The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
X-822
CGRTaiLUENT OF UNNECESSARY CREDITS.
The roquost .-;hich th3 S.:1Cr:;Jta.ry ol thv Trea.(.lur;- naa,e· on F$bruary 6 1
1918 1 to every bank and tiUst company of th0 country th:l.t it should set
...
·aside
1%
icato:::; of
·'
of its. resourcea ea.ch V/iJ6k for investn:ent in the· Treasury certif.:..
indobt.,·ine·3G~
bank~
.has brouc:,:ht to the Fede.ral resorve
quirie3 as to ho,v the b.:mks could :a.ake available so.lg.rge
;l
J;..:l.ny ·.11l-
for the ·
GUm
u::::~ of the Gt. ivcrrur..ur.t and a.~ the same tirr:e maintain th~ir usual· business
with their deposit.ors anJ. custon:ers •. Thera is welco:.r.e ev.i.•i0nce that the
bankers of the country are giving thou.;htful ·.consideration to t:ne question
of conserVillg CrGdit for the
Governl~:r.t~
.:..nu the F.:.deral. .Reserve Board..·
thinks it the appx:opriate time to issue a statezi:ent expressing its views
upon the .r:rinci.Ples which should guide the action of the banks.
It is clc:a· that if the war requirements of the Goverrur.ent are tQ be
financed. without undue expansion of banking credit; not only nust ~here
b~.
\
sene raduction of existing credits
but there .will have . . to be applied ·
. 1
a rigid check upon the further expansion of credit in
di~sctions
not clear-
ly essential for the JlrOsecution of the war 1 and for the health·
necessary cOIL!ort of the people.
and
It is no more·. possible. to sup!3rimpose
upon the volwr.e of pre-war credits the imr..ense volume of ad.ditiona.l credit
re~uired
by the Government for war purposos
t~n
to ouperimpose upon the
volume of Jlre-war production of goods the imnense volume of additional
goods required by tha Gover:ru:rent to prosecute ·the war. Our .Pl ovlero is to
essential
convert ~ essential into mor$ /creO.i t, and to convert les;.; e.3sc.ntial to
mgre essential production ani distribution of goods.
The saving. of
~redit
and money goes hand in hand with the saving ol labor aud
aateri;~.ls
program of adjusting the business of the nation to a wo..r
ba.~is)
best hOJle of avoiding competition between 'i.he
;..nd itJ citizens
G~vernrr.ent
in the
and our
x-s~a
... 2 -
for crodit 1 rr.oney ~ labor ax:.J. n:a.terials 1 .-:hich ca.n only result in credit
and price inflation
As far as
...
.::~.nd
higher
exp~nditur"-z
cost,:;~
of living; .i.:J S2.tvin&.•
..:..ro financed by th..; s.;-..l.s· c1 nevv securities
they are scrutinized Ulldo•" the leaiership of tile Capital haueo Conmittee
of the Federal Resei'Ve Bo~rt; a:.> trustees
or
th;,; ir.liiviclual b'lnking credit
of tho country 1 however 1 the bankers arc ch:...rged with th0 duty of studyint;
and underst"".ading the program i.n
ord~r
t:h::.t ea.c.b. and everyone rr:ay in turn
educc.to his borroNers and th...: pople of his COllllU:ni.ty to tho neccocity of
Sc:l.Ving credit as well as food and other U.:dtori;.;,.lo, and u:a:y thereby conaervo.
the . credit of hl('.l bank i or the use vf the Cuv.;.;:·ntt.0nt as far
~s
rr;;;.y be prac-
nece;mary not only !or Government financing, but ·also for the protection ancl
".:..i.10
undue
of bank credits leads inevitably to unsafe
ex~~aoion
oconorr.ic
conci.l.tions~
banks themselves 1 individually ani
colloct~vely~
preservation d
~nd
si.r.cc
unoound
and no atone ahould bo- leit ur..tt.lrnod. to keep ou.r bank-
ine, inotitutions soui1d and strong.
It is not
. purpose of the Board tv suggest
til~
.
tl:~e
specHic. wc.y z in
which credit should be conserved. 1 or unnecessary expenditures curtailed;
each banker a:u.st determine this for hir..:self.
