BANKS IN U.S.A.

Auckland Star, Volume LXVI, Issue 158, 6 July 1935, Page 19

BANKS IN U.S.A.

CONTROL OF SYSTEM. POWERS OF SUPREME COURT. SEW DEAL WARFARE. ' (By PAUL MALLON.) ' ' / ' WASHINGTON, May 20. The nonchalance with which the New Deal came out left-handedly in favour of buying the Federal Reserve system, lock, stock and vaults, was somewhat mystifying. Treasury Secretary Morgenthau interjected his endorsement as a sort of "by the way", afterthought, while testifying about the. new Bank Bill. President Roosevelt murmured a quiet approval while reaching for a cigarette at-.a Press conference. Now, everyone knows that a Government does not ordinarily endorse any such seemingly revolutionary suggestions in such a casual way. But the New Dealers have performed many unprecedented feats before, and have performed them casually. Consequently there appeared to be more behind this move tlian the offhand treatment of .it would indicate, and there is. The underlying explanation why Messrs. Roosevelt and Morgenthau did not go any stronger on it appears to be that they did not think it was important. Apparently they neglected to stress that because there are other people who think it is, notably Father Coughlin. It is a little-known fact, but the Government could buy up the capital stock of the twelve Federal reserve banks for 146,000,000 dollars. This is small change tu a Government-spending four billions for relief alone. The stock is now held entirely- by member banks (those private bankers whom Coughlin always talks about). It is little to them .financially because it represents only 3 per cent of -their own total capital stocks. It pays dividends, but it figures very small in the banking structure of the nation. * How to Comb Their Hair. The financial . experts of ; the Government have never thought much about buying this stock, 'for the simple reason that they run the twelve banks, anyway. They did not figure that they needed to buy something they already operated through th© Federal • Reeervs Hoard.

Apparently the system was set up that way to maintain the illusion. that the hanking syptem was democratic. It was a proper constitutional subterfuge to let,the bank stock be privately owned and then have the Government regulate the banks energetically. This regulation has always been more or less strong. The strength was increased by emergency banking Acts since the New Deal came in. And under this new bank hill the hoard will be able even to tell all the Federal reserve bankers what colour shirt to wear and how to comb their hair. Strategy. You can see from this that the strategy of New Deal reformers has been to expand their power over the Federal Reserve. It will be complete it they get this new bank bill. That is what they are primarily interested in. But if anyone seriously wants them to own it as well as operate it, they are willing. All it means to them is an ultimate acknowledgment and fulfilment of the le<ml ruse by which they seized it. it irieans the last trivial constitutional delusion of private ownership is lost If the trial kite which now has been casually attached to Father Coughlin s balloon floats well on the public breeze, you may expect that step to be taken. Apparently they do not intend to do anything important about it now. But (rood prophets are betting that, within two years, the step will be taken. Some Precedents. If the thing is no more important financially than this you may wonder why Messrs. Roosevelt and Morgenthau mentioned it at all. You under-estimate Father Coughlin. It is one of .his pet policies. Even a left-handed indorsement of it may .tend to assuage his followers, which is a politically desirable result from a' New Deal standpoint. Furthermore, it is an ideal mantilla for tlie administration to wave in the faces of the bull-like bankers who are raging against the extension of Governmental power contained in the New Bank Bill. Four democracies have central banking systems owned by the Government. Thev- are Sweden, Finland, New Zealand and Australia. (Of course, Russia, Italy and Germany have dictatorships.) In France and England, a fiction of independence is kept, similar to ours, but actually it does not amount to much. CouA-curbing. Talk has developed in Congress lately about changing the powers of the Supreme Court. 'It.is only talk. What started it of course was the 5 .to 4 decision outlawing the railway pension system.'' Congressman Kamsay, of West Virginia, who is a very good lawyer, has formally proposed a constitutional amendment in the House. It wou'd prevent inferior courts from invahdaun D Acts of Congress and permit the Supreme Court such power only PX §

two-thirds vote. Congressman Lewis, of Maryland, has dug up an old irapassed Borfth hill of 1923, which would require a vote of 7 to 2 for •invalidation of Congressional laws. The interesting part of Borah's old proposal is that it assumed Congress could change court procedure without a constitutional amendment. The only thing the constitution says on the subject is that the Supreme Court shall have appellate jurisdiction (article 3, section 2, paragraph 2), over acts of Congress. This talk always arises when the court invalidates a popular Congressional Act. Nothing will be done about it' now. Labour leaders are willing to confess off the record that they see no way to write a Railroad Pension Act getting around the Supreme Court decision. Five functioning justices of the Supreme Court are over 70, but other Federal employees are required to resign when they reach that age. Mre. Roosevelt's. friend Congresswoman Caroline O'Day argued in a Congressional hearing that men have destroyed women's historic- place in the home by inventing machines to do her housework, thus causing her to seek new friends outside. So they blame even women's new freedom on men. That may be' a tip to husbands not to buy housework-saving devices. Point and Counterpoint. Opposition tactics have tended lately to put and keep the New Deal on trial constantly, and the New Dealers are fighting back. The job against the Administration is being done not only bv the Republicans but by such outstanding hecklers as Long, Coughlin, the American Liberty League, the Chamber of Commerce, etc. Wise politicians in all camps believe the-fever pitch is being reached too soon. Privately, they do not believe the opposition momentum can continue to "•row for the next 16 months until election. —(N.A.N. A.)