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Show How Flow All the People P.2yeda Playeda Played P.2yed P2yed [ . a Part PartIn PartIn In Building Nation's Nations ! ' Credit Stru Structure StructureBanker cture ctureBanker Banker Describes the Way Loans and Securities of Bank Banks BanksAre BanksAre . Are Basedon Based on the Hopes and Plans of All AllClassesValues AllClassesValues AllClasses Classes-Values Classes Values - Values Dependent on Public's Publics Public'sAbility Public'sAbility Public'sAbility PublicsAbility ' Ability to Meet Obligations ObligationsBy - - By FRANCIS FRAI\CIS FRAI CIS \ H SlcSON SISSON S1SSON.President S1SSONPresident ; . , President American Amenc:1D Amenc1D : Bankers Association ASSOcI3tlon in The Forum Ibrum CREDIT CREDIT ma > ) } be Informally describeda described ' - a & * l 1 . fnturfl future hones hopes , , nlnna plans nnfl and good ennd In Intentlons intentions In intentlons tentlons tentions com cony concerted erted Into present purchasing purchasing pur _ chasing PO\\ PO potter POer potiser \ \ er The y yfarmer " \farmer farmer \ farmer , the manu -I I - # * manuI Iv f/ f v s fL ' / ' , , fracturer racturer facturer the mer met mery /y y / ' " "J J " < / L chant , the home LR homeLR 'If If ' . ' A f purf ir r2 f .t1fi"o .t1fio t1fio .t1fi"obuyer . : . ' < ? tbuyer " buyer , the purr pur > r " , " chaser of householdIi household householdand \ Ii 1t7 1t7goods ' " .I I . . goods , the investor investors s fJ ; r ; " and the speculator speculatorJ speculatorti ti P V ' : . J all borroat borroft borro\ borro borron \ ' , at timest timesr times timesThey ' t r , . ( 'sofbJ sofbJ ' ! : , - < $ " y " They plan to 1epay repay icpay3 repayi % i \ 1th ith the earningsw earningsfl earningsof earnings 1Y ' ; w of their crops pro- pro - - fl pro-J pro J . pro.J 1 ; : , .J J . .Jczds 1Beds ' eeds czds Beds of tho the sa'cs sacs sales ' oftheir of " , s their goods . , inF in inp InP p F SISSONcomes comes from theirsages their theirwages H It li S1SSON SISSON SISSO \ wages sages ages and sa/arles sa arles salaries saarlesor salariesor / or profits from the resales of their theirsecuntlcs theirsecurities theirsecurities secuntlcs securities at enhanced market v\ues v ues values vuesech valuesetch viluesoich , \ ] e\ch e ch etch ' \ as the case may beThe be b ( ) beThe The greater part of these various variousforms variousforms variousforms forms of c1e ciedU ciedlt H is obtained by the bor borro'o borrosers borrovers ro\'o ro 'o o rosers ' \ ers directly or indirectly mdIrectly through throughthe throughthe throughthe the expansion of the loans and Invest Investments investmeats Investments ments meats of the binhs b"l.nlts bl.nlts blnlts banks " . It Is this which whichcrpates whichcreates whichcreates crpates creates the notes , securities and mort mortgages mortgages mortgages gages In the portfolios of the banks banksThe banksThe banksThe The banks are abl ablu abhi " to c extend tend these theseloans theseloans theseloans loans because a great many people de deposIt deposit deposit posIt money with themEven themEven them themEven Even under the best conditions the theplans theplans theplans plans of a small percentage of borro borron borroners borrowers ' ? ers go wrong through mistakes hard hardluck hardluck hardluck luck or dishonesty , , and the judgment judgmentof of the banker in such cases is proved provedby provedby provedby by the after event to tl ( have been at fault faultThe faultThe faultThe The losses caused under such condi conditIons conditions condltlons tIons are ordinarily fully tully met by funds fundsset fundsset tundaset set aside out of the earnings of the thebanks thebanks thebanks banks tor for just this purpose and do pot poth pothaffect notiaffect " affect the money of the depositors , who whoiseldom . , seldom hear anything about such suchlosses suchlosses suchlosses suchlossesIn losses lossesIn In the vast majority of eases tases rases and in inthe inthe inthe the 0\ 0 