The Boa1'd can only discusJ
the subject in general tenns 1 with emphasis on the
~cess~ty
that
w~1ile
credit conservation should be undertaken rromptly it should be car:riod out
gradually 1 with reasonable discretion and ·td th the least possible avoidable
embarrassment to the business of inciividuals and industries,
education of borrowers and
cust~ers
. Proper
to the needs of the .situation will
accomplish far more than abrupt discri~dnation or pressure.
In the absence of any official classification of the more essential
X-822
- 3 -
and the l(;).;::s essontial things and ent23rprises it will be nocesQary ·for
each banker in determinine ho,·• he rra.y do his share in the conservation
of credit to use h.is o·m jud.;ment.
There seem to be, ho.vever, two clearly
defined groupG of loans:
(A)
(B)
Loans to .facilitate production or distribution.
Loans for non-productive or non-distributive purposes.
LOANS FOR NON-PRODUCTIVE OR NON-DISTRIBUTIVE PURPCSES.
Loans for
loans for
non-produc~ive
non~essential
or non-distributive purposes o.re usually
purpones.
The following are typoo of this class
of loans:
Loans i or ~,;urcha3inz or c<:~.rrying property, .vhe the r real
estate or persunal securities.
Loans for""' ddi tions to or improverurnts of property not
used in production or· di;::tr.i bution.
Loans to States or
uunicipaliti~o
for improvenants.
By inquiring the purpose for which each
n~w
loan is required, and
declining wherever practica:b1e to grant loans of these cla·sses, and by
gradually causing existing loans of these classes to be reduced or
eliminated, bankers could conserve credit
also give :u:any people an in:petus to save
importance to
t~e
nation,
borro·vers to reduce loans
withcr-.~t
a~~
ca-Llsint; hardship and
a tin.e
wi~en
s.:wing is of vital
Dut discretion uuot be uoeu in not forcing ·
to an extent that iJ unreasonable or would
cause avoidable hardship or emba.rmssmentj much can be accompli::.hed by
sound advice and the exertion oft
•
rr,or..tl
··
pressure •
X-822
- 4 L'OANS TO FACILITATE PRODUCTION OR DISTRIBUTION,
The three rr.ain ·groups of bcrrO'vr;;;•·s for productive or distributive
zr.anufactu~·ers
purposes are famers,
1.
FA:R:.mRS:
an:i
merch<-.nts~
The farmers a.r~ ·being asked to produce more than o•:er
. befol·e and loans for productive purposes must hatre the right ci way.
But
the kind of loans which should .be discouraged or declined are:
(a)
Loans for the aCquisition of additional property 1 unless tho
area U21der pr-oduction is to be increased· thereby and immediate
recul ts zuy be expected;
(b)
Loans for an:,· construction not necessax-y to the p·roductiveness
of the fann within 'tho year; and .
(c) . Loans for the purchase of articles of comfort ·.and 1uxur7.
In sections wnere farrrJ~g profits have been large, an
endeavor should
of 1on5 standing loans o.:.- to the financing of their. seasonal requirements)
thereby conserving bank credit.
2.
:MANUFACTURERS:
be urged to reduce or
lVJanufacturers who are rraking large profits should
e~tinguish
their debts rather
tha~
increase capacity
and output unless the industry is one which is clearly neccsoary to the
prosecution of the war.
All manufacturers should be urged
to.c~rry
inventories as practicable; to eliminate from their products
add to its cost but not to its intrinsic
v~lue
as small
el·~ments
·vvhich
and serviceability, or which
are. int.roduced simply for fashion or appearance;
a:~.~ LO
avoid
:,;.J
far as
practicable introducing new styles during the period. oi the cv0.r.
~anufacturers ~ose
product is not clearly
r~~uired ~ither
for the
prosecution of the war 1 or to rr.aintain the hea.lth and efficiency o:f our
civilian
population~
•
should be urged to assist the Governn.ent by .;l.dapting
X-822
- 5 ..
at least a part cf their ph.nts to the zranu.iacture of articles clearly
req,u.ire.i ior these purposes.
