Are Bankers Patriots?
Rosner, Henry J.
Are Bankers Patriots? Ipj It Eronomlc to Demand Exorbitant Interest From Government* andtoBlork,by Virtual Dictatorship, Programs of Public* Works? r:ft great cry of the hour In the United...
...It Is the' sharpest decline in purchasing power In the history of the nation...
...This viewpoint Is wrong...
...The theory underlying both the two billion dollar Reconstruction Finance Corporation and the Federal Reserve Banks' purchase of government bonds In large quantities is that the banks must be strengthened...
...Surely, the consumer measured by even capitalist standards ought not to be expected to pay dividends on stock which represents no physical investment...
...To denounce him as a "hoarder" Js absurd, In a country where there is no unemployment Insurance, be will begin to spend when t h e grim spectre of unemployment leaves him...
...F. E. Schmitt, editor of the Engineering News Record, estimates that in 1932 city and state governments In the United States will spend a billion and a half dollars on public construction as compared with a normal expenditure of three billion dollars...
...It can't put men pack to work unless the purchasing power of the workers Is restored and It can't restore purchasing power without first putting men back to work...
...Interest was paid, otherwise no dividends could have been declared...
...It would be silly to lead money to produce goods which cannot be sold, since that la the only way the money can be paid back...
...This Is undoubtedly typical of the country...
...It is extraordinarily bad economics and la in effect an acceptance by American capitalism of a permanent army of the unemployed...
...In no other way can the Increase In savings bank deposits la the last year be explained...
...Increased federal construction will not help alnce in normal times i t is 5 per cent of the total expenditure on public works...
...That can best be done thorugh a vast public program of slum clearance and rehousing...
...Here Is a list showing the book value and the percentage return on the stock of those which paid 4 per cent or more In 1931...
...This is one of the most Important Immediate demands >t the Socialist Party In the coming campaign...
...It Is a vicious cycle which must be broken...
...Instead, our government agencies under compulsion from the bankers add to the army of the Jobless...
...The city officials called upon the bankers for help...
...Editors, bankers, economists, business men and public officials join In this cry...
...The figures prove that many large American, corporations not only have kept out of the bankruptcy courts but have paid a -return to their stockholders...
...To remain solvent, it lays men off...
...Otherwise, they will not extend credit to business men to finance the opening of factories or to cities to finance public improvements...
...It is impossible to estimate the number affected because of the Inability of 100,000 men to earn wages...
...No account is taken of the interest payments to bondholders...
...The drop In the cost of living has had little effect In counteracting the decline in wage payments...
...In 1929 the average rate of return on the book value of preferred and common stock was 11.3 per cent...
...That means that the wage earn, era can spend only one-half as much In dollars as they could In 1929...
...Wages Still Fulling The New York State Department of Labor, which compiles the most accurate employment and payroll Index In the country, has Just reported a 7 per cent decline In employment and a 10 per cent decline in wage payments In New York State factories from April to May...
...Lowered costs of government mean less taxes which mean reduced expenditures for business...
...Solvency, the triumph of capitalist economics, has been achieved...
...In January the Comptroller of New York City announced that he was unable to sell city bonds necessary to meet obligations to contractors...
...in 1930, It had fallen to 6 per cent and by 1931 \t had dropped to 2.6 per cent...
...The story of New York Is the story of the entire nation...
...The U. S. government, through its great powers of taxation and its strong credit' position, Ts the logical agency to provide the purchasing power so necessary to economic revival...
...Although the gross revenues of large corporations have shrunk enormously in the past three years due to the decline in prices and the decrease in the volume of sales, most of them still show a profit on the book value of their common stock...
...Jobless Army Grows Without a huge Increase over normal programs of public construction to take up the slack of reduced private activity, the country must have a huge army of the unemployed for many years to come unless a Socialist economy Is established...
...This will add another million men to the army of the unemployed...
...In other words, the credit of the U. S. Government Is mobilized back of the banks to give them courage to advance money for- work-creating projects...
...That has been accomplished by cutting expenditures to the bone...
...As we have seen, none of these bankers have been willing to help cities finance work-creating p u b l i c Improvements...
...These generally result in the issuance of excess quantities of stock which do not represent actual physical capital required for the business...
