Evening star., 1940-10-14
Bankers Are Cheered
By Brisk Demand
For Loans
New York Institutions
Busy With Defense
Contract Financing
BY PAUL ID. GESNER,
Associated Press Business Writer.

NEW YORK, Oct. 14-Loan de-
partments of the big Wall Street
banks look buster than they have
In a long time, and the executives
in charge are happy about it,
Borrowers who have been awarded
Government defense contracts and
who require funds for new factories
and equipment have been beating a
path to the banks since the Gov
ernment. in effect, arranged to guar
antee the loans.
A pronounced pickup in demand
for bank credit has been noted
within the last two or three weeks.
bank executives reported Many of
the credit seekers have been nego-
tiating directly with New York in
stitutions; others are counting on
getting their capital needs from the
same source. but through out-of-
town correspondents of the New
York banks.
Expansion of the loan applications
has led some bankers to conclude
that the next phase of the defense
program will involve gainful re-em-
ployment for very large amount
of dollars that had long been idle.
New Form Clears Way.
Until the Defense Advisory Com
mission recently worked out new
contract form for defense orders
making them assignable as security
for bank loans, few commercial
banks in any of the large centers
had been asked to supply credit in
substantial amounts to speed the
wheels of the defense machine.
Some of the downtown bankers
had been reported to be pessimistic
about their sphere of participation
in the defense financing, believing
the bulk of the required money
might flow to the defense contract
holders from the Reconstruction
Finance Corporation and other Fed
eral agencies.
Their concern over the possibility
the banks would play only neg
ligible role in the financing of the
great defense effort naturally was
made more acute by the banks am
pie capacity for doing a major job.
With excess reserves of the Fed
eral Reserve System at around So
700,000,000 an all-time record, lead
ing bankers have been contending
the banks could easily supply a
large share of the credit needed in
carrying out the defense plans.
Revival Is Hailed.
Coupled with the bankers feeling
of satisfact ton over the revival Of
interest of commercial borrowers
was a hope that it might signal
the beginning of long term trend.
For several years commercial banks
all over the country have been COM
planning about the difficulty of find
ing profitable channels for idle
funds, in the absence of broad de-
mand from commercial borrowers.
and also because of current low in
tereSt rates.
Feeling that these conditions were
due to remain for long time. many
commercial banks in process of
reorientation created new depart
ments in an effort to find work for
their earning assets.
Establishment of personal loan
departments figured prominently in
the drives for new business launched
by some of the big banks, and thus
1t became possible for persons of
small means to step into such banks
and talk over the matter of loan
of couple of hundred dollars with
officers who in the more prosperous
banking days were accustomed to
negotiating loans in the tens and
hundreds of thousands.
But as hopeful as the bankers
are about the ultimate rise in busi-
ness in connection with defense
spending, they are not counting on
a repetition Of the great expansion
which marked the first World War
period.
Bank credit reached huge totals in
those days to finance inventories
and new construction for war ma
terials and incidentally to supply
the credit necessities of very active
stock market. The stock markets
credit requirements have been at a
low ebb for a number of wears