Blame & Bankers

President Roosevelt has learned that it is one thing to desire credit inflation and another to achieve it. For more than a year Jesse Jones shook a horrendous finger at the banks, accusing them of damming enormous reservoirs of potential credit. The bankers weakly replied that not even on the highways & byways could they find borrowers to whom anyone but a philanthropist would lend money. Wholly unconvinced, Congress authorized RFC and the Federal Reserve banks to make direct loans to industry (TIME, July 2). By last week the Federal Reserve had loaned a measly $810,000 of the $280,000,000 available, and Jesse Jones's RFC only $8,040,000 out of $300,000,000. And Mr. Jones, showing signs of weariness from his vociferous efforts at pump-priming, was ready to admit last week that the banks as a whole were "doing their share in lending."

That was no mean concession from the chairman of RFC, but the rest of the Administration was far from satisfied. Three days later Secretary of the Treasury Morgenthau announced a fact-finding inquiry to settle once & for all the question of what was holding up credit expansion. Dr. Jacob Viner of the University of Chicago was picked to head a staff of 50 fiscal experts drawn from Midwestern universities to comb the Chicago Federal Reserve district, considered typical of the whole country.

The probing professors will attempt to answer such questions as: 1) Are responsible businessmen unable to borrow from their banks? 2) Have they been refused because their credit standing has been impaired by Depression? 3) Are banks refusing loans because of a desire to stay liquid, or are the State and Federal examiners too strict? 4) Are businessmen liquidating bank loans with funds obtained from Federal agencies?

A somewhat similar inquiry in Manhattan a year ago revealed that not one businessman whose loan application was turned down had any reasonable claim to credit. Nevertheless, most bankers felt confident last week that, the Roosevelt Administration being what it is, they would once again be blamed for all the woes of credit stagnation.

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