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Dwight Macdonald

Sparks in the News

(18 July 1939)

From Socialist Appeal, Vol. III No. 51, 18 July 1939, p. 3.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Bank Report

The big news in the press this week, bigger than Danzig, bigger than the W.P.A. strike, is a table buried in the financial pages of the N.Y. Times under the not-too-thrilling headline: FEDERAL LOANS UP IN BANK PORTFOLIOS. The table, based on the newly issued second-quarter reports of the fifteen largest Wall Street banks, shows the percentages of these banks’ total assets invested in various ways. it is worth reproducing:


June 1938


June 1939




U.S. Gov’t securities



Loans, discounts, etc.



Other investments & assets



Total assets



The big news here is not something unexpected has happened, not “MAN BITES DOG”, for example, but precisely “DOG BITES MAN – AGAIN!” A trend which was alarming enough – to the bourgeoisie – a year ago has become even more serious in the past year.

Banks make money – and keep the capitalist system going – either by loaning their funds to business men or by investing them in business enterprises. But this table shows us that both loans and investments have in the last year shrunk even beow the alarmingly – again, to the bourgeoisie – low levels of 1938. On the other hand, there has been a decided rise in the percentage of assets held in the form of cash – that is, lying idle in the vaults, producing no income for the banks or for any one else – and in Government securities, which yield a very low rate of interest.

In short, only a little over one-fourth of these great banks’ total resources of $15,240,000,000 is at present invested in profit-making enterprises. The rest is either idle or else is siphoned out of the field of private enterprise completely into Government securities.

Bond Addicts

The banks aren’t making much money, but there is a great deal more to it than that. Their economic base has been shifted in the last ten years from private to state capitalism, from business enterprise to government enterprise. In 1930, the national banks of the country had $21,600,000,000 out on loan to their customers, and $4,106,006,000 invested in government securities. In 1937, they had $12,700,000,000 out on loan, and $12,300,000,000 in Government securities.

Small wonder that the conservative Senator Barbour, of New Jersey, recently described the banks as “bond addicts”, which have been “all but ruined as lending agencies”. The Senator admitted, sadly, that no outlet for bank funds exists in private industry, and that the banks, therefore, “are helpless and. cannot break the habit of putting surplus funds into Federal security issues.”

The resulting situation is a curious one indeed. The huge annual deficits of the New Deal have been met not by increased taxation but by selling government bonds and short-term notes to the banks. Thus the New Deal has borrowed the money it needed for its spending programs from those very citadels of finance capitalism most violently opposed to any such program. The banks have lent the money simply because there has literally been nowhere else – except a safe deposit vault – they could put it. The New Deal is dependent on the banks, and the banks are dependent on the New Deal. So far, the political implications of this increasingly closer relationship between finance capital and the state have remained simply – implications. But it is in this sector that we may expect, in the future, especially clear warning signals of the approach of an American form of fascism.

Money Goes on Relief

There are two major indexes of the success of the New Deal’s attempt to save capitalist democracy: idle men and idle money. The last two years have been heart-breaking ones for the New Dealers because, after some progress in 1935–6, the whole business collapsed again, and unemployment and excess bank reserves have been steadily mounting ever since. Unless new fields for profitable private investment are opened up in a hurry, the outlook for capitalism as we know it is not bright. The latest S.E.C. report on new security issues, for May of this year, is not encouraging. Only $31,200,000 in all were registered, only a little more than half the May 1938 figure – and over half of this measly $31,200,000 was accounted for by new investment trusts, which means a mere reshuffling of existing investments rather than creation of new outlets.

Meanwhile, money keeps piling up in the banks just as new thousands keep swelling the ranks of the unemployed. In the last three months alone, deposits of the fifteen largest Wall Street banks jumped 6%. Chase National, which a year or so ago outstripped London’s great Midland Bank to become the world’s biggest bank, has just reported an all-time high of almost $3,000,000,000 resources, which is $500,000,000 more than it had last year. Chicago has two billion dollar banks for the first time in its history. And while deposits mount, loans dwindle, investment in new enterprises has practically dried up. These vast accumulations of capital once were reservoirs from which money flowed to turn the wheels of tens of thousands of profit-making enterprises. They have become in our day stagnant pools, breeding places of disease for the whole capitalist system.

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