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( f i i e Sulphur Springs, W. Va.,
May 30, 1936; D. C. Bankers Association
Conventionj reporter's copy)
___________________ FEDERAL RESERVE SYSTEM.__________________

Mr. Eccles: Mr. Chairman, my golf partner and good friend Bob,
and fellow bankers:
On behalf of my party and myself, I want to express to the bankers
of the District of Columbia my great appreciation for being included again
this year in their guest list. I recall with a great deal of pleasure the
delightful time I had last year down in Hot Springs, and up to date the
time I have spent here has been equal, if not superior, in delight to that
last year.
It is always a pleasure for me to meet with bankers in convention,
as I feel they have many problems to consider in which I am greatly in­
terested. We are living in a very rapidly changing world, and banking is
being forced to recognize many of the fundamental changes which have
taken place and which are taking place throughout our industrial, economic
and political system.
The future of banking is going to depend upon the ability and will­
ingness of bankers to adjust their ideas and to operate their institutions
in line with changing conditions. We all know that industry,has rapidly
became concentrated into great national institutions, until today ap­
proximately 200 of our great corporations own and control over 50 per cent
of the entire corporate wealth.
Banking prior to the war was conducted largely on a basis of com­
mercial lending. At the time of the depression in 1929, less than 13
per cent of the total resources of the banking system consisted of eligible
paper, and at the present time less than 8 per cent.
It is evident that there has been a fundamental change in the bank
credit structure. **usiness has been able to go to the capital markets
and to adequately finance its requirements on favorable terms through stock
issues and through bond issues, and that, together with the retention of
earnings, which from 1923 5o 1929 equalled about 36 per cent of the total
earnings of all corporations, put the corporations in a position at the
peak of prosperity before the depression commenced in 1929 where they had,
if anything, an excess of working capital— I am speaking generally— to
such an extent that over five billions of funds were loaned by others,
largely corporations, in the call money market.
Today, generally speaking, corporations have less use for commercial
or short term credit than they had at any time during the '20's, because
they have about as much cash or working capital as a whole as they had

-2before the depression, with lower prices and less business in many cases.
What does that mean, then, for bankers? with about nine billions
of time funds in the commercial banks of the country upon which banks pay
some interest, it would seem that if the banks are going to keep abreast
of the times and provide the credit, and thus provide the money needed,
as money is provided by bank credit, they must get into the long-term
capital market to a greater extent than many of them have been willing
to do.
Now, they can either do this directly or they can do it indirectly
through purchasing Government securities and through the Government pro­
viding the long-term credit in the various fields of direct loans to
industry— farm mortgage credit, housing credit, and other types of credit.
There is every justification for the banks providing credit in the
long term fi'eld. The Banking Act of 1935 recognized this fundamental
change, and made paper, other than what was termed short-term commercial
or agricultural paper, eligible for advances by Federal Reserve Banks to
member banks. That creates, in times of emergency, a desirable liquidity.
It recognized the long-term mortgage, permitted loans up to 10 years and
up to 60 per cent of the mortgage on an amortized basis. The Federal
Housing Act provided for a 20-year, 80 per cent mortgage on an amortized
basis under Title II of that act, which loans banks are permitted to make.
There is a great challenge to the bankers of America. I e have a
frontier here. That frontier consists of the needs of 130,000,000 people.
Foreign trade is desirable, and should be encouraged so far as possible,
but the real market is at home, and so long as you have a population of
130,000,000 people, with 12,000,000 families at a period of our greatest
national income receiving less than $1,500 a year, with 16,000,000 families
receiving less than $2,000 a year, and with 19,000,000 families, or 71 per
cent of the population, receiving less than $2,500 a year, and this in the
period of our greatest prosperity, I say there is room in America for a
market for the goods and the services which we have the man power and the
facilities to provide and produce.
We have hardly scratched the surface of our potentialities. When
we consider the housing condition in this country, in that field itself,
with the deplorable conditions under which more than half, possibly 75
per cent, of our population live, in a country vdth all the resources and
the facilities necessary to provide comfort, if not luxury, to our entire
population, with idle facilities and idle men, I say there is a challenge
particularly to the bankers of this country, and if they are going to
maintain the position of leadership that they should maintain, they must
not think in terms of the pastj they must think in t erms of a moving econ­

-3Conservatism means progressivism, and we should not be frightened
by changes. Too often the banking and the business leadership of this
country have held back, and have resisted necessary economic and social
changes. There has been little progressive legislation that they have
not resisted— -the 8-hour law, the first income tax legislation, the
Interstate Commerce Act, and, getting back to the time of the first
national banking act in the sixties, it was criticized by the bankers
of that date as being unconstitutional, as too much centralization of
power* The Federal Reserve Act in 1914 was vigorously fought by most of the
business and the banking interests, and if you will look back at legisla­
tion which today you are in favor of, you will find that at the time that
it was proposed, the banking and business organizations of this country
resisted it.
The record is not an enviable one, and, as a result of that re­
sistance, the lack of a sufficient amount of enlightenment to keep pace
with the rapidly changing economic and social developments, the capital­
istic system was almost annihilated.
Let us be more forward looking in the future than we have been in
the past. Let us have a social objective. Let us recognize that we live
in a great inter-dependent society, and let us profit by the action taken
by our older brother, Great Britain, in dealing with and being willing to
accept many of the inevitable changes.
Now, I have talked longer than I had expected to; in fact, 1 did
not expect to talk at all when I came down here, but your good Chairman,
the President of your Association, Charlie Doing, was kind enough to ask
me to come in and say a few words to you this morning, and 1 again want to
say that I appreciate this opportunity and this privilege.
1 thank you.