Bankers would do ·.ve;ll to scrutinize carefully
the credits of those engaged in induotrieJ not
cle~rly
esJential for these
pl.rpoaes since such industries are likely to "be the first ones to suffer
int..::rr... ption t;ooia transpcrt:..tion 1 fuel ot· po.vvr eru"bargoe:3.
3.
MERCHANTS:
Alu,cst ·.;he """n.e sug,ge<.;tions that have been rrade with
regard to the production of eoods by rra.nufacturers tray be applied to th6
distribution of goods by
~:chants;
nauely, reduction of stock carried;
reduction or elimination of that portion of their
sto~k
consisting of
articles of mere fashion or luxury anJ. tho .ubstitution of plainer c.-nd
more serviceable articleSi· and tho avoidance of the intro:luc'tion of new
styles in clothing, articles of personal comfort, etc.
The· Board feels that it would be impracticable to deal ,..,ith the subject
more specific1lly at the present tirr;eJ but urges that every banker assist
in the zr.oven;e:nt, to the best of his ability:
·•
(a)
By e::.tudy:;.r.g ·~a.ud understanding the econcmic necessity for
the consenra.tion of credit;
(b)
By a careful analysis of each loan in his inJtitution to.
ascertain those which are the least es~ential to the prosecution of the war;
(c)
By applying to each application fer a ne~·• lren the teat
11 is it necessary for the prosecution of thd r1ar or tne
health and safety of our civilian populJ.tion 11 •
{d)
By discussion with other bJ.nkers in tho SC;l.me place or
neighborhood as to rr.ethods of credit con;:;t;rvation which
it may be practicable for them to und~rtate.
(e)
By urging his local trade organizations and board of trade to:
study the subject and make iefinite recu~endations for the
conservation o.f credit and the conversion of less essential to
more essential production ar.i di:.tribution.
X-8ZZ
(f)
· (g)
.
(h)
By discussing the n:at·ter ·,v-fth his custon.ers with a view
.to ·educating thvm to the necessity of keeping their
ao:a..::.nd..1 for ~..: red~.t at ,., · mininum.
By exell'tiug .nis i:dluence upon h: -~ neighbors and his
llUnicipality to reduce expenditul·es for improvements
to a ll'..inin:um during the period of the war. Postponement of every improven.ent not absolutely necess:::..ry for
health and safety shoUld become a national policy.
By acting always with discretion and rei:l.s..;na.bleno;J:,::.
The conservation of credit and money will rr.·. ,1 t in the· savin.; of
(;\.
la.tor and rr.a.terials which the Government needs for tho prosecution of
in,proverr.ent
.
.
tho war; and every/
or expenditure Whloh a.n inaiviliual.~ a
corporation, or a n,unicipa.lity refrains from ma.king durit:r,r.. th·. . 'i'fJ..r
represents a
re~uirement
to be tulfilled. whan·the
war·i~
over.
Merchants ani .tri'.,1ufacturers will readily understand th"l..t p:..·esent
saving is laying up :fer the :future an important reserve purchasing power
which .they may
COUd O,tl
dUl"ing whateVe·r period
O.f
reajjustn:ent SJ follow
the end of the war; and i t must be .;..;pare.t•t to ev·:;q banker that the larger
the savings his custon:e .rs make the larg,u.· the
dcp<~.:>i ts
such saviugs -,vill
inevitably; create.
It is hoped. by the BoardJ that the Federc...l reserve bat.:is will
the~elves
the leaders in this campaign by
districts corr.mittees oi bankers, merchants 1
org~nizin~
an~
~ke
in their respective
uanufacturers so that
results riaY u.~ I~;;A.ched. (jy a mutual. understanding and a united effort for
the public g,u;;.Q. r;;..ther t.h.1.n by a policy of enforcing r..ard and fast rules.
If at any tine ·the
assii3t~nce
will be given GlaJlJ.
business wet be
t.:d~en
or advice of the Boar.i should be desireli .it
It is realized that each industry and branch of
upon its onn merits and ,that proper treatment in-
volves in a great many cases a redirection of industries anJ redistribution
'.
X-822
of labor.
