The President's News Conference
THE PRESIDENT. I have nothing today but background. I want to express my appreciation to the representatives of the press for the way you have handled the pretty difficult situation during the last 4 or 5 days. You contributed very materially to producing that unity of action which is essential in the presence of national difficulties of this character. I know it has been difficult for you and difficult for me in relation to the press as well. And it is always difficult to bring about a unity of view amongst discordant elements. We had plenty of difficulty in bringing unity of action amongst financial institutions by which they must make some sacrifice to the national good, some special effort. And I think we had a very remarkable occasion last Tuesday evening, when 40 public men of divergent political parties were willing to arise entirely above politics, and with a discordant note of only one or two out of the whole group, within 3 hours were able to reach that unity of action as to what amounts to a very major legislative program.
In that connection, and still as a matter of background, I am wondering if we could get clear possibly to the public what we are really trying to do. When one is dealing with complex questions a man understands by instinct perhaps more than by experience. Some instances that have come up in the vast correspondence that comes in here rather indicate what the service is that we are trying to perform. There are some sections of the country where farmers are unable to obtain credit for production purposes with even unencumbered farms, and they are unable to obtain credit to carry their commodities over, and in that way they are forced into the market. There are localities where the flour millers and the spinners are only able to secure credit from day to day for their raw material instead of buying seasonally as is the normal practice in the trade, which thrusts the burden of carrying commodities back on the farmer and limits his market. Likewise in these localities where there are difficulties the manufacturers are not able to obtain their usual credit and are compelled to reduce their labor, which contributes to unemployment.
Now, these situations arise because of the lack of the ability of the bankers to serve their communities and their lack of ability is largely due to unreasoning withdrawals of deposits. Fortunately, those areas are very limited, but the whole purpose of the plan is to mass the pool credit in sufficient volume to take care of those areas. There are some things about the banking situation that are not generally understood--that the banks of the country have probably 3½ billions, or over 3 billions at least, of eligible paper which they can turn into the Federal Reserve System at any time they like, but those are not the banks under consideration but the stronger banks out of the stress areas. So that the purpose of this mobilization of credit is not alone to take care of--I will put it the other way. The banks in stress areas of course are using their eligible paper with the Federal Reserve and the purpose of this credit pool is to make advances against noneligible paper, that is, other assets, so as not alone to give them resources to meet any unreasoning demands but perhaps of more importance altogether, to give them the courage to go on with their normal business with the feeling that they can always reach out in case they are subject to pressure. None of those measures are measures of inflation. They are measures of stemming the tide of deflation. So that all that I mean that for is perhaps some of you may want to endeavor to get this down to the understanding of the people on the street who do not ordinarily grasp the meaning of credit flow when it emanates from large institutions.
There is one other background question, and that is this moratorium. I can advise you that there has been no suggestion of any general extension or postponement of moratorium. I would suggest that you reread my statement on the 20th of June, which was referred to in the statement we gave out on Tuesday morning. In that statement there appears a very definite statement that the basis of settlement of our debts was the capacity to pay under normal conditions. And it is consistent with our own policies and principles that we take into consideration abnormal situations which exist. I stated there I was sure the American people had no desire to attempt to extract any sum of money beyond the capacity of any debtor to pay, and that in the view of the administration, supported at that time as on this occasion generally, that we had to recognize the situation that exists. That complete year's postponement was an emergency measure to take care of an emergency situation for the normal development of readjustments that affect the economic situation. I have the same thought now, that it is not customary amongst decent individuals or amongst nations to require a debtor to make payment of any kind beyond the capacity of the individual or nation to pay, but that. does not imply for one moment that individuals and nations should not pay their full obligations within their capacity. In fact, that is the very foundation of both morals and economic life. It is not a subject I care to make any public statements about, or to give out anything out on authority from here. But I thought you might be glad to know that that is the basis on which we are acting. We are not doing anything revolutionary at the moment.
And that is all that I have got on my mind today.
Note: President Hoover's two hundred and fourteenth news conference was held in the White House at 4 p.m. on Friday, October 9, 1931.
Herbert Hoover, The President's News Conference Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/207869