AMERICAN BANKING

Hawke's Bay Tribune, Volume XXIV, Issue 82, 19 March 1934, Page 9

AMERICAN BANKING

TWO RIVAL PLANS Anomalous Position Arises QUARREL MAY BE BREWING By Telegraph—Press Assn —Copyright. WASHINGTON, March 17. The Reconstruction Finance Corporation will seek legislation to grant it power to perform complete banking functions. President Roosevelt has long held that the private banks are not adequately meeting the demand by business for credit, and be is prepared to put the Government agency directly in competition with them by allowing it to grant loans to industry and individuals. The Reconstruction Corporation Finance Bill sent to Congress to-day will put the Government into the banking business on an unprecedented scale. Loans will be made to concerns employing a minimum of 10 persons They will have maturities not exceeding live years and "ill be contingent on increased employment of labour. Concerns can build up reserves before repaying their indebtedness and the measure is otherwise designed to ‘‘meet every legitimate credit requirement of large and small industrial and commercial concerns.” Later in the day a rather anomalous situation developed when it was revealed that the Federal Reserve Board strongly opposed the Corporation’s measure, which was drawn up by Mr Jesse H. Jones, the Corporation’s chairman, and that it has forwarded Congress a measure of its own which provides an Industrial intermediate Credit Bank in each Federal Reserve district with a total of 300,000,000 dollars provided by Congressional appropriation. The banks are empowered to make loans either direct to industry or through comtner cial banks for five years. Critics of the Corporation plan pointed out that whereas the Corporation was an integral part of the Government the new system banks would be supervised by the semi-independent and “bank-minded” Federal Reserve Board. A mysterious touch was given the whole matter when President Roosevelt informed Press correspondents that he knew nothing about the Jones measure. It is felt here that a quarrel is brewing between the Corporation and the Federal Reserve Board, Mr Morgenthau, Secretary of the Treasury, supporting the latter.

Mr Jesse H. Jones, chairman of the Reconstruction Finance Corporation, speaking before the sixth mid-winter meeting of the New York State Bankers’ Association on February 6 asserted that too little credit and too severe terms would be worse than too much credit. Although the Administration has no thought for coercing banks or dictating their management, President Roosevelt would be greatly disappointed if the banks do not assume their full share in the recovery programme “by performing all of the functions that banks are intended to perforin, and that, of course, includes providing credit where credit is needed and can be extended with reasonable safety,” Mr Jones declared: “Too strict credit rules and too short maturities will greatly hinder recovery. There is never a day that the R.F.O. does not have applications for individual and industrial loans that are perfectly sound. They are not loans that normally would be liquidated within a few months, but many of them could be made by the local banker and could be liquidated, if the borrower is given reasonable time and notice. _ The common cry almost everywhere is that the banks are not lending. We get it on every side. Your representatives in Congress continually get it, and there is a persistent demand upon them to authorise the R.F.C. to make direct loans. Unless deserving borrowers can get credit at the banks, you need not be surprised if Gpngress yields to ihis pressure.”