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Prudence Panic
"This is pre-eminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facconditions in our country today. ing "This great nation will endure as it has endured, will revive and will "The only thing we have to fear fear itself: nameless, unreasonable, terror which paralyzes needed efforts convert retreat into advance."
(From President Franklin D. Roosevelt's Inaugural Address)
Bank moratoriums and other protective measures necessitated by the financial crisis which has swept the country are not invoked to help the banks so much as they are designed to safeguard the public and to protect depositors from the effects of the vicious stampede or hysteria which breeds from fear and lack of confidence. The whole structure of civilization rests on credit and confidence, and when they are destroyed our present civilization will topplc into the dust to be trampled under foot while some other form of society emerges.
The banking system of the country is fundamentally sound; the financial institutions are amply able to take care of normal of hysteria and unrequirements but when wave business controlled fear spreads like wildfire and everybody rushes headlong at the same time to get their cash the banks are unable to meet the This is very easily understood when one realizes that the bank deposits of the nation total something like $40,000,000,000 yet there is in existence only some $6,000,000,000 of currency. The difference is made up of notes, bonds, securities and, other investments which are the equivalent of money and can be realized on under normal conditions. However, they are not cash and when all the people demand cash at the same time, there simply is not enough to go around and emergency measures must be adopted to conserve the cash resources.
There is just as much cash in the country today as there was during World War days when people's pockets bulged with money or from 1925 to 1929 when prosperity reached its peak. The reason $6,000,000,000 in currency can be built up into $40,000,000,000 of deposits is that the money is kept moving from one to the other; it is kept active through regular banking channels. When this movement of capital is halted and depositors clamor for cash, then the banking system is paralyzed, business stagnates, and, if it is prolonged, the people will suffer mayn hardships because there is no medium of exchange.
To remedy the situation, there must be restoration of confidence and in this we have the forceful and positive leadership of President Franklin D. Roosevelt, his new cabinet and the leaders of banking, industry and commerce. These men, however capable and conscientious they might be, are not magicians and they can acomplish little without the cooperation of the public. If the people will let prudence take the place of panic, replace fear with faith, substitute credit for cash. then the whole situation can be quickly remedied, confidence will be restored and everybody will be happy again.
The position of the four Fredericksburg banks is excellent. They are well organized and conservatively managed and throughout the whole period of economic disturbance the local banks have faithfully served the community. financing business enterprises. lending money to worth while undertakings and providing a safe depository for public and private funds. community can exist under our form of living without adequate banking facilities and in this respect Fredericksburg has been exceptionally fortunate.
The last statement of Fredericksburg banks showed healthy and liquid condition and but for the unprecedented situation originating in other states and spreading so that their connections in the metropolitan centers became involved, they could have carried without interruption in serving the banking needs of the community. Because the banks in practically every other state had been closed or were under cash limitations, Governor Pollard proclaimed a statewide banking holiday for Monday and Tuesday which is mandatory on all banks in Virginia, causing them to suspend business on those days. This has been extended to Friday by President Roosevelt's proclamation. The four Fredericksburg banks were shown by the last statement to have:
$6,478,642.83 5,504,046.36 Deposits 762,173.03 Capital and Surplus 821,529.90 Cash Reserve
This perfectly sound and healthy condition with cause for alarm or anxiety on the part of any depositor. The percantage of cash reserve to deposits is more than 15 per cent which is in excess of the legal requirement. Loans and discounts of local banks amount to $3,996,764.39. an amount entirely reasonable and based on sound banking judgment.
There is encouragement for Fredericksburg people in the fact that there has never been bank failure here and no depositor has ever lost penny in a local bank This is record of which our people may be justly proud and it should enable them to view the future with confidence.
There have been two instances in modern times of banking difficulties here but in each case the security of depositors was the first consideration and they were fully protected. It is a unique fact that in both of these situations a local banker took charge and worked out the affairs so that no depositor lost cent. That man was John F. Gouldman, Jr., cashier of the Farmers & Merchants State Bank, banker and business man of wide vision, sound judgment, practical ideas, and quick action.
In November of 1912, the Conway, Gordon & Garnett National Bank got into trouble when depositors started run with wholesale withdrawals. Mr. Gouldman was called in, the run was checked and the affairs of the bank were taken over by the Farmers & Merchants State Bank so that every penny of deposits was made good.
Last March The Planters National Bank of Fredericksburg found it necessary to effect reorganization and again Mr. Gouldman was brought in. At the request of the bank directors Mr. Gouldman set up plan of reorganization which was put into effect over night, every deposit was guaranteed, new capital was put up