overwhelming erwhelming 0erwhelming oierwhelming \ volume of business businessinvolved businessinvolved businessInvolved involved the confidence of the bankersin bankersIa bankers Ia in their customers and the confidence confidenceof of the customers in their own abilityto abl1ltyto abl1lty ability to carry out their plans and obligations obligationsto to successful eueeessful conclusions are wholly whollyjustIfied whollyjustified whollyjustified justIfied This is the normal economi economic economicsituation economicsituation situation and It constitutes the condl condi condltions conditions condltions tions under v . which shich hich the use of credit creditadds creditadds creditadds adds to public pubUc pubUc'oelfare ' \ welfare \'oelfare 'oelfare oelfare and progressThe progress progressThe The Faithof Faith of tho the Banks i iSuch i t tSuch iSuch Such0 Such \0 0 ' \ T\as T as gas \ as the structure of hopes , good goodIntentions goodintentions goodIntentions Intentions and common confidence in inone inone Inone one another that e existed , < lsted among all allclasses allclasses allclasses classes of the mtion'3 mtion3 n"l.hon's nl.hons nlhons nation's nations " . ' community life lifeShen lifewhen Shen \ hen the series of economic shocks shocksbegan shocksbegan shocksbegan began to shake the nation's nations ' social h1r ftb- ftb h1rric ftbric fib-ric fib ric - ric in 1D 1929 The people had deposited depositedblll10ns depositedbillions depositedbillions blll10ns billions of dollais doI1us dollars : vlth vith the banks be- be because because be because - - cause they hid h"l.d hl.d hld " . confidence In them The Thebanks Thebanks Thebanks banks had loaned large volumes of ofthese ofthese ofthese these deposits nn un n farm and home mort mortgages mortgages mortgages gages and on notes of manufacturers manufacturersbusiness , . business men and finance concerns , and andhad andhad andhad had invested lDested infested lD\ lD \ ested In the standard securi securl securlties securihes securlties hes ties of the nation's nations ' corporations stale staleand staleand stateand and loc locil local l government units and the thenatIOnal thenational thenational natIOnal governm government nt Itself , because becausethey becausethey becausethey they had bad confidence in the citizenship citizenshipand citizenshipand citizenshipand and business condition of the natIOnTheir nationTheir nation nationTheir Their mortgage and other loans to toowners toowners toowners owners of farms aggregated $6 6 $ 500 000 000,000 000000 , , 000 Loans on urban real estate were were4 $4 4 ? $ 000,000000 000000000 000,000 000000 , , 000 Loans to individuals se- se secured secured se secured - - cured by U S Government , , munlc1pal municipal munlc1paland municipaland municipaland and corporate securities totalled $11 11 $11,000.000000 11000.000000 11000000000 $ , , 000,000000 000000000 000.000 000000 . , 000 Loans to industrial industnal and andcommercIal andcommercial andcommercial commercIal enterprises in connection connectionwith connectionwith connectionwith with the production and distribution d1strIbution of ofthe ofthe ofthe the nation's nations ' infinite varlties varIties of goods goodsamounted goodsamounted goodsamounted amounted to almost $19,500,000,000 19500000000 $19,500,000,000.Investments 19500000000.Investments 19500000000Investments $ , , , . Investments in Federal , State and mu municipal municipal municlpal nicipal bonds \ were sere ere almost $6,000,000- $6,000,000 6000000 $6,000,000000 $6,000,000-000 $6,000,000 6000000 000 $ , , ; , - 000 , and in various vuious ! kinds of raUroad railroad raUroadand railroadand railroadand and corporate securities $11 11 $11000,000,000 11000000000 ? $ 11 000,000,000 000000000 000,000,000.These 000000000.These 000000000These , , , . Theso These made total loans and Invest invest- investments investments Investments - ments of $58 58 $ 000000 000 000 000This 000This 000 000This This great credit structure was buHt