U.S. BANK CRISIS

Hawke's Bay Tribune, Volume XXIII, Issue 75, 10 March 1933, Page 8

U.S. BANK CRISIS

USE OF SCRIP ABANDONED ISSUE OF NOTES PLANNED. PRESIDENT’S POLICIES. Washington, March 8. America appears definitely to havo embarked cn a policy of at least “mild” inflations. Another day’s conferences between the President and his advisers revealed that various plans for the issuance of scrip had been abandoned and instead some 2,800,QU0,000 dollars in Federal Reserve notes not redeemable in gold will be issued, thus extending almost to the limit the 40 per cent gold coverage provided by law, with indications that this might be reduced later if necessary. To-night Mr Roosevelt held a final conference with Congressional leaders, and outlined the policies he will present to Congress to-morrow, which, according to the best information, consist of firstly, the legislation necessary for the uew currency issue, and secondly, granting to the President of dictatorial powers in the banking situation until permanent legislation is passed to invoke such economics as are necessary to balance the Federal Budget. There is every indication that Congress will promptly agree to his request. It is being commented everywhere that the crisis, coming on Inauguration Day, has been a boon to Mr Roosevelt, overwhelming public reaction to the seriousness of the situation, and so adding to his prestige. He can now easily effect adjustments in the nation’s banking and financial structure that otherwise would have required a protracted fight in Congress, not unlikely ending in defeat. SIGNIFICAN MOVE. Close observers interpret the abandonment of the scrip plan as a significant move, but nevertheless there is a pointed conflict between the large banks—notably, the New York group —and Mr Roosevelt over the gold standard, inflation and other questions which before the bank crisis loomed as major issues of the new Administration.. The New York bankers wished to issue scrip against their assets which are relatively sound, and they appear willing to allow exterior institutions to fare as best they can. Thus Mr Roosevelt’s decision to print new money will definitely rebuff them. There is an ever growing demand from the western agricultural sections for ‘‘easy money” or an inflation policy. Nevertheless, despite Mr Roosevelt’s desire to make the benefits of the new currency as nationally uniform as possible, he indicated clearly that he was aware of the realities of the situation, and would not keep irretrievably weak banks bolstered up at the expense of perpetuating insolvency. When in conference with Mr Ritchie, Governor of Maryland, to-day he admitted the plight of the small banks without the necessary securities to benefit to a large extent from the new currency, but said that their problems ‘‘must be merged into the necessity of national readjustments.” EXTENSION OF HOLIDAY. Democratic leaders estimated that Congress would require about three days to pass the emergency legislation, and they would then adjourn for several weeks to allow time for the formulation of general bank law revisions. In the meantime it is believed that Mr Roosevelt by a proclamation will extend the bank holiday for at least a few days and continue the strictest control of gold, which he still insists will remain the basis of currency. Bankers report that considerable gold is returning in deposits. If the movement continues it is calculated to ease the situation. The first definite adverse reaction to Mr Woodin’s regulations developed when the New York bankers objected to receiving deposits for new accounts winch must be segregated, and kept in cash or Government bonds available for unrestricted withdrawal. They complained that this worked to the advantage of hoarders and penalised those leaving money in the banks. Furthermore, it made limited payments, also provided for in Mr Woodin's regulations, unfeasible. From New i’ork, Mr Winthrop W. Aldrich, president of the Chase National Bank, the largest commercial bank in the world, in which the Rockefellers are heavy stockholders, issued a sensational statement advocating sweeping bank reforms calculated to reduce the present overlords of the New York money market to a position of relative impotence. He suggested a complete divorcement .1 commercial investment phases from banking, which is a direct thrust at Mi Morgan and would forbid private bankers to be directors of banks ol deposits, positions which several of Mr Morgan s partners now hold, while it would force all commercial banks into the Federal Reserve system Mr Aldrich also announced that bis bank’s own securities would affiliate with the Chase, Harris. Forbes Corporation and would sever connections with tile bank Yesterday the National City Corporation, whose storm centre was the recent Senate investigation, made a similar announcement BANKS TO REOPEN Washington, March 8. The President, Mr Roosevelt, early on Thursday predicted an immediate

resumption of banking activities throughout the United States as a re. suit of the enactment of the Emergency Bill, a speedy passage of which is pledged to him by Congressional leaders. Mr Roosevelt in a statement said: “I have been in conference with Members of the Senate and House ana 1 have talked over with them measures which have been carefully studied and prepared and which will immediately relieve the situation and at once start banking operations throughout the en tire country.” BILLION DOLLARS CIRCULATED MANY BANKS OPEN FRIDAY 1 -I .hington, March 8. Legislation intended to put into cir. culation a billion dollars now rn the postal savings system is being drawn up for submission on Thursday, it possible to the extra session of Congress Mr Roosevelt remarked: *1 am gratified ut the outlook." A Senator Robinson, a Senate leader, said: “The bill will result in the opening of a large number of banks on Friday.’’ The details are not announced, but it is understood that they centred upon the expanded issues of Federn Reserve notes based upon Government obligations. T he Treasury has threatened to publish the names of gold hoarders. Permission was withdrawn from Nev York to issue State-wide scrip. CUTTING THROUGH TANCLE PRESIDENT’S SCHEME SOUND London, March 9. Comment on the American crisis is reserved pending the meeting of Congress. “The Financial limes” says that if the proposals cabled from New York represent those being submitted to Congress, the President has cut through the tangle with a scheme sound ami straightforward, though it will have its painful reaction.”