New Morris Plan

Twenty-three years ago a young Norfolk lawyer received a letter from a member of the Virginia Corporation Commission : "I have carefully considered your application for a charter for your hybrid and mongrel banking institution. Frankly, I don't know what it is. It isn't a savings bank; it isn't a state or national bank; it isn't a charity. It isn't anything I ever heard of before. Its principles seem sound, however, and its purposes admirable. But the reason that I am going to grant a charter is because I believe in you."

Other people believed in Arthur Joseph Morris and the "hybrid and mongrel" notion of banking became the Morris Plan banks in 150 U. S. cities. Founded on a desire to provide the laboring man with a better source of credit than the fleecing loan shark, the Morris Plan is today dignified by the name "industrial banking." Morris Plan Banks ("companies" in some states where only an orthodox bank may use the word) make loans of $50 to $5,000 largely on character, earning power and two indorsements -- a type of business which many commercial banks find un profitable. Some of the banks are controlled by Morris Plan Corp. of America but most of them are autonomous local institutions in which the parent company has a minority interest. Because 6% interest on the whole sum and an investigation fee (usually 2%) are deducted from the loan when made and because the loan is repaid in regular instalments, the borrower pays about 17% for the money that he actually uses. But that is better than the 42% of personal finance companies and a far cry from the loan shark to whom the sky is no limit. Last week the genial, oracular founder of Morris Plan Banks released a bigger & better Morris bank plan:

1) that the Government promptly organize "First Industrial National Bank of the U. S." with capital of $1,000,000,000 and branches scattered the length & breadth of the land;

2) that this bank "extend credit to every person, firm or corporation requiring money with which to purchase necessities or to employ men to aid in that purpose";

3) that the loans, not to exceed $5,000, be made with or without security other than two indorsements but that the use of the money be carefully supervised;

4) that the real basis of the loans be character and past earning power, thus qualifying a vast number of unemployed, and that each branch have an employment agency. Planner Morris, who collects American antiques and champion Leghorn chickens, was simply advocating what few serious economists have dared to suggest: opening the till of government credit to the consumer. Every single governmental attempt to prime the business pump throughout four years of Depression has been one indirect method or another of easing credit to producers. The Governor of Georgia urged that Army planes scatter greenbacks over the land but no serious effort has ever been made to bolster buying power by direct consumer credit. To prove that his new government bank would be no sinkhole of public funds, Planner Morris cited the record of his oldest banks. In 23 years the Morris Plan system has loaned $3,000,000,000 to 15,000,000 individual borrowers. Only 2% of indorsers or co-makers were ever called upon to make good, and losses averaged less than 1/2 of 1%--a loss ratio lower than that of either state or national banks.

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