:lhic is a pr.·oH.:.;rr. "'h.!.ch l1as beJ!:. actively ::Jtu:liod and in rm:ny
cases comprehensi•rely dealt 'Nith by var:i.oun d\'>pa:-trr.snt::; and boards of the
Governner.t.
Wher . wer your
corr.mitte~?s
dl:lsir-e the ad.vice or coopoJration of
these Governrr.ent agencies the Board will be glad to act as int0nnediary
and advisor in such cases.
3/21/18
',
X-622-a
There is
~ppended ~n ~rticle
which appeared recently, written
by H. Gordon Selfridge, formerly a Chicago merchant and now proprietor of one of the large
It would dppear
stores in London·
re~il
th~t
one of the first and most useful steps
that could be undertaken would be to h.. ve a committee of bankers and
dry goods people
~ke
up the problem, and agree upon a policy, of
discouraging extravagence d.nd
encour~ging
In this connection it is
helpful to have the ledding
the Committees and
~sk
suggest~d
newspap~r-s
thrift.
that it would be very
tuken into the confidence of
them to cooperate.
Nothing is more destruc-
tive to the development of the proper spirit of economy dt this time
th~n
the
~ges
of advertisements of new styles of ladies' wear, and
new styles of automobiles, that
ul~rly
in the
Sund~y illustr~ted
~re
cont~ined
in our
purtic-
p~pera,
ed)tions.
When the banks and dry goods people have
~greed
upon
a
policy
"'" committee composed of the prominent lddies of the community would
prove .... most powerful means of IDdking the pl .... n effective.
•
THE NEill YOR~ TU1ES. SUND_AY, MARCH. 17, 1918
ECONOMY A GOSPEL IN ENGLAND. NOW·
H- GorU.on
·s~;:lfridge
Describes· the
Rem<::~.rk"-ble
Readjustment
of Business in London.
Tr~de
G~.nd
Foster&d by Su.ving.
:r""'triotism Do Not Mix. ·.
By. H. Gordon Selfridge.
(Mr. Selfridge, formerlt"' Chic ... go mclchc;4nt, is now the proprietor of
the li:.i.rgest ret""il store in London • . Of his 3,50C employes, u thous.;;.nd have
been C.;;.lled to the colors.
The other.:; . b.....ve bought $.100, ooq of. wr..i.r sa.vings
certific""'tes.)
English business hu.s been entirely
re~djusted
to
a
glo.nd tried to muddle through in the first ye""r of war on
usuo.l" program, but we soon found th..;.. t such
war.
rnous
de~nds
The Government's
th~t
we could not meet them
o.
wo.r b«.sis.
a.
"business
En-.
""-S
blind policy would not win the.
on our industriGI.l resources were so enor~nd ~t
the
s~me
time continue to produce
all the things we.were o.ccustorned to h~ve before the wur.
The business of the English people is now tho business cf wo.r.
the productive energies of the nG1.ti0n
w~r
needs of the Government;
~re
All
directed. first, to supplying the
second, the necessities of the people;.
third,
the necessities of the export tr"'de.
Every one in Engl""nd is .... t work - including mo.ny men
women who
never worked be foro.
To be idlo in Engl_.nd tod"'-Y is not "good form".·
Every one is wu.cking;
w.;.ges o.re the highest ever recorded;
sca.le of
'
"'-tid
livin 1~
h""s been r""'ised;
wide economy anj saving.
the whole
domestic trude is good, despite n"'-tion-
Engl.... nd is doing her big job cheerfully, despite
•
- 2 -
the terrific cost of the war in blood
I
believe~
is
thu.t.~verybody,
~nd
treasure, and the reason for this,
rich dnd poor, is working for the nation with
a deterrnindtion to see it throug,h.
War is not a money-making business,· and money will. not win this great
struggle between democracy and
~utocracy.
English· merchants <:1nd
turers now see thd.t it isn't merely money th.... t ·d.
the product of huma.n labor.
n~tion
c:..t war needs, but
While we pay W(j,r taxes in money
Government bonds in money, what is
re~lly h~pp~ning
is
manuf~c ...
t~t
a.~d
pay for
the Government.
is taking a large share of our industrial production - our labor and material- d.nd consuming it in
Wd.rf~re
•.
