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Show Manifold Ways in Which the T Banks Are Serving the Nation Handling Millions of Transactions Daily for Individuals, Corporations Cor-porations and State and National Governments The Structure Strengthened and Deserving of Public Faith By FRANCIS MARION LAW, President American Bankers Association THE banks of the nation provide the machinery through which pass daily many millions of checks and drafts, aggregating aggregat-ing hundreds of millions of dollars. dol-lars. The banks are largely financing the Federal Government Gov-ernment in its Re-coverey Re-coverey Program, involving the greatest peacetime peace-time expenditures ever known. Likewise the banks are largely financing the cur- I F. M. LAW terest rate ever been so low. Every sound business In the country today can get what money it needs. A Return of Normal Lending Banks are badly needing loans for revenue purposes, and now that confidence confi-dence In banks has been largely restored re-stored they are naturally returning to a more aormal lending policy. Before the bank holiday the confidence of the people was shattered. The thought uppermost up-permost In the minds of depositors was the safety of their funds. Withdrawals from banks became increasingly heavy and general. Under such circumstances the banker, mindful of his primary responsibility re-sponsibility to his depositors, was more concerned in the collection of loans than 'n the making of new loans. The result was a severe contraction of credit. cred-it. For this the banker should not be blamed. He simply performed hie manifest mani-fest duty. Bankers at this time are very properly prop-erly viewing the credit needs of business busi-ness with serious and sympathetic consideration. con-sideration. Applicants for loans are not always familiar with the rules govern ing bank credit and constructive and interested help on the part of the banker bank-er will bring about the making of many additional loans, without doing violence vio-lence to any principle of good banking. Certainly no one would advocate the making of unsound lo?nr by banks. The creation of a large volume of unsound loans would not only weaken the banks it would prolong the depression and wipe out some of the gains already made. It is to be earnestly hoped thai no banker will yield under the pres sure of his desire for earnings, or for any other reason, and make loans ol the wrong sort. John Ottley of Atlanta, in a recent address, said "The plan ol lending freely and hoping for the best has never proven wise." There are many needs for credit ol kinds which are not within the province of commercial banks to meet. Likewise there are many types of credit, bui there are also many types of credit fa cilities available enough, it woult seem, to meet the requirements of al, classes of worthy borrowers. The Duty of Every Banker It is clearly the duty of every bank er In the country to perform certain services. The most important are: 1. To afford perfect safety for de posits. 2. To grant credit to those who de serve it. In the matter of credits the public-must public-must In fairness remember that com mercial banks are not lending their own money, but the money of their de positors. represented very largely by the earnings and da-rings of the peo pie. The eople who own these deposits have accumulated them through years of labor and sacrifice, and in many cases the deposit represents their all. These depositors have the right to call for their money at any time, or at most on short notice. Deposits constitute a sacred trust. There are certain basic principles in sound banking that must be held onto even in this period of change, but the progressive banker must be responsive to changing conditions and he must be active in seeking proper opportunities to meet the sound needs of his CU6 tomers. ' in a recent message to Congress, the President said "1 am greatly hoping that repeated promises that private in vestment and private initiative to re lieve the government in the Immediate future of much of the burden which it has assumed will be fulfilled." Repeated assurance has been given by the Administration that there Is no desire on its part to continue government govern-ment lending a moment longer than is necessary and that at the earliest possible pos-sible time the government will gladly give way to the banks and other lending lend-ing Institutions. This, of course, Is as it should be and we are all earnestly looking forward to the time when private pri-vate initiative and enterprise shall have recovered its vitality sufficiently to throw government crutches away. Numerous bank failures have ere ated in the minds of many a grossly exaggerated ex-aggerated idea as to the losses of depositors de-positors in closed banks. The record Indicates that depositors In banks which closed in the past three years will realize on an average about 65c on the dollar. That would mean a loss of 35. It has been estimated that during dur-ing the depression the average value of investments in stocks lost about 90; bonds similarly declined approximately approxi-mately 60 and commodities 6i. Deposits In sound banks continued to be worth 100 throughout the depression de-pression and 90 of the bank deposits of the country were not affected. Rankers Deserve Confidence The