CAUSED BY FEAR

Hawke's Bay Tribune, Volume XXIII, Issue 72, 7 March 1933, Page 8

CAUSED BY FEAR

UNREALISABLE ASSETS. DEMANDS UPON BANKS. The financial crisis in the United States of America was commented upon by passengers by the Maunganui, which arrived at Wellington from Sydney yesterday. The opinion that the crisis was caused to a very large extent by fear was expressed by Mr Edwin Fleisher, a retired clothing manufacturer from Philadelphia. “I don’t know how many people have drawn their money out of the banks and hoarded it,” said Mr Fleisher in conversation with a “Post’’ reporter. “One or two of the small banks failed, and that seemed to destroy the people’s confidence.” The inability of the banks to meet the demands upon their cash reserves was not due to their being financially unsound, continued Mr Fleisher, but was caused by the banks lending money on securities such as real estate which they were unable to convert into liquid assets. “Were it not for the Reconstruction Finance Corporation, America would be in a very much worse position, ” said Mr Fleisher. “There seems to be no limit to the funds the Government is making available to help the banks out of their difficulties. The money is being lent on the strength of the frozen collateral securities in an attempt to ease the people’s minds and restore their confidence.” POSITION BASICALLY SOUND. Mr Fleisher said that when he left the United States there were no definite signs of improvement, but he regarded the position as basically sound. All that was required was a return of confidence to throw back into circulation the vast amount of money lying idle. Although he has travelled extensively in various parts of the world since his retirement, Mr Fleisher is on his first visit to New Zealand. He will spend a week in the North Island before returning home by the Mariposa from Auckland. Reference to the banking crisis was also made by another passenger, Mr W. A. Wessell, of Detroit, a member of the treasury staff of the General Motors Corporation, who said that to a large extent the trouble could be traced to the lending of money, particularly by the State banks, on the strength of inflated land values. Both State and national banks, he said, appeared to be affected by the depression, which had reduced many securities to a fraction of their original value. THE WAR DEBTS. “When I was in Europe I refused to discuss war debts; they are too controversial a subject, said Mr Wessell It was very hard, he continued, to judge the financial conditions of a country from casual observations. Al! over the world sports fixtures and theatres seemed to be as well attended as ever, and the streets were filled with prosperouslooking people. “It is only when you get to know a man personally and leain that he has lost his position, hi* house, his motor-car, and so on, that you begin to realise what the position really is.” continued Mr Wessell. It was very difficult to say wbat attitude America would take in the future in regard to war debts, said Mr Wes sell, but probably the banking ciisiwould serve a good purpose by bringing matters to a head and precipitating re media] action which would bo unavoidable sooner or later.