INDUSTRIAL BANKING IN AMERICA.
[To THE EDITOR Or TIE " SPECTATOR.") Sia,—Less than twelve years ago industrial banking was unknown in the United States. The character and earning capacity of the working people of the country were not recog- nized as assets by the men who managed the banks. One could borrow money on what labour produced, but not on the labour that produced it. The bankers dealt with those who pos- sessed what is known as banking collateral. They made loans on notes secured by bonds, stocks, mortgages, &c. The man who had nothing but wages, no matter how good his reputation, could get money only by pledging his household goods or giving his creditor a first lien on his pay envelope. As a rule, this was not so much banking as highway robbery under cover of the law. Nine times out of ten the excessive interest charges and other harsh conditions of the loan meant ruin to the borrower.
What is known as the Morris Plan, which dates from March, 1910, has changed all that. Less than fifteen months after this was put in operation at Norfolk—the home town of Arthur J. Morris, a young Virginia lawyer who devised and has developed it—it was adopted at Atlanta, Georgia. In 1912 It became known in Baltimore, Washington, and Richmond. Eight new companies were organized in 1913 and four in 1914, and nearly ninety banks or companies have since been organ- ized in the principal American cities by the Industrial Finance Corporation, of which Mr. Morris Is the active head. The purpose of this plan is to enable a man or woman to borrow money for remedial or constructive purposes. Interest charges are moderate, and the time allowed for repayment ample, the amount loaned being proportioned to one's income. To make it easy for the borrower to meet his obligation when it falls due, he is required to subscribe for one or more of the company's investment certificates, having a face value of the same amount as the loan itself. For this he pays 2 per cent, of the total amount weekly. In fifty weeks, therefore, he has saved the exact amount he owes. Two weeks later he cashes his certi- ficate and applies the proceeds to the repayment of his loan. Nothing could be simpler and nothing more dignified from the borrower's point of view. No pawning of his watch or waist- coat; no " garnisheeing sa of his. salary; no five or ten per cent. a month interest, with monthly commissions for renewal of the loan. just a etraight, clean-nut banking operation at fair interest rates and on easy condition of repayment. The essential requirement k that the borrower shall be able to obtain two co-makerr of his promissory note—not necessarily Alen of means, but people in his own walk in life.
Not only the number of banks and companies operating the plan, but the volume of their transactions has grown by leaps and bounds, and industrial banking has now become almost as widely and ss firmly established in the United States as com- mercial banking was in 1910. To-day its facilities are enjoyed by hundreds of small firms and corporations as well as by many thousands of individuals. Hand in hand with the oppor- tunity of borrowing goes the opportunity of saving. The Morris Plan banks issue investment certificates in denomina- tions of $50 or more, usually bearing 5 per cent, interest from the date of purchase and virtually redeemable on demand. A large part of their working capita./ is far' ed from the sale of these securities for cash or on the instalment plan, so that, to an appreciable extent, the working people of the country may be said to be financing themselves through the instrumentality of the Morris Plan. Outstanding investments in these securi- ties on December 31st, 1920, amounted to nearly $11,000,000. To round out this financial system the Morris Plan Insurance Society was established in November, 1917, mainly for the pur- pose of enabling borrowers to insure their lives for the amount and period of their loans, thereby protecting their families and the co-makers of their notes. The statistics of Morris Plan operation are impressive. Ae against one company in exist- ence at the close of 1910 there were over one hundred operating on June 30th, 1921, with a total capital of $13,000,000. By that time. the number of loans made in all parts of the United States aggregated over 1,400,000 and amounted to nearly $250,000,000. Loans are now running at the rate of over 300,000 a year for an aggregate annual amount of $70,000,000. And in less than four years the Morris Plan Insurance Company has issued to more than 90,000 borrowers policies aggregating over $16,000,000. In every city where the Morris Plan is domesticated the fore- most bankers and other business men of the community are identified with its operation as officers or directors; and it9 national development through the Industrial Finance Corpora- tion has enlisted the service and support of many of America's financial and industrial leaders.—I am, Sir, &c.,
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