Today in Washington
Mr. Fish's bill, which is shortly to be considered by the house Banking and Currency Committee, provides that the loans should be made only by banks which are members of the Federal reserve system. It limits the total amount to about $1,000,000,000 and stipulates that fifty per cent of this sum shall be used for loans ranging from $1,000 to $25,000 and about 33 1-3 per cent of the money shall be loaned in amounts from $25,000 to $100,000 and that the remainder, namely 16 2-3 per cent, shall take care of the loans above $100,000.
To avoid becoming mixed up in new speculative enterprises, the bill provided that no loans shall be made to businesses which were not in existence three years before December, 1929, so that the help can be extended to businesses affected by the depression. Also, loans would be made only to concerns that employ five or more persons.
It is estimated that there are more than 1,000,000 firms in America with capital of less than $50,000, so it may be seen how far-reaching the extension of this credit might become in assisting in the reemployment of persons now out of work. It is believed that much of the money will be used to buy equipment to replace worn-out machinery and tools.
* * *
The rates of interest would be some what flexible, so far as the R.F.C. is concerned, in order to help the banks carry what might otherwise be described as "slow" paper. Thus if a bank rediscounted a loan for $10,000 and received $8,000 back from the R.F.C., the bank in question might pay four per cent for that loan, whereas the customer himself might be paying six per cent on the whole $10,000. In this way the bank would be reducing its risk and increasing its chance to make money on the loan. The bill declares that no more than 10 per cent of any loans can be used by the borrowers to pay debts to banks.
With these and other safeguards it is felt that small businesses will be encouraged to borrow and banks will be persuaded to lend, thus ending the statement on intermediate credit which has been retarding reemployment of millions of workers for the last three years, even when spurts of good business have, appeared.