162 RURAL RECONSTRUCTION 



whether the employment is one promising to repay the outlay made 

 upon it with increase so as to improve the borrower's position or 

 not. If the object is found to be a good one in this sense, the loan 

 is granted under conditions of amount and time for repayment 

 corresponding to the case. In the unlimited liability banks, of 

 which I shall still have to speak, this rule wants to be observed with 

 unpitying strictness. The borrower is to receive all that he needs 

 for his purpose, for fully as long as it will require to repay itself. 

 For he is not to be made to tax any other source of income for its 

 repayment. But he will not be allowed either more money or more 

 time. A limited liability bank, in which business is in the main 

 based upon the presence of share capital, in which, also, business 

 may be assumed to be generally fairly brisk and turnovers are likely 

 to be rapid — as in industrial centres — the bank can, without danger 

 or hesitation, relax this condition to this extent that, like the Scotch 

 banks, it grants cash credits, which, as a rule, run for a year at 

 a time, being renewable at the end of the term, and covered, for 

 purposes of recovery, by an acceptance, with power given to the 

 bank to call its money in before the expiration of the term in the 

 event of shortage of money or the discovery of the borrower being 

 no longer deserving of the credit accorded. Where this course — 

 which is most convenient, both to the bank and to its borrower — 

 is resorted to, care is invariably taken to make sure that the borrower 

 is " good " and that his credit may be assumed to be well employed. 

 It is a question of character and standing, and also of general 

 observation of the man's doings. Any discovery that conditions 

 are otherwise would lead to the immediate calling in of the credit. 



In unlimited liability banks, without shares, or with only very 

 small ones, in which, accordingly, liability of members constitutes the 

 only available security, such granting of cash credit is, as a general 

 rule, distinctly unadvisable, as involving danger. These banks are 

 generally very small, their members are, as a rule, comparatively 

 poor folk — otherwise they would take shares — unused to business. 

 Their transactions are not likely to be either large or frequent, but 

 they will require long terms. Under such conditions over-easy cash 

 credit might tempt borrowers to improvident borrowing. Therefore, 

 the simple specific loan practice ought to be adhered to. Cash credit 

 has been, all the same, practised by some rural unlimited liability 

 banks in Germany — avowedly for the purpose of saving the officers 

 trouble ; but we have seen what that has led to in the great collapse 

 of 1911. Much better leave cash credit alone. 



But, to return to the general subject. As a matter of course our 





