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Show National Topics Interpreted jA flllllffjgi by William Bruckart ygjIH Washington The President lately late-ly has been stressing the necessity of providing cred-More cred-More Credit it, loans of money Demanded "h0 w"tl to do business but who haven't the resources after four years of the depression to get going again. Jesse Jones, chairman of the Reconstruction Finance corporation, has made several speeches urging that the banks make loans freely to the butcher, the baker and the candlestick can-dlestick maker. From elsewhere in the government, there Is the cry that more credit shall be provided, credit here, credit there, and credit otherwise. All of which has moved observers here to Inquire, "whither goest thou, Uncle Sam?-' Students of finance and economics who are regarded as knowing their oats tell me that there must be liberal lib-eral use of credit at any time in this country. It seems to be the system we have built up. Now, more than ever, I am told, is there fl necessity for liberal terms to borrowers. They predicate their views on that which is the fact, namely, that in every community there are businesses that would like to get going again on something like normal basis If they had the resources- These resources, however, hare been depleted by four extremely difficult years, and consequently conse-quently the business men have to proceed slowly. But the continued shouting that there must be credit has more to It than just the fact that money ought to be loaned. The economists admit frankly that other factors must be considered. In the first Instance, when the hanker of your community makes a loan, he loans your money that has been entrusted to his care in the form of deposits In his bank. In the second place, the business man who borrows is taking a risk, for he has to put up collateral security se-curity with his note to the bank, and needless to say that collateral Is always sufficient to Insure the bank against loss. So, If the borrower fails to make a profit on the money he borrows, or if he makes a bad guess on the investment of that money, and loses, he not only loses the amount borrowed hut his collateral collat-eral as well So, even If he has the resources to put up the required re-quired collateral, he Is going to think twice before he borrows. Summed up. therefore, the question ques-tion of private credit or private loans on liberal terms Is not limited limit-ed to the batiks by any means. In other words, you can lead a horse to water, but you can't -make him drink. In this case, sometimes there Is no horse to lead to a:er and Sometimes Some-times there Is no waler when the horse gets there. Hut let us turn to a consideration of government credit. The government govern-ment Is Hitting out money In a dozen different a;s and It Is using the semi government agency, the federal reserve s .stern, to put out other money. Yet the same factors are Intluencing that situation as those that are at work in the field of private finance. When the federal reserve system was created during the administration administra-tion of 'resident Wilson, one of the dreams of Its sponsors was that It would make credit easy, that it would provide money when business needed it. This has been found to be true. I'anks that are members of the federal reserve system hnve the privilege of discounting notes they have taken from their business-house business-house customers, with the federal reserve banks. What they do actually ac-tually Is Sell that note to the reserve re-serve bank and get rash for It. but they agree to take It up In a sped-fled sped-fled time. It Is almost like borro-v-Ing from n local bank, except thai the transaction Is between two banks Instead of between an Individ nal or a corporation and the local bank. The federal reserve banks are operating op-erating now on what Is known asi an easy money Easy Money policy. They are Pot'cy loaning money to t he member banks on discounts at a very low rate of Interest. In nddilion, the reserve banks are riipigcil in open market operations under which Ibev are buying I nit oil stales bonds ami treasury notes at the rate of about fifty million d,. liars' worth a neck. The theory of this Is that the re serve banks, having nn elastic stock of money, will put oul cash every time they buy one of those govern ment bonds, which are acquired wherever Ibev can be bought. That has put out cash, but from what the financiers tell nie the release of that currency ban not resulted In banks loaning additional funds to their customers for the reasons outlined above. Since Ihere has been no swarm of borrowers nt the bank windows, the rush that has been put out bv the reserve banks simply has found its way back Into the banks ns deposit,,. What then? The banks have taken thai cash to pay olf whatever debts they have nt the re serve bunks and have taken their customer),' notes ha. k to hold them