Bankers' Grace

Up to June 16, 1933 U. S. bankers were privileged to borrow from their own banks all that their own banks saw fit to lend. On that date the Banking Act of 1933 went into effect. One of its provisions prohibited bankers from borrowing from their own banks. Another required them to repay all such intramural loans by June 16, 1935. As that date approached last week many a borrowing banker was in a cold sweat. Loans outstanding totaled nearly $90,000,000. Penalty for failure to pay was fixed by the Banking Act at one year in jail, $5,000 fine. Bankers dispatched telegrams to Congress, wrote letters, even went to Washington. Last week June 16 came & went but no banker was jailed for nonpayment of his loan. In time's nick Congress had passed a resolution giving the borrowers three years of grace, moving the deadline for repayment ahead to June 16, 1938.

Acutely displeased was the respectable, conservative American Banker (circulation: one out of every three banks) which growled:

"We feel that the entire banking profession has definitely lost ground because of the strained appeals which have been made to Congress to postpone action on the law. .. . The public is entirely justified in interpreting these appeals in the worst light possible. They are confessions that some banks have made bad or illiquetiable loans to their own officers. The public's feeling is that if such bad or illiquetiable loans have been made to an ordinary citizen, he would have 'gotten the works' long ago, been sold out or required to obtain additional endorsement or collateralization which would have made his loan legitimately renewable.

"The public suspects, with no small degree of reason, that many of these illiquetiable loans to officials go back to 1929 speculation. ... It is noteworthy, perhaps, that a hundred years ago American banks were required to publish the total of their loans to members of their official family and their corporations, and that Canadian banks are still required to report similar figures."

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