REOPENING the closed banks of the nation, at least those which can and should be able to keep open with government help, means the release for use in American business and industry of at least $1,000,000,000 of the savings of the nation.

The deposits in closed banks are estimated at about two billions, but the depositors will be lucky if 50 per cent is made available in the next few months, the remaining 50 per cent being left for the necessarily slow liquidation of the future.

Over the last 50 years, the records show that an average of about 66 cents are recovered out of every dollar tied up in closed banks. The Federal Government would not be taking much of a chance therefore in making available 50 cents now and letting the balance be realized out of whatever sale of assets or repayment of loans that the closed banks might expect over two or three or even five years. The more time the closed banks have for liquidating their old assets the more they probably will realize, though depositors naturally would rather have as much cash now as possible.

The process by which the Federal Government will reopen the closed banks will take time to work out and only the general principles of the plan can be developed at this time.

Broadly speaking, the assets of all closed banks will have to be revalued and there is already going on an examination of many of the banks opened after the bank holiday on a restricted basis, as well as some which have been unrestricted but which are not in good enough shape to be admitted to the insurance deposit scheme which goes into effect on January first next.

Wherever a bank has some loans that are of slow, or doubtful repayment in full, the bank is supposed to set up a reserve of capital to meet the possible loss. But the banks find in some instances that their capital is not sufficient to write off their poor loans or that what is known as capital impairment would take place even if all the loans were repaid, this being the result of large write-offs in the past two years.

The Federal Government is prepared to lend money to these banks for new capital. The Reconstruction Finance Corporation can lend an unlimited amount by purchasing the preferred stock of banks or trust companies. Congress either forgot or deliberately failed to limit the amount of preferred stock that can be bought. At one time it was believed at least two billion dollars would be needed for that purpose. But now it is assumed that less than a billion will do the trick.

Actually very little cash will be needed to finance these capital transactions. The government will subscribe to, let us say, $100,000 in order to bring the capital of a particular bank up from $400,000 to about $500,000 and thus enable the bank to have the proper ratio of capital stock to the amount of deposits it is carrying.

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If the government buys the preferred stock, it can send a check to the bank payable whenever the bank needs the money. With the capital actually assured, the bank in question may not need any money right away, for it can carry in its statement the fact that it has $100,000 of government money. A pledge by the government to buy the stock would be as good as cash and later on when the transaction was consumated, the government could if it liked, offer the preferred stock for sale to the public by the treasury itself and in effect guarantee payment of the preferred stock.

So it is not expected that any huge borrowing will be necessary at this time to get the money to pay for the preferred stock.

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In the case, however, of those banks which have been closed and money new is needed to release deposits, the Reconstruction Finance Corporation will lend actual cash and the banks in turn will notify depositors that half of their money is going to be available to them. This probably will not occur until after the first of the year, though a determined effort is going to be made to release as much as possible in the mean time.

If a billion dollars is released, some of it will go to buy the usual necessities of the household but much of it will go to pay off mortgages or to buy bonds of good companies, the customary investment progress.

It is believed that a billion dollars in cash will support ten billion dollars in credit. This think that by printing a large number of dellars, this makes uses for those dollars. The real problem is how to spend these dollars for the government wouldn't give them away.

Actually the best way to produce a healthy situation is to release dollars that already have owners who in turn have a multitude of uses ready fort them money the moment they can get them fingers on the cash they have been deprived of since the bank holiday in March