Wu.ste Viewed c...s Treu.sondble.
No business man in Ertg)u.nd tod...y <..dvocc...tes liber... l individua.l spending,
because it is now reu.lized th<..~. t such spending .for person<-~.1 needs'· means one
of two things - either
c;~.tl
exhc;;.ustion of the necessities of life at a time of
thredtened famine, or else the selfish employment ~~ 1<-~.bor in luxury production when it ought to be devoted to necessa.ry production.
Spending for one's self in such
nized
i;I.S
a distinctly unsoci<.tl
Whut difference is there
<..~.ct,
betw~en
a.
time of
~tional~need
and tre<>.son.;.blo if
c<.~.rried
is now recog- _
to excess.
having curgocs of n:.::cdcd reateric....ls sunk by
enemy submC;I.rines or h"wing them consumed ....t hor;Je for mere personc.<.l gr"'tificution!
fo;.~.cturer
It took us some tim0 to soe thG truth cf this, but every
"'-nd merchC;I.nt in Engk.nJ tod . . . y knows thG gospel of "goods ..:4nd ser ...
vicestt, und the curt ..dlment of
Every thinking
.~
~4nu-
~r.m,~st.ic
Englis~~n,
spending is everywhere advocu.ted.
before spending for himself or his
f~roily,
stops to consider, not whether hv cun afford it, but whether the nation can
afford to
h~ve
him spend·
Economy is being const... ntly urged by the news-
41
..
· X.-822-b
papers, even though for the time it rreans less advertising
they realize,
But
do the merchi..i.nts, that the Wi:i~ cannot be provisioned, mu-·
<4S
fin~nced
nitioned, or
reYe~ue.
from
person~l
profits in business not essential to the
w~.
Luxury business h;;.s ceased in England.
orate gowns.
There hasn't been
Ger!T'b.ns·invaded Belgium.
i.4.
The women no longer buy eliib-
big social function in London since the
Motor riding for pleasure was. l,o!).g ""go abandoned
becduse the gdsoline is needed in Fl,:mders and the chauffeurs ure wanted at
the front or in the f""ctories.
be~n
mobile hus
~s
$2,500 on
last longer
backs.
made in England, bXCepting for war work·
mo.teri~ls
our labor und
a.
in new
priv~te
bec~use
For the
w~r
business
h~~
We
expend as much
~ke
our clothes
s~~e
it would be crimin<Al to waste it for personal grCJ.tireason
Industry.~
dr~stic
c~n
we know the boys in the·trenches need the wool for their
are not
we
more serious work for the spinners and
This
We do not consume
building - no one
building without Goverm~ent sanction•
VJool is scc.Lrce;
fic .... ticn.
For nt::<.orly two yec:.rs npt a single nelf{ auto-
r~king ~ny
new
c~rpets.
There is.
we~vers.
Shifted to Necessities •
curtctilment of
cert~in
not hurt business.
lines of production to make wuy for
It hus merely resulted in
shifting
d
of labor and bl.lsinoss activity from the less essentigl. to the vitctlly essentiu.l
industries.
To give .... fc:w illustra.tions:
Phonogr<;.oph.factories ure now turn-
ing our d"lic-...te sbt'll p;.•rts, jtll.'velry mc...kers are producing periscopes·, Wdtchm<:.<.kers ure <:djusting fuso;;, :wsic-roll
bakir;g
i.r
mc~.chinery
r~ctory i~
baby-food
turnod to ga.uge
pl;..ni is munuiu.cturing high-explosive shells,
making shell primers' gluzi<;re .... rc,
r~ctcry
rn.;~.kers h<.~.ve
I'k~kin,3
a.
m;;.~.king,
crea.m-separut-
c.-rtridge clips'
is producing plugs for shelh, tho output of
<.J.
a
a
textile-
..
X-822-b
jl
machinery plant is now
shall adapters.
field k~hs.j<'and ah'·a.aV:er·tising "'gency is making
Everybody is <:lt work, produci.ng more lind earning more than
ever before, but the output is war necessities.
