THIRD APPROXIMATION

trouble involved in small loans for short periods, bypermitting a maximum rate per month of 3% per cent.

Only in the present generation has the age-long curseof the loan shark been met by constructive measures ona large scale. These are based on the simple principle thata man’s friends and neighbors possess the necessaryknowledge whereby to distinguish between a safe andunsafe extension of credit to him. The Morris Plan banksare founded on that principle. More effective are theCredit Unions founded by Edward Filene and others inAmerica somewhat on the models of the Raiffeisen andother plans in Europe . Labor banks are rendering a simi-lar service. These are enabling the poor to make effectiveuse of personal character as a substitute for collateral se-curity and are thereby greatly reducing the rate of inter-est on the loans of the poor. In 1928 one large bank inWall Street instituted a similar system for loans withoutcollateral to salaried employees. These devices and othersare doing much to solve the problem of accommodatingthe reliable man of small means with loans at rates com-parable with those ruling in the markets for the well-to-do.

§5. Salability as a Safeguard

When a security, because it is well known, or for anyother reason, has a high degree of salability, that is, canbe sold on short notice without risk of great sacrifice, itsprice will be higher than less favored securities, and therate it yields will therefore be low. Salability is a safe-guard against contingencies which may make quick sell-ing advisable. In other words, in a world of chance andsudden changes, quick salability, or liquidity, is a greatadvantage. For this reason, the rate of interest on in-

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