The War and Our Financial Fabric

It will be clear, I think, from the analyses in the foregoing chapters that banks have not only a delicate, but a most difficult task to perform. So difficult is the task that it is impossible to give satisfaction to all classes of the community. They have to give satisfaction to borrowers, to their depositors, to their shareholders and, at the same time, to the critics who say they are ever alert and watchful that they are trading within safe limits.

What critics mean when they talk of safe limits they would not find it easy themselves to define with exactness. They know what they mean by sound principles of banking so far as lending on sound security goes. They know what they mean when they say that a bank must not engage in speculation, and that it must carefully scrutinize every class of wealth on which it lends. This seems to me a tacit acknowledgment that banks do not create credit in the sense that many suppose. It would come nearer the conception of credit creation if banks were allowed to speculate and attempt to create wealth out of nothing.