...The bankers get their...
...The complete fizzle of Hoover's widely heralded program of financial reconstruction confirms this point of view...
...One savings bank official at the time told me he knew of no better Investment than a five-year New York City bond bearing 6 r>er p*nt interest...
...Instead, government .follows the footsteps of bus* Iness under the pressure of powerful banking interests...
...After a series of conferences with Charles Mitchell of the National City Bank, Thomas Lamont of J. P. Morgan and Company, and others, It was stated that the bankers would take $200.000,000 of five-year bonds at 6 percent required t o meet--outstanding commitments...
...Eleven months earlier the city had been able to sell $52,000,000 of four-year subway bonds at 3 per cent...
...Men have been laid off, wages have been cut, hours have been lengthened until costs are leas than revenues...
...The first half were closed la pre* vioue epidemics, The working class, mar It always wit, th...
...It is notorious that book value Is far in excess of actual cost of physical investment The period 1921-1929 was characterised by many mergers...
...American business has balanced its budget...
...The average rate of return on the cost of the physical investment must be higher than the return on book value...
...porations that printed annual reports for 1931, 1930 and 1929...
...The workingman employed full-time today at 1929 wage levels can buy 17 per cent more for his dollar but he la not using that Increased purchasing power...
...r:ft great cry of the hour In the United States Is: Cut government costs and balance governmental budgets...
...S o m e groups of corporations have done far better than the average...
...In Horrible Dileauua ' Bankers will not extend credit to business men to finance Increased production unless there Is some evidence of Increased demand...
...Nobody knows what percentage of the bonds w*s kept by the banking syndicate...
...N ow that business has "cleaned its house," government must do likewise...
...Remember, however, that the return is computed on the book value of the stock...
...He Is banking it fot the rainy day of unemployment...
...Subsequently, more than $300,000,000 of public Improvements were laid on the shelf...
...why worry about the unemployed ? Bank loans are guaranteed, Interest payments on bonds are met, weak banks are bolstered as a result of this legislation, but unemployment Increases and factory payrolls decline...
...It means the denial of fulltime - employment for an entire year to more than 100,000 men employed either directly on the construction Job or indirectly In the manufacture and delivery of building materials...
...What does it matter If 30 per cent of the American people starve in the midst of plenty...
...The bankers, promoting the merger, capitalise at the outset the Increased profits which will accrue from monopoly control and the economy of large-scale enterprise...
...The, National City Bank in its April monthly letter published a table showing .the average percentage profit on the book value of the common and preferred stock of 1620 industrial utility, insurance and finance cor...
...The Issue was over-subscribed within s few hours...
...In return for the generosity of the bankers in helping the ottp meet its obligations, at 6 per east, the administration agreed to suspend all new public construction...
...Much Water hi Stock I t is physically impossible to determine the "water" In fiftyone billion dollars of stock carried on the books of 1620 corporations., It must be considerable, in view of the many mergers In recent years...
...These figures are representative of the big business since It is only the large corporations that publish reports...
...Since March 1929 when business first started to recede, total wage payments to factory workers in New York State have declined more than 55 per oeot...
...Capitalism ftr.de itself In a horrible dilemma...
...With the federal government now practising economy there will probably be a decrease for 1932...
...II BANKS CLOSE CHICAGO — (FT* — Thirteen Chicago banks closed in the two days, June 81 and 28, In a hew flurry of crashes on the second half of the Windy City's banks...
...Business under the profit system cannot do it...
...It ia rumored to be very large...
...Thus, reason the business men who control our destinies...
...These Improvements included new hospitals, schools, subways and bridges, every one of which is necessary to the welfare of the citizens of New York...
...Bankers Halt Work As an Initial step the bankers have refused to finance public improvements...
...A 2.6 per cent return on stock Is low measured by capitalist standards...
...The Reconstruction Finance Corporation, for Instance, lends $15,000,000 of federal money to the Missouri Pacific and Southern Pacific Railroads to enable the companies to meet maturing bank loans held by J. P. Morgan, Kuhn, Loeb and Co., the Guaranty Trust Company and the National City Bank...
Vol. 14 • July 1932 • No. 1