built buHtwhile builtwhile builtwhile while the country was at peace , whfle while whflethe whilethe whilethe the farms and factories v . were ere produc produc- productIve productive productive - - tive while the nation and the tho world worldprovided worldprovided worldprovided provided great active markets for their theiroutputs theiroutputs theiroutputs outputs , v . while chile hile the earnings of all kInds kIndsof kindsof kindsof of enterprise were large , while the tbe \ ftorking orklng corking people of oC the nation were werefully werefully werefully fully employed employzd , , while " wages "ages ages sages and sat sal satarles salarks salarics arles arks arles"ore \ were \"ore "ore ore " ste ste- ste stedy ste"tly stetly " - > dy cly and generous , whle while whleprIces whileprices whileprices ] prIces of commodities co.nmoclltlc'I co.nmoclltlcI conmoclltlcI conmoditics . ' were strong and andwIllie andwhile andwhile wIllie while the minds d tf ( .f f . the people were weredomInated weredominated weredominated domInated by faith in the future and andconUJcnce andconfilence andconBJence conUJcnce confilence in me oe ale , anotherircat another anotherGreat ( Great ircat Lh1ng CInngss Ci-ingas Ci ingas - s Lame Came to the N1tlOOTben NationThen Nition N1tlOO Nation NitionThen Then Tben fuddenly suddenly suddenly , , almost almoct ; as IlS it if the sun sunItself sunitself sunItself Itself had lead lost part of ita its vitality vitalityeverything , eferthing e\ e er \ ! r ) t11l11 ! ; , changed Foreign markets marketsCailed marketsfailed marketsfailed Cailed failed and disappca dlsappca disappea eJ e1 Industry slack slackened slackcoed slackencd ened coed A rapid diop d10P drop in all kinds of oC com commodity cominodity cornmodlty modity inodity values set in The earnings of ofbusiness ofbusiness ofbusiness business tell Cell fell Unemployment devel developed developed developed oped Wages and salaries sdlaries went do\\ do don dorm doDomestic dormDomestic do\\nDomestic do nDomestic \ \ n Domestic mirketa m"l.rket ml.rket mlrket mtrketa " . : . shrank Fear be became became became came geneial gene1al The securities markets marketsbecama marketsbecama marketsbecama becama panic pamc lidden ddden iidden as the prices of of8to ofstopks ofstocks 8to stopks 1.S 1S . and bo be ids witheied wIthe1cd wltheied to iractlOns fractions fractionsof iractlOnsof of their former values It was tbe the tbegl thegi thegicatest gl gi eatest disintegration dlsmtegratlon of hum h humanplins u m an anphns a n nplans phns plans , economic conomlc conditions conchtlOns and worldly worldlytialues worldlyvalues alues tialues \ that history hlstory had ever witnessedThe witnessedThere witnessed witnessedThe There The < > e destructive changes cut right rightthrough rightthrough rightthrough through the qualities and values of the theloans theloans theloans loans and investments , the notes and andsecurItIes andsecurities andsecurities securItIes in the binks b\nks b nks banks ' \ Business BuslDess men menand menand menand and manufacturers could not r repay repaytheir repaytheir pay paytheir their notes nole ! . > to tiia lilO tare banks as due Many Manygovernmental Manygovernmental Manygovernmental governmental units unlls and corporatIons corporatIonsdefaulled corporationsdefaulted corporationsdefaulted defaulled defaulted the payments vaymlnts on their the1r bonds bondsProperty bondsProperty bondsProperty Property 'snde snde ' ynJei1y .1n 1n . Ea lYing lycng ng real estate morl inert morlgages inertgages mortgages gages became W worth rth less than the face faceof faceof faceof of the mortgages The market alues tialues tialuesof \ valuesof aluesof of standard securities became less lessthan lessthan lessthan than the banks had paid tor for them as in investments investments investments vestments or accepted them at as col collateral collateral collateral lateral tor for customers ' ' loansThIs loansThis loans loansThis This meant , . In fine , , that the