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- . . • • • " . ' . • • • " • • •• Kn Address before the Itai England Council Bank Management Conference by Ralph B« Flanders October 11, ^L Coming from business Into the Federal Reserve Bank, i t has seeded to me perfectly natural to view banking in itfl iMMift**! cts, and i t has interested me greatly to discover ho-? 11 fee, in many TS/S, the business of banking ig to general commercial and industrial operations. i few nalnutee, to follow this line of I wish, for cht, lending up to the polftti of view which seem to be m n -erve b-rv.ing as a private enterprise. Business One of the important iiKenesses between banking ann industry i s that both, at the present time, are primarily concerned with *«r o H e r s . For the banks, the major part of theee war orders tafce th« fors of Bsrollen Government portfolios, we have been asked to provide the Oovernrosnt with funds for carrying on the war, and the securities we hold are the evidence of the celerity with wnioh ?refc*T«met that demand. Banking has not had anythi &e the obvious d i f f i c u l t i e s in naeet- ing these war orders that other types of business have had with theireu In fact, B0Pt busineea and mor diture of labor and overr other va/« in the future? j f i t ciin be obt-iined r i t h smaller expen- oy investing in Government securities than in But will thie situation last? Ought wi to depend on i t I think everyone of us feels that the ans^^r to tb auf-stion i s no. As with a l l war buainesa, from the s t r i c t l y businesf! standpoint and •^ithjut r^f^r^nce t "ith war busineea, IrlOtla will and a t t i t u d e , "there is a catch to it. 14 the catch l i vaV taxef: pXttl renegotiation. i l t h banks, the catch lg war taxes plus what? Without going Into all the ™ayg In which an end may be put to the present situation with reg r to our federal portfolios, we can be very sure that, for the long future, it is not safe to depend on thera. In fact, it is positively and absolutely dangerous to depend on the > for our main source of Inoome. And th** dangers are of a aort vjhloh will not merely affect the future of individual ban^e, out t whole future jf the institution of riv -,te banking, is to make sure that after the perio-initiative again becomes th that we have to do finance is past, private n-Bt&y of the business of bank! Post-war Plann1IUC A second respect In which banking is like other kinds of nriv te business is that it is in need of post-war planning. the banking business will not To drop back into 3 simple as it will be for some indus- tries to convert back to their peacetime product. It is going to be neces- sary, in fact, for our institutions to give f w more careful attention to the product the have for sale than was given in the past. Our salable nroduct oonsiats of loans and discounts in thn fields of building, agriculture, consumer credit, general business, and personal loans. Saoh of these require© studyftft*vto sake sure that the product we have to offer fits the p#it-»V«V world. On building loans, for instance, we say expect a favorable market with some new elements ann oovic»8 ooia'ng into the picture as compared ith the Situation a generation ago. Of these, the moat Import .nt is the T.H.A. loan, which is now nretty well established and which will nrobably continue. There are other typen of loan possibilities which are not yet organized because the Aifflftttltivi In the *a? of th: One of these unsolved problwas is th*tt of iXua cle r/mce. m% been solv^• f« cannot atait the ne*lr&olilty or the possibility of continuing far into the p#it»i v.orld th?> low-grade duelling conditions of th*> crowded areas in our c i t i e s . The banks have a responsibility for assisting intha solution of the problem of wiping out th^se sore spote. In i t doing, they rrii:^ assist In arrest- ing the vioioup circle of urban decay in which lose of pt 1 *«t&te earning power leads to higher taxes which, in turn, leads to further lowered earning pow r and further higher taxes, ^d jnfln:tun. fh§ banking ernity cannot stand aside from thie serious ?)roblera. Then ther«? ie the revival of bueinosf) ana oerRun&I loane, larly in the smaller denominations, articu- Skill in estimating credit, courage in implementing e k i l l , and organization for ?>rofitably car -ing out small loans wXll have to be continu <i Drought to oaar on our There i t g>ing to oe an lncr market for agricultural loans, -hither for production, for builciing, or for aociitional e :ui,>ment. situations Viir The somewhat in tfei ipitlrt group areas, such w r.otntoes, apples, cranberries, or tobacco on the one hrmci, and general f rming anft dairy farming on the other. farm e But in a l l , the r rovements in en uv- a field for conditional sales which ntuet be sur- veyed and peit^d. There In a cQrresy>onclin, o rtunlty in the consumer credit for automobiles, houe^hol'i machinery, furn'tur^., returns on such flnancin partic onlj co F i %\\: shulri the major to the MLg trecl.lt companies, with m&ny banss to the extent of buying the paper of the^e credit pry low 11 lay ^Ith th« i h a t t e ; an4 profitably ptrtltl •$•• field, return? How many of tti &r« thoroughly f r? of our own fit in thic? type of b t Uuil we can I These are our products, what are our **lfc*t*1 01 I e the prospect among our clients? One of the lram^3I I :ts Is that of the termination loans. Wt should be prepared to advise on p f m l < f i for th^se in the case of any of our clfents with war business subject to termination. The advice may be tactfully given well in advance of V-K Da. • Ther^ is one poiht vhioh personally I feel cannot b# emphasized too strongly. Th^re le no question In my mind but that the contracting offices and officers are going to be overwhelmed with work on and shortly V-E Day. *we haven't seen anything yet.