OCR Text |
Show HOW THE BANKS AID THE GOVERNMENT Normal and Emergency Needs Met by Advances of Banking Credit " NEW BRUNSWICK. N. J. The : American commercial banking credit system is an absolute essential In the financial operations of business and government, Harold Q. Moulton President of the Brookings Institution Institu-tion of Washington, D. C, Bald here recently In an address before the Graduate School of Banking con ducted under the Joint auspices of Rutgers University and the American Ameri-can Bankers Association. ' If the flexibility and expansibil ity provided by commercial banking ' credit were eliminated, Dr. Moulton N declared, "It Is scarcely too much to say that the economic system Itself would shortly be destroyed. x "Normally the amount of credit v. extended by commercial banks to the l government Is small in amount and for the purpose mainly of financing temporary requirements in anticipa-N anticipa-N tlon of tax collections or bond sales. K But in periods of war and acute de-i de-i presslon, when the financial require-:i require-:i ' ments of government expand with great rapidity, the expansion of com-merclal com-merclal bank credit is on a treinen- dous scale. Such Is the case at the : present time, ft yf How Public Needs Are Financed "The purchase of government se- curitles by Individuals and by the commercial banks provides the gov-! gov-! ernment with the means by which ; J Its manifold activities are financed. The Treasury obtains the funds, with which the Reconstruction Finance Pi Corporation and other government i-jj credit agencies finance their opera-- opera-- tlons, through the sale of securities, largely to commercial banks. These ; funds. In turn, have gone to the as- ; slstance of distressed banks and other financial institutions, to aid Industrial In-dustrial and agricultural enterprises, fT to finance new public and private f'i capital construction, and to provide relief to the unemployed." Dr. Moulton declared that It Is not true that the world depression was caused by a breakdown of the American Ameri-can banking system, "which did not, )Jjt in fact, occur until the depression had been under way for more than Mi' three years." He added: r "Nor is it true that the world mal adjustments existing in 1929 can be . explained simply by undue exten- slons of commercial banking credit 8 In the preceding years. These mal-adjustments mal-adjustments Involved world agricul-ji agricul-ji tural, industrial, commercial and " financial relations." i |