Business: Co-operative Credit

Since the ebb tide of Depression first set in, Wall Street bankers have united often in mighty efforts to impound the waters of deflation. Spurred on by Governor Eugene Meyer of the Federal Reserve Board, big New York banks combined again last week under the leadership of President Mortimer Norton Buckner of the Clearing House Association to launch the long-debated $50,000,000 Commodities Finance Corp. (TIME, Aug. 15). Though dubbed “the commodity pool” in its rumor stage, C. F. C. will purchase no commodities. It will conduct a financing business along strict banking lines. Banker Buckner defined its scope as “facilitating the financing of the purchase, carrying, and orderly marketing … of agricultural and other commodities.” Actual operations will be handled by two subsidiaries, one engaging solely in an acceptance business, the other lending to worthy companies. C. F. C.’s directors are representatives (in most cases presidents) of the 19 subscribing banks whose deposits total six billion dollars.

Board chairman of New York Trust, Banker Buckner is an old hand at cooperative banking. He headed the Clearing House Committee when its members promptly offered to lend up to 50% on deposits tied up in the defunct Bank of United States. When the torrent of failures threatened to engulf a large part of the banking system last autumn, he was picked for president of National Credit Corp., which buttressed frozen institutions until organization of the R. F. C. Last week National Credit Corp. retired another $19,000,000 of its outstanding notes, bringing the total repaid to subscribing banks up to about $105.000,000. The remaining $30,000,000 is expected to be paid off before the year end, the affairs of the Corporation wound up.

Banking opinion continued to be divided last week as to C. F. C.’s potential value. Its supporters point out that it will provide commodity financing in regions where ordinary banking facilities have all but disappeared, and where banks are unable or reluctant to extend further credit. Scoffers doubt the reality of a dearth of bank credit for sound borrowers, point out the huge pool of R. F. C. funds and the failure of eligible borrowers to step up for direct loans from the Federal Reserve in large numbers.

There are few critics of another co-operative banking enterprise, American Securities Investing Corp. (“the bond pool”), formed by J. P. Morgan & Co. and other banks to purchase sound but depreciated bonds for profit (TIME. June 13). Its formation marked the turn in the bondmarket. Officered by Morgan Partners Thomas William Lament and George Whitney as president and board chairman, A. S. I. C. has called for only $10,000,000 of its subscribed $100,000,000. Even on that sum Wall Street thinks it must have rolled up a fat profit. A boiling bond-market last week brought the Dow-Jones averages 24% above their June lows. Nu merous second-and third-grade issues have registered gains that shame the performances of shares on the Stock Exchange.