Show how all the people 1 clayed acl a part t 0 in building nation credit Str structure banker describes the way loans and securities of banks are i based on the hopes and plans of all classes clare values dependent on publics ability to meet obligations ity by FRANCIS it II SISSON president american association in tin the forum may be ba informally described C CREDIT as ai future hopes plans and rood good intentions tent ions converted into present purchasing power the I 1 farmer the manir 11 tac the merr mer chant the home buyer the purchaser of household goods the lp investor vestor and the speculator all borrow at times tilea they plan to repay with the earnings of their crops proceeds of the sa sales les ot of their goods incomes from t their heir P F H SISSON wages and salaries 3 0 or r profits from the desales ot of their securities at enhanced market values each as the case may be the greater part ot of these various forms ot of credit Is obtained by the borrowers directly or indirectly through the expansion of the loans and investments ot of the banah it Is this which creates the notes securities and mortgages in the portfolios ot of the banks the banks are able to extend these loans because a great many people deposit money with them even under the best conditions the plans of 0 a small percentage of borrowers go wrong through tal mistakes hard luck or dishonesty and the judgment ot of the banker in uch ruch cases la Is proved event tc have been at tault fault the losses caused under suet such conditions are ordinarily fully met by funds set aside out ot the earnings of 0 the banks for just this purpose and do not affect the money ot of tho the depositors who seldom hear anything about such liuch losses in the vast majority ot of cases and in the overwhelming volume of 0 business involved the confidence ol of the bankers in their customers and the confidence ot of the customers in their own ability to carry out their plans and obligations to successful conclusions are wholly justified this Is the normal economic situation and it constitutes the conditions under which the use ot of credit adds to public welfare and progress the faith of 0 th the bank is such was the structure ot of hopes good intentions and common confidence in one another that existed among all I 1 classes of 0 the nations na tlona community life when the series ot of economic sl shocks began to shake the nations social fabric in 1929 1925 the people had bid deposited billions of oc dollars with the banks be cauls cabie they had bad confidence in them the banks had loaned large volumes ot of these deposits on farm and home mortgages and on notes ot of manufacturers business men and finance concerns and had bad invested in the standard securities ot of the nations corporations state and local government units and the national government itself because they had confidence in the citizenship and business condition ot of the nation their mortgage and other loans to owners ot of farms aggregated loans on urban real estate were loans to individuals secured by U S government municipal and corporate securities to 11 loans to industrial and commercial enterprises in connection with the production and distribution ot of the nations infinite les of 0 goods amounted to almost investments in federal F state and municipal bonds were almost and in various kinds of railroad and corporate securities these made total loans and investments ot of this great credit structure was built whits while the country was at peace while the farms arms and factories were nvere productive while the nation and the world provided great active markets tor for their outputs while the earnings ot of all kinds ot ol enterprise were large while the working people ot of the nation were fully employed emp oyed while wages and salaries were steady and generous while prices of 0 commodities were strong and while the mirds of the people were dominated by faith in the future and confidence in one another great changet laine came to the nation then suddenly almost as if the sun itself had ast t part ol of its vitality every tUta changed foreign markets failed dad and disappeared industry slackened A rapid drop to in all kinds of 0 commodity values value let iet in the earnings ot of business busti iea tell fell unemployment developed wages and salaries went down domestic markets shrank fear became general the securities markets became panic pan lc eldden as the prices ot of stocks and bonds withered to fractions actions tr 0 of their former values it was the tb 0 greatest disintegration ot of human plans economic conditions and worldly values that history had bad ever witnessed thew these destruct lyt changes cut right through the qualities and values of the loans and Invest investments the notes and securities la in the banks business men and manufacturers could not repay their notes to the tanks as due many governmental units and corporations I 1 defaulted the payments on their bonds I 1 property underlying real estate mortgages became worth less leas than the face of the he mortgages the market values of standard securities became less than the banks had paid tor for them as investments vest nien ts or accepted them at as col I 1 la lateral teral for or customers loans this mcana in fine that tile the ability of 0 borrowers to carry out the future hopes plans and good intentions that I 1 have dennec denned above as the basis ot of credit had bad become impaired to a tar far greater extent than had ever before occurred in the nations history the re suiting gulting losses could not be abs absorbed by tile the banks alono alone out ol of the normally ample finds ads that had been set act aside against the expectancy ot of a certain inevitable percentage ot of human plans gone wrong banks bank showed all reasonable care it was in loans loana and investments whose values thus became so unforeseeably impaired that the banks in all confidence in alt all good faith in all humanly care and good judgment titia entrusted ent the billions ot of dollars ot of deposits which their cus tomera had to those loas loans and investments were under all normal conditions as good as gold itself indeed it th the banks in stead had filled their vaults gold bars and then some unknown cosmic ray had transmuted them into lead the re results stilts would have been scarcely more mora startling than the depreciation that was caused in the assets ot of the banks by the unforeseeable economic forces which permeated and debased them th tb laev inevitable lable result was that when the banks urgently needed the money they had entrusted to those assets so that they could meet the unreasoning demands 0 of their depositors they could not get it back it was not that our banking system and methods were ot of themselves weak or reprehensible apart from ram the rest ot of the life of 0 the ration atlon as has so much been made to appear it was not that our banks were permeated with incompetency or dishonesty or with lower standards ot of business ethics than were the other forms of 0 human activity with which their own late ate and activities were inextricably interwoven as it almost seemed at times there here was a concerted national conspiracy to lead our people to believe the great tact fact ot of american banking is that it shared fully in the plans and hopes and hazards of the american people and when those plans went wrong the blanks banks carried their share of 0 the burden and suffered their share oi of thi tha misfortune |