ability abilityot abilityof abilityof ot of boirosers boi rov rovers . ers to carry out the future futurehopes futurehopes futurehopes hopes , plans and good Intentions that thatI I have denned donned . above a.bove as the basis Msis of ofcredit ofcredit ofcredit credit , had become Impaired to a far fargreater fargreater fargreater greater extent than had ever before oc occurred occurred occurred curred in the nation's nations ' history The re- re resulting re- re resuiting re resulting - - sulting suiting losses could not be absorbed by bytbe bythe bythe tbe the banks alone out of the normally normallyample normallyample normallyample ample funds that had been set aside asideagainst asideagainst asideagainst against the expectancy of a certain In Inevltable inevitable Inevilable evltable evitable percentage of human plans plansgone plansgone plansgone gone wrongBanks wrong wrongBanks Banks BanJ.s BanJs . Showed Sho\'red Sho 'red red Shoved \ ' All Reasonable CareIt CareIt Care CareIt It was in loans and . Imestments investments investmentswhose investmentswhosevalues , , whose , -values values .alues alues - . alues thus became so unforeseeably unfore unforeseeably untoreseeably seeably Impaired , that the banks , in all allconfidence allconfidence allconfidence confidence . , In all good faith , in all allhumanly allhumanly . . humanly reasonable care and good goodjudgment goodjudgment judgment had bad entrusted the billions bilhons of ofdollars ofdollars ofdollars dollars of deposits which their cus customers customers customcrs tomers had entrusted to themThose themThose them themThose Those loans and Investments were wereunder , . under all normal corditlons corditions as good as asgold asgold asgold gold itself 1tself Indeed it If the banks 1D in 1Dstead instead instead stead had filled their theJr vaults with gold goldbars goldbars goldbars bars , and then some unknown cosmic cosmicray cosmicray cosmicray ray had transmuted them into lato lead , the theresults theresults theresults results would have been scarcely morestartling more morestartling morestartling startling than the depreciation that thatwas thatwas thatwas was caused in the assets of the banks banksby banksby banksby by the un unforeseeable foreseeable economic forces forceswhich forceswhich forceswhich which permeated and debased themThe themThe them themThe The inevitible me\1t"1.be me1t1.be me 1t"1.be 1t1be ineiitible \ " . ] resultas result \ was \\as as as that , when whenI whenthe whenthe whenthe I the banks urgently needed the money moneythey moneythey moneythey they had entrusted to those assets , so sotint sothat ! th"t tht tint " they could meet the unreasonIng unreasonIngdemands unreasoningdemands unreasoningdemands demands of their depositors erosltors they could couldnot couldnot couldnot not get it 1t backIt backIt back backIt couldI I It v . was vas as not that our banking 5) 5 system systemand ' 3islemand ) stem I Iand and methods \ tteie neie el e of themselves themsel'fes themselfes ' we1k weak weakor weikor : or reprehensible reprehenslbe ] , , npa1 apait apart t from the rest restI restof restof restof I of the life of oC the nation , , as has so much muchbeen muchbeen muchbeen been made to appealIt appearIt appeal appear appealIt It Itvas \vas vas gas v . \ as not that our banl banks banksere s s'oere \\ere ere \'oere 'oere oere sere ' \ \ \ per permeated permeated permealed meated with incompetency or dis dishonesty dishonesty dishonesty honesty or with IOTCT lo\'er lo 'er er lorcr ' \ " standards of ofbusiness ofbusiness ofbusiness business ethics than were the other otherforms otherforms otherforms forms of human buman activity with which whichtheir whichtheir whichtheir their own fate and activities actlvlUes were in ine ineatrieably inextrlcably e .tricably tricably eatrieably > . interwo\ interwo interwoven interwoen interwoien \ en , as . , It almost almostseemed almostseemed almostseemed seemed at times , thereas there \ was \as as sas |