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Show Fi;IDS 3:iKS ViLLIHG BCEHGWEiSS CAUTIOUS Prominent Writer Refutes Statements Eankers Are Refusing Sound Loans Describes Reasons for Reduced Re-duced Volume of Credit. rIGURES supplied by typical, well- managed banks in different parts of the country show that a high proportion pro-portion of all applications for loans have been granted in the past year or two, says Albei t W. Atwood in a recent article in The Saturday Evening Eve-ning Poit on "The Idle Dollar." Excerpts Ex-cerpts from Mr. Atwood's article follow: fol-low: "Frequently banks state that as high as 90 per cent of all such applications appli-cations are granted and for from 60 to 75 per cent of the amoun' asked for. Allowing that the banke.'s make these figures as favorable to their own case as possible, it seems strange that we are told again and again that baukr are nofflendh:;?. "If we take into account the whole class of regular bank borrowers, the plain fact is very. few want to borrow bor-row yet. For the word 'borrow' is merely another name for the word 'debt,' and we face a great worldwide world-wide drive to get out of debt. "An experienced small-city banker, asked if banks were lending freely enough, wisely replied: 'The really good borrower does not wish t . borrow bor-row now. In fact, I think our customers cus-tomers are making a remarkably fine showin?; in paying off their loans, especially loans of long standing.' stand-ing.' The Shrinkage of Credit "Or if we thii.k of business concerns con-cerns rather than of individuals, it is conservative to say that those able to maintain high credit ratings have been mostly the ones able to maintain main-tain ample cash resources and, therefore, there-fore, least in need of credit As prices and costs fell, many concerns found themselves with plenty of cash because of the shrinkage in operations. Cash resources were still further swollen by l duced dividends, divi-dends, and smaller Inventories made bank borrowings still less necessary. "Expressed in another way, banks cannot expand credit, they cannot make loans, unless there is a demand de-mand for the same. Fundamentally, the business transaction makes the loan, the loan does not make the transaction. It i3 a mistake to try to force upon business organizations tune's which they do not need. Under the circumstances, the 'idle dollar' is a natural and proper enough phenomenon. phe-nomenon. A demand for credit is difficult dif-ficult to create artificially, and there is always danger in so doing. "Banks must be liquid enough at all times to pay depositors. The idea of a commercial loan is that it represents rep-resents a self-liquidating process in business. If the banker makes only those advances that are inherently sound, and selects his maturities wisely, he will have incoming funds to meet demands. Government Lending "As everybody knows, the Government Govern-ment has vast lending agencies, for home owners, farmers, and the like. These have nothing to do with the subject of this article, except that all such Government operations would be impossible if the banks did not lend the Government money for the purpose. "No one can set a time when borrowing bor-rowing will be resumed. But it will come when men once more feel that conditious are sufficiently settled to warrant them in taking chances, in entering upon deals, and in trying to make money." Mr. Atwood says that it may be that the banks are overcautious now, just as they were overconfident in 1929, but calls attention to the fact that until a 1 tie more than a year ago banks were failing "partly because be-cause they had loaned too freely, and were being criticized right and left for precisely that." He adds: "Indeed, the banks which had been cautious in their lending policy came through the crisis safely. Under Un-der such conditions it is utterly useless use-less tj criticize banks for not making mak-ing loans. After the experience they had for several years, especially in 1932 and 1933, it is only natural that they should relax their requirements very slowly and gradually. "Unfortunately, many of the applications appli-cations for loans are not from people who want temporary banking accommodations accom-modations for three or six months and are quite able to meet their maturity dates, but are from those who really need permanent capital. They are busted and they want someone some-one to stake them to a new start What they really seek is a partner to furnish them with long-time capital. capi-tal. But depositors insist upon being paid on demand, and, therefore, It is a grave question whether banks should tie up their funds for any length of time." |
