Evening star., 1953-08-19
Some Banks Eased
Loan Policy Too Far,
U. 5. Controller Says


Some national banks have lib
eralized personal loan policies
beyond the point of prudence, :"
according to Ray M. Gidney,
Controller of the Currency.
In his annual report on ma
tional banks. he held that some
down-paymentS have been too
low and some payoff periods too
long.
He added, however, that mot
few" banks which erred in that
direction have since adopted
more realistic and conservative"
policies. He said national banks
were in generally good condi-
ton" at the end of 1852.
Installment Credit Up.
Mr. Gidney's criticism was
based on a big Jump in consumer
installment credit extended by
national banks in 1952-from
So billion to 81 billion.
THE lowering of credit stand
ards to build up loan volume and
earnings" Mr.. Gidneys report
commented, is recognized by all
sound bankers as a poor policy
and experience has shown such
tendencies to be invariably cost
ly.
But Mr.. Gidney said, the Ma
tion's 4,916 National banks were
generally Ito be complimented
for having adopted and followed
sound investment policies"
National banks are chartered
under banking acts of Congress.
The banks are regulated by the
controllers Office which exam
ines their records at least once
q year.
Firm on Three Rulings.
Mr.. Gidney said the control
ler'S Office was sticking by three
of it's rulings despite pleas for
relaxation. They were:
l. Mortgage lending-"It would
be unwise to liberalize" the
present rule that national banks
may invest in mortgages no more
than so per cent of their time
and savings deposits or 100 per
cent of capital, whichever is
larger. Most national banks
have put only about 35 per cent
of their legally available funds
into mortgages. Therefore, re-
Taxation of the rule would only
permit few banks (Which have
reached the limit to further ex-
pand their real estate mortgage
lending activities"
Mr. Gidney said national banks
still have $10.9 billion mortgage
lending authority left.
2. Timberland mortgages -
Banking interests in several
States" have requested that
adequately managed timber
lands should come within the
definition of improved real
estate" and be eligible for ma
tional bank loans.
Mr.. Gidney said such loans, at
least on long-term basis, could
not meet present standards of
the controllers office because
the timber against which loans
would be made is not insurable
against fire and other damage
and is non-productive for years
at a time. He said the con-
troller's office was looking into
the possibility of making short
term timberland loans legal for
national banks.
3. Turnpike bonds-There will
be no change at present in the
controllers rule that new turn
pike bonds cannot be accepted
as national bank investment.
This, Mr.. Gidney said, was be-
cause new turnpike does not
have earning record.
Mr.. Gidney gave this summary
of the financial condition of
national banks at the end of
1852:
Record Assets Listed.
National banks had record as
sets of $108.1 billion. This rep
resented half the assets of the
Nations 1896 commercial
banks. National banks had de-
posits of 500. 2 billion and capi-
tai and reserves of $7.6 billion.
National bank loans to COM
merce and industry totaled
$l6.9 billion. an increase in 1852
of $1.2 billion. Loans to real
estate owners secured by mort
cages amounted to $8.3 billion,
an increase of $724 million.
Loans to individuals totaled
ST. billion, and increase of $1.3
billion during the year.
A decline in the market value
of Government securities held by
banks, brought on by rising in
terest rates. was only a paper
depreciation" Mr.. Gidney said,
because the banks mostly hold
short-term securities that can be
kept to maturity and redeemed
at the Treasury for face value
regardless of the market value.