No great nation can go thrnu~h this war without paying its share~
VJhen England entered the war, the London··
frofits and patriotism do not mix.
merchants expected to see their
ordilll;4r~ttade
~nd
disappear,
they were ready
to shoulder any burden the war imposed.·
But trade has not been wiped out.
The strange thing is that it has grown.
My own business has paid t'e Brit-
ish Treasury_, in two years $500,000 in excess-profits taxes;
t~kes 80
.the Go't-ernment
per cent. of the increased profits over the pre-war standard.
The reason for this growth in
getting very high wages, and they
ret~il
~re
trade is that the workers are
now raising their standard· of living.
But the more prosperous middle-cl"ss people have
They are giving up
scule of living·
wh~t
grc~tly
curtailed their.
the munition workers are gaining.
incomes <:lnd prof£ts have been reduced, their taxes have been
T~eir
and they
feeling the cost of the war.
~re
in England, und this surely is
The piano
nJ<;~.ny pi,;:~.nos
is
distinct
typi~l.
soci~l
~
great leveling
gain.
In our store., we are selling
~
gre;;;.t
to f"'milies who h"'ve drea.med for ye ... rs of being able to buy them.
But these are
m,;:~.king
tr~de
~
There has been
incre~sed,
not~
few pianos.
new pianos any more th.;.n we can for building new !louses.
second-ht;lnd pit.nos coming frcii1l the
midd.J.e-cl~ss
'ihese ure
homes, often sold to pro,.iJ.e.
funds for buying W<J.r bonds i.:l.nd w"'r Si.:I.Vings certificc-. tes.
Ii the merchants did
moving these
pi~nos
those of the highly
try.
a
business of millions of pounds of
from the homes of the more
p~id
prospe~ous
st~rling
in
middle cldss to
munition workers, there would be no loss to the coun-
No labor or material would be cunsumed 1 excepti.ng in the moving of the·
,.. . f)f
X-822-b
- 5 -
instruments.
In
f<..~.ct,
is really h"ippunin 10,
the Treasury v• .;ulu
by th-.; operi.74tion, becc:Luse what
Uut tho workt·rs <ir~.- trc:Lnst'erring some of· their spend-
.lB
l<.~ttt.r
ing power to the middle c.lc.. ss, c:i.nd the
ernment~
g<:~.in
The moving of the
piG~.no~
are tra.nsferring i t to the Gov-
simply· is ..... .way of getting
t.~.
part of the
munition worker's spending pcw0r turn(;d ov .... r to the na.tion. ·
London murch.:...nts
not only a.iding the Government in spre1:;4ding the
a..n;
go$pel... of war ec(momy, b\..i·t th0y a.re doing their part in diverting the wages
of munition workers fron
c~r...;bss
spending to Trea.sury fjnancing.
.~Iy
own
employes have put ~lOO,OOC of their ec:i.rnings into wa.r savings certificc:Ltes,
a.nd· each W8ek
w~
distribute
prizes to the holders of
extr~ certific~tes ~s
winning numbers.
Whvn the British Trec..sury
fl'ot~.ted
the lr:•st big war loa.n we offered a
ca.pital proze of ~ 5,000 (~25,000) in w~r b~nds to the customer buying the
bond
c~rrying
the winning number.
druwing of the numbers •
the London
officic~.l
Mrs. Lloyd ·George presided over the
B.ef ore ;;..dvertising this bond
corresponding to an
Americ~n
while you
t~.re
tht~.t
you hc:Lven't told me
r~cing
doing it I'll be
~
lottery.
t~.bout
it", was his reply, "and
south."
It is to the south of London where our men
trenches.
·I. telephoned
police commissioner to 4sk
him whether I would be put in ja.il for conducting
"Just consider
sc~.le,
~ro
giving their lives in the
We sold $17,000,000 of war bonds, a.nd to do it we spent $60,000
for prizes, a.dvertising, a.nd clerk hire.
iday shopping sea.son, a.nd after
Government we did the larbest
Tha.t
wt~.s
s~lling th~s gre~t
Christ~~s
business we
in the midst of the holamount of bonds ·for the
ht~.d
ever done.
@FedFRASER