until they mature. Which Is per I fectly natural, because the banks can earn a profit only from the interest in-terest they receive on loans, and If the customer paid 6 per cent and the bank discounted that note with a reserve bank, it would have to pay a part of that 6 per cent as Interest In-terest on Its borrowings from the reserve banks. Hence, with the note back In Its possession, the bank gets all the Interest. Now, as to the loans that are being be-ing made by the Reconstruction Finance Fi-nance corporation, the Department of Agriculture, the Farm Credit administration, ad-ministration, the Federal Home Owners' Own-ers' Loan corporation, and whatever other agency there may be, it is the same old story. None of them can loan unless the security Is ample. That Is, a farmer cannot borrow unless un-less he has a farm which he can mortgage or a growing crop or some work stock, and the city man cannot borrow unless he has a house which he can mortgage. If it were not that way, the government would be putting out money without a chance of getting repaid unless the borrower borrow-er wanted to do It. It takes no fortune teller or soothsayer to foresee fore-see where that would lead and what it would amount to In the end. It would simply be taking money paid Into the federal treasury by taxpayers taxpay-ers and virtually giving It away. Obviously, soon the taxpayers would quit paying It In. And having mentioned the taxpayers. taxpay-ers. I gather from conversations with unbiased observers here that the taxpayers are due for a tremendous tremen-dous shock anyway before this recovery re-covery plan is completed. The expenditures ex-penditures are so vast and In so many ways that it is difficult. If not impossible, to tell how much the thing is costing. Secretary Wallace's plan to buy up about six million pigs weighing weigh-ing less than loO Wallace Plan pounds and one Half Success million sows about to farrow, as a moans of cutting down the hog surplus and forcing prices higher appears to have been only about l.aif successful. Or, to say it another an-other way, the program failed. Department De-partment experts won't fay why It failed, but there has Nvn a good deal of discussion In the Capital that the'secretarv's plan missed fire because it did not take into consideration consid-eration the practical, the human side of the equation. It was a beautiful beau-tiful theory. I think the secretary ought not to charged wholly with it. however, because It had its Inception In-ception in the minds of certain men who claim to be leaders In agricultural agricul-tural thought who put their heads together with some of the professors profes-sors who are so numerous around ashing:, ,n. From d.vers source. I get he information in-formation that farmers in many sections sec-tions of the country held off marketing market-ing their pigs and their sows, even with the premium the Department of Agriculture was paying, because they wanted to wait for those higher high-er prices that the Department of Ag riculture said would come. Quite obviously, they evpectod the little i:gs to grow- up. and when they became be-came bigger pigs and prices were higher. there would be bigger amounts of money. The net result of the whole show-was show-was that the Department of Agriculture Agricul-ture put out only about JJJ.iMViXhI In its pig program, whereas It had estimated esti-mated that there would be approximately approxi-mately S.".0.mi.Oim expended. A part of the total paid out went to the processors, such as the meat packers pack-ers and butchers, as compensation for the work they did. The conn try's hog population was reduced by the extent of about four million pigs, while In.stcad of one million sows being bought and killed, there were not more than one hundred thousand. thou-sand. Notwithstanding the failure of the program to buy pigs and sows. the outlook for Expect Lower hog supplies In Shipments ""' Principal markets mar-kets during the coming marketing year Is f,,r ),, rr shipments than in several years. The marketing year ending (VIobor 1. I'.'l's';. saw roughly -tT.g.'.ii.OeM head oT hogs slaughtered. That total, and it Is fairly accurate because fed oral inspectors see all of the hog. killed, was the largest h, fnr years. Put the marketing year lust now starting gives every Indication of a considerably smaller shipment and slaughter ami that probably menus higher prices, according to I ho experts. Tin- relationship between hog prices and corn prices has been uu favorable for hog prodneibm In the last three months, and the prediction predic-tion from the Department of ,i:rl culture Is that this condition will continue for probably a year. II to be assumed that this w ill rcsul' In a smaller pig crop this fall thin Is usual, although since the plan . buy pigs failed to inaleriali-e Int. satisfn, oi y results. 1 do nol see b.o. the experts can guess the dimen slons of the pig crop. . Wr.lr.n Nr. ,,,, ,'n |
