in specific
form and not indulge in the general
ities which take the government far
afield.
For several years there has been
need of an intermediate credit sys-
tenn in America. Commercial banks
were never designed to furnish inter-
mediate credit, and when bankers
talk about credit, they usually mean
short term credit for businesses
They do not think of mortgages"
for construction as form of bank
credit because they customarily
think of 9O-day loans and even nine
month loans as the type of bank
credit that is used by business.
Mortgage Credit Demanded.
What the demand for insured
loans for business comes from is
that part of the credit mechanism
which is really mortgage credit
for the building of plant, or IA
cilities, or both. Banks are not eX-
pected to furnish this kind of credit,
so when the discussion of insured
loans arises, the issue is compli-
Gated by appraising the credit
needs of business in terms of short
term rather than long term ad-
vances.
Lately, banks have been making
some five and even seven year
loans. This is offered as proof
that no longer is there any need
for new machinery for intermediate
credit. But an examination of
these five and seven year loans will
show they are the exception which
proves the rule and that they are
customarily granted to companies
which can float issues in the in
vestment banking markets.
AS for the smaller companies, un-
less there is record of earnings
of a gilt-edge sort. they cannot get
intermediate credit. The banks
properly object to joining in specu-
lative loans. But speculative loans
are what make recovery possible
Risks have to be taken by some one
and the sum total of the risks taken
measured against the losses will
show that mortality is not as great
as is commonly supposed and that
payment of insurance premiums by
good companies will help offset
such losses among the poorer risks
The principle Is a simple one
Shall a system of insurance of pri-
vate loans be established in Amer
lea with Government support such
as is now successfully operated with
respect to housing loans? Most
private bankers say no" though
here and there are some progressive
bankers who have sent word to the
Government that with certain safe
guards it would be a wonderful
thing for the banks which are not
able to earn anything on their idle
money.
The Wall Street Viewpoint.
The Wall Street point of view is
that if the Government will repeal
most or all of its reform measures
change the tax laws. and give
business a chance" there will be
no need for the new. laws to make
intermediate credit or any other
kind of credit available.
But the Washington point of view
Is that such a contingency is not
likely to happen so long as the votes
are counted quantitatively instead
of qualitatively. and that a system
of concentrated wealth can no
longer be depended upon to insure
high wage levels or employment.
Between these two viewpoints is
OF course. the truth. Some measure
of revision of tax laws and some
changes in the Wagner law and
other broadly phrased statutes
would be helpful, but America
would not get economic recovery by
that alone. There was from 1926
to 1888 an intermediate system OF
credit available in what was known
as the bank affiliate" This was
wiped out in the reform wave and