Give & Take

Two months ago Franklin Roosevelt said he wanted the various systems of bank examinations standardized. Last week from this acorn had sprung an oak: exams were not only unified but the banks' lending policies had been greatly changed by a new extension of New Deal credit control.

That four different systems of examinations--by the Federal Reserve, Federal Deposit Insurance Corp., the Comptroller of the Currency, and the States--bothered bankers was only one of the reasons the Administration wanted them unified. Of more immediate concern was a belief that the various stiff restrictions on bank investments might explain the fact that today U. S. banks have $2,780,000,000 in excess reserves sitting idle. This second idea of Mr. Roosevelt's did not appear until last fortnight. Until then a committee of underlings had been absorbed solely in the technicalities of unifying the existing examinations. Fortnight ago, in a letter to Senator Vandenburg, Federal Reserve Board Chairman Marriner Stoddard Eccles suggested that bank regulations should be loosened in depressions when credit is needed, tightened in booms (TIME, June 27).

It was immediately apparent that Acting Comptroller Marshall Diggs, FDIC Chairman Leo Crowley and Secretary of the Treasury Morgenthau preferred to regard bank regulations as safeguards for depositors. Last week, after hot & heavy debate, the four reached a compromise "through the usual democratic processes of give & take." The National Association of Supervisors of State Banks approved. So did Franklin Roosevelt. The new rules go into effect July first. Important changes:

P: Loans are reclassified as I, II, III, IV, instead of "slow," "doubtful," and "loss," and bankers may make sound commercial loans for longer than nine months without the loans being criticized by examiners as "slow."

P: Banks may now invest in unlisted securities and those without public distribution, provided the issuer can service the loan.

P: Only 50% instead of 100% for net depreciation of defaulted and doubtful loans will be used in computing a bank's net sound capital.

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