** after I t will take weeks and months for most contracts to get through the mill. The contracting agencies are foreseeing this to the ll^ait of their powers in training hundreds of contract ttmlartlM officers; thv period wtH bs done. difficult all th n be done by UMM to shorten But nfc th I, it ie going to be a long and process, and for mo&t contractors, some dation will be required. if of loan accoruo- This possibility should be discussed &na t>re- pj r -'v, for in an vane e. There is another service which the contracting officers ar red render to contr--etore which should be thoroughly undnrBtood and th« banl^a ©ay well di8ouaa with their c l i e n t s . Thin Is the plan out originally with the :^tudebaKer Corporation whereh;/ ^ont of the questions wnlch remain to be settled after termination can be settled In advance, leuvim-t l i t t l e more thun inventory quantities to be filled in T?hen the tltae of termination . speeding eettlaraent le availaole ftp Dart of wisdom to examine thftfti 1 underetand that thi-3 p f i l U of , the s^rvicee. tblXltlsa careful!;/ I t will be the nci nulckl • Why not alao ciieeuea no . of ad f rorkir mination? LMg Wf Of you a*0 doing, the q ,i ^fto:- termination elJ foj^ t e r - ahead among the buslnen^ee of your raglM rrill hn IOOK appr^cit ted in th*? long run by your c l i e n t s . ffct "orM of the A«B«A« in s e t t i n g up machinery for nro\rldlhg t h i s • ltuatione |h*ri tfco arainary banking ;-roc^Qures i f f difficult IF worthy of th nlgh&et on— OilJBtitm Of s a t i s f a c t i o n to -1., Of it tho f i r s t C'>rr,/ ^ut t;:--o pi-ms originated l i Pi i | for Mtion. jjlana 3tata, Connecticut, igrloultura, tnat ar« the her.rt flnan " c u l t u r a l loanB, w%ftFOin a B%nse in competition ^ i t h lll-»AA%ttr«d oi b*»» thtw PW no tlMIOQ | nnd. ouploymont in %hX§ country-. H0*opmioaloil7 iponoorod bodice. proper to tJ I .intain priVftto banking as the p r i n c i p a l c i a l tupport tf bvolnoofli bn or v i l l fully organized, effort I t l i vjvi ;rtaklri5'3 of t h i s sort and soul Of tlM effor" U t.' La i I t steovU oe r •-• .xtvr 'ructive* c fh« fctef* t i t i o n , howov#ri need not be *ition la rondorls^ lorvlao n^v^r c&n ':itutions arid the priVatO institutions as MA both Op or& So in the flo!4 oa4 flfid OMAO Of - c ^ . l v l t y ; bu1" 30 f Q of a c t i v i t y vl | llM prltmtO I their PO 1 emd on a BOPi O«roful approaeJa t o t h e subject Of agricultural Oro4it I • have been glVlBf in the l a s t fow r®. k IQ^OliLtlllo dOVOlopsont In t i n NP • -tion ha? been t a k i n g p l a c e Kork , l t t e u n d « r •- camalttOO Of 1 - : Fol . L HoiOXTO B&rik i - in ooory^n tion with ix». Crlppol, th*? National ian for-nerl-.- loc-r n thi- trlot] Dr. Bart of c u l t u r a l School; Rf>c lTt 01oYoIaad| Th^ oit#Alt f i l e that XM\ .- ooamltt • mt of 4«Y«1O , ^ork, lorrjell Agritrtlaal I Rational kliUMl and dir,cuBB6d b,/ the Agricultural Qeaftiftae of our Foder.il rvo Bank eeter&ay, and i t \n my feeling that means must be found to make t, cedureo the have developed * - ge to the bmnlU of N«^ lngl>nfl, OORI^OD 'ttcul&rly the country bariu • I r l i another problc I which remains the ea'ne for banks and industry. Fortunate! in thin r#i ^l&n. for both, wm have reason to believe that conditions wiXX eape up within the next few months. Execution ma be tlo be no reason for delays on Now i s the time ip b/ lac.< of man-o-^r, but there should oore in carrying out plans which art carefully made in the present. The m n fltNAtlo Aifficuit for Jity banks, but there •••m to be taany oases in which the country banks ha ve b#*l pc.rticularl hit. r.oae aeans mu;<t be found to make Ola blinking busines«, *^ven In the country, Lllt«r«a1 o lnttlXlgvmi fOttttf iinm, Ikf iSrit out i n t e l l i g e n t pr Th;it s done if country is. 3u»raing up our whole situation, e may aay that the preservation of the oriV'-te bunking gystftra depends on I t s rendering, in a l l i t s proc*?dure«s and in 11 Lti lines of organisation, on who at support jid satisfaction the; future of any i n s t i t u t i o n depends in this democr/ntic country. 1/ concentrating on valuable p-rvice, ich the recipient v l l l be gXa4 jther the maximum service to the public, 'ntiou of ..rofit for ,y, our banits can look forwarcl to r i v . t e operation.
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