Reliable information versus faith;

              10 HASKINS & SELLS February
Reliable Information Versus Faith
BANKERS by and large ten years ago
would probably have told anyone
who asked, that bank credit was based
largely on character. Some of them, if
they had admitted the truth, would have
confessed that many bank loans were made
and denied on "hunches." If the com­plete
history of bank credit granting could
be accurately written, it would probably
prove conclusively that many a banker has
been a poor judge of character. Some of
them would be willing to admit that the
remark ascribed to the late Mr. J. P.
Morgan, about preferring to loan a mil­lion
dollars, without collateral, to an honest
man, rather than ten thousand, on gilt-edged
bonds, to a dishonest one, has been
considerably overworked.
There are still many bankers who loan
on what they regard as intimate knowledge
of a borrower's affairs gained through long
association with him. There will always,
in all probability, be cases of this kind.
Reputation and standing in the com­munity
are enough foundation for some
bankers to establish a liberal line of credit
and loan on it to the limit. Character,
confidence, capacity, etc., as the basis for
credit, lend themselves admirably to allit­erative
speechmaking and inspirational
essays on sound credit granting.
The banks in the larger cities, and par­ticularly
New York, have discarded during
late years the romantic philosophy of by­gone
days, and have taken to requiring
certified financial statements with a care­ful
checking of various aspects of the
credit-seeker's condition and future pros­pects.
A great deal of pioneer and con­structive
effort in this direction has been
put forth by the Robert Morris Associates,
an organization of bank credit men. The
future holds great promise of improve­ment
as a result of the work already done,
to say nothing of that in contemplation.
Slowly but surely banks in smaller cities
and towns will be bound to see that what
is good for the big city bank is good for
them.
A well-known concern of many years'
standing, selling an article of the semi-luxury
type, found itself toward the end
of the year nineteen twenty-one in a con­dition
where money was tight. Lines of
credit with four banks in the home-town,
a city of some one hundred and sixty thou­sand
inhabitants, had been used to the
limit, and even stretched some. The
bankers were somewhat apprehensive as
to their loans, and were demanding that
they be reduced.
New officers of the corporation took the
situation in hand and developed a plan for
relieving the pressure. The scheme as­sumed
the form of going to banks in various
cities and towns throughout New Eng­land,
New York, and New Jersey, borrow­ing
amounts ranging from five to fifteen
thousand dollars and opening accounts
with the understanding that a branch
store was to be established in each place.
This plausible story was accepted and the