country can have full confidence In the integrity and competence of the bankers of the country. Out of the lessons les-sons of the last few years has come experience that will be valuable to the banker and to his community He can be counted on to show a proper appreciation appre-ciation of his responsibilities and obligations ob-ligations and to take his place among those who are making earnest and un selfish effort to promote recovery He Is not Infallible, but" with every power that lies within him I believe he may be depended upon to fulfill his duty as a custodian of the people's money, as a dispenser of credit and as a God fearing American Citizen Imbued with sincere regard lor the common good rent credit needs of states, counties, cities, public schools and other political polit-ical sub-divisions, all of which have intimately in-timately to do with the daily affairs of all of the people. Each day banks throughout the country coun-try are making hundreds of thousands of new loans and they are renewing and extending old loans for the accommodation accom-modation of a vast number of borrowers, borrow-ers, these borrowers being individuals, corporations and partnerships and their loans being Incident to agriculture, agricul-ture, Industry and trade in every com-. com-. munity in the land. The banks, through their trust de- ' partrnents, are continuing the work ould which they have faithfully carried on a . throughout the depression and are pro-' pro-' tectlng trust funds placed In their care out against the worst shrinkage of values they ver known. Included in this activity Is n a the service the banks are performing Mrs. la connection with administering the affairs of widows and orphans. The banks, through the medium of their savings and thrift deposit depart-"" depart-"" ments, are furnishing safety for the accumulations of many millions of people and on this class of deposits reasonable interest Is paid. In- Banks are providing a service for the k" safe-deposit and safe-keeping of the eld possessions, papers and securities of a very large number of people. The officers of banks are unstintedly and unselfishly giving advice and counsel coun-sel to the people cf their communities, thereby to a considerable extent guiding guid-ing their daily financial and fiscal affairs af-fairs during this most difficult period of disturbance. The Banking Structure Strengthened The banking structure as it is today has been greatly strengthened and the 3Sgg process of strengthening still goes on. "l Banking is not a closed science. The ; banking system which we have had was not good enough, and I earnestly believe that an able and non-partisan commission should be set up to make a study of our numerous banking laws to the end that a properly correlated banking system might be worked out and submitted for consideration to the next Congress. A good system would Include rigid requirements as to management, intelligent in-telligent and Impartial supervision and, In due time, unification of supervision. Such a system, composed of banks adequately capitalized, capably managed man-aged and conscientiously supervised, would eliminate any possibility of a recurrence of what has happened In the past four years. The temporary Federal deposit Insurance In-surance plan under which deposits in banks up to $2,500 for each account are Insured has been In effect for six months and has proven a potent factor In restoring confidence. Only two small banks out of over fourteen thousand holding membership in the fund have failed during this six months' period. The temporary plan has been extended very wisely for a year, and the amount of the insured deposit has been Increased In-creased to $5,000, thus insuring in full over 9S In number of the depositors In the country's banks. ; Hoarded money Is returning to the ! banks and deposits are showing a vast I Increase. Banks everywhere are super : liquid, meaniug that they have an un-: un-: usually heavy proportion of their deposits de-posits in cash. There are two kinds of unemployment in this country unemployment unem-ployment of men and unemployment of dollars. These men and these dollars muBt be put to work. Banks In strong and highly liquid condition are prepared pre-pared and determined to do their proper prop-er part In putting money to work. Requisites for Grants of Bank Credit That brings me to the all important question of the granting of credit by banks. Two things are necessary to Increase bank credit: 1st. The banks must be liquid and confident in their own strength. 2nd. Business men must further lay their fears and regain confidence to the point where they will dare to think and plan ahead. The first requisite is accomplished. The second is in process. Bank credits will Increase and money will go to work as soon as business men get over their disinclination to borrow and this will be when they begin to see profits within their reach. In past depressions the real movement move-ment of the expansion in bank credit has always come after general business recovery got under way and not before. The number of good credit risks Is increasing in-creasing daily. Not in my time have good borrowers been so warmly welcome wel-come at banks as whey are today. Never Nev-er before has there been such competition compe-tition tor good loans, nor has the in- 80 |