U.S. CRISIS

Nelson Evening Mail, Volume LXVI, 10 March 1933, Page 5

U.S. CRISIS

“MILD” INFLATION ISSUANCE OF SCRIP ABANDONED FEDERAL RESERVE NOTES TO BE ISSUED (United Press Association —By Electric Telegraph—Copyright; WASHINGTON, Bth March. America appears to have definitely embarked on a policy of at least “mild” inflation. Another day’s conferences between the President and his advisers revealed that various plans for the issuance of scrip had been abandoned. Instead some 2,800 million dollars of Federal Reserve notes, not redeemable in gold, will he issued, thus extending almost to the limit the 40 per cent, gold coverage provided by law, with indications that this might he reduced later if necessary. To-night President 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, firstly, of legislation necessary for the new currency issue; secondly, to grant the President dictatorial powers over the hanking situation until permanent legislation is passed; powers to invoke such economies as are necessary to balance the Federal Budget. There is every indication that Congress will promptly agree to his requests, it being commented everywhere that the crisis, coming on inauguration day, had been a boon to President Roosevelt. The overwhelming public reaction to the seriousness of the situation lias so added to his prestige that he can now easily effect adjustment in the nation’s banking and financial structure that otherwise would require a protracted fight in Congress, not unlikely ending in defeat. Close observers interpret the abandonment of tlie scrip plan as a significant move under the surface, hut it nevertheless pointed to a conflict between the large hanks, notably the New York group, and President Roosevelt over the gold standard, inflation, and other questions which even before the bank crisis loomed as major issues for the new Administration. In the post-war years money power has been gradually absorbed by New York hankers, and they wished to issue scrip against their assets, which are relatively sound and appear willing to allow exterior institutions to fare as best they can. Thus President Roosevelt’s decision to print new money was a definite rebuff to them.

Despite President Roosevelt’s desire to make the benefits of the new currency as nationally uniform as possible, lie indicated clearly that lie was aware the realities of the situation would not keep irretrievably weak hanks bolstered up at the expense of perpetuating insolvency. In a conference with Governor Ritchie of Maryland to-day, he admitted the plight of small hanks without necessary securities, which would benefit to a large extent from the new currency, but he said their problems “must he merged into the necessity for national readjustments.”

Democratic leaders estimated that Congress would require about three days to pass the emergency legislation. It would then adjourn, for several weeks to allow time for the formulation of general hank law revisions. Meantime it is believed President Roosevelt by 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 eurrency.

Bankers report that considerable gold is returning in deposits, and if the movement continues it is calculated to ease the situation. The first definite adverse reaction to Mr Woodin’s regulations developed when New York bankers objected to receiving deposits for new accounts which 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 they made the limited payments also provided for in Mr Woodin’s regulations unfeasible.

SENSATIONAL STATEMENT From New York, Winthrop W. Aidrich, president of the Chase National Bank, the largest commercial bank in the world, in which the Rockefellers are heavy stock holders, issued a sensational statement advocating sweeping hank reforms calculated to reduce the present overlords of the New York money market to a position of relative impotence. He suggested the complete divorcement of commercial and investment phases of hanking, which is a direct thrust at Morgans, and would forbid private hankers to he directors of banks of deposits, posits, positions several Morgan partners now hold. This would force all commercial "banks into the Federal Reserve system.

Dir Aldrich also announced that his bank’s own securities affiliate, the Chase, Harris, Forbes, Corporation, would sever connections with the bank. Yesterday the National City Corporation, whose affiliate was the storm centre in the recent Senate investigation, made a similar announcement.

President Roosevelt early oil Thursday predicted ail immediate resumption of hanking activities throughout the United States as a result of the enactment of tlie Emergency Bill, a speedy passage of which is pledged to him by Congressional leaders.

Dir Roosevelt in a statement said: “I have been in conference with members of the Senate and Bourse. I have talked over with them the measures, carefully studied and prepared, which will immediately relieve the situation and at once start banking operations throughout the entire country.”

Legislation intended to put into circulation a billion dollars now in the postal savings system is being drawn up for submission on Thursday, if possible, to the extra session of Congress. President Roosevelt remarked: “I am gratified at the outlook.” Senator Robinson, Senate leader, said : “The Bill will result in opening large numbers of hanks on Friday.” Details are not announced, hut it is understood they centred upon expanded issues of Federal Reserve notes based upon Government obligations. The Treasury threatened to publish the names of gold hoarders.

Permission was withdrawn from New York to issue State-wide scrip.

SOUND BANKS IMDIEDIATE REOPENING PROPOSED (Received 10th March, 8.50 a.m.) WASHINGTON. 9th Dlarch. President Roosevelt in his message to Congress proposed the immediate opening of all sound banks and provisions for currency expansion during banking reorganisation. lie will request of Congress at an early moment two other measures he regards as of immediate ur-

gency. It is understood these refer to granting him power to cut Federal expenses drastically, also getting to work on a huge building programme to provide employment. “It is my belief,” the President said, “that this banking legislation will not only lift immediately all unwarranted doubts and suspicions in regard to banks which arc 100 per cent, sound, but will also mark the beginning of a new relationship between the banks and the people of this country.”

NO DEBASEMENT OF CURRENCY (Received 10th March, 9.25 a.in.) WASHINGTON, 9th March. The currency expansion contemplated, well-informed authorities state, would not result in any debasement of currency whatever, nor operate through a reduction of the gold content of the dollar. It would not bo printing press money in any sense, said one authority. PRESIDENT’S MESSAGE REQUEST FOR IMMEDIATE ENACTMENT (Received 10th March, 9.5 a.m.) WASHINGTON, 9th March. “To review at this time the causes of the failure of our banking system is unnecessary,” said President Roosevelt in a 500 word message. “It is sufficient to say the Government has been compelled to step in for the protection of depositors and the business of the nation. Our first task is to reopen all sound banks. This is an essential preliminary to subsequent legislation directed against speculation with the funds of depositors or other violations of a position of trust. In order that the first objective, the opening of banks for the resumption of business, may he accomplished, I ask Congress for the immediate enactment of legislation giving to the executive branch of the Government control over banks for the protection of depositors, and authority forthwith to open such banks as have already been ascertained to be in a sound position, and other banks as rapidly as possible ; and authority to reorganise and reopen such banks as may be found to require reorganisation to put them on a sound basis. I ask amendments to the Federal Reserve Act to provide for such additional currency, adequately secured, as it may become necessary to issue to meet all demands for currency, and at the same time achieve this end without increasing the unsecured indebtedness of the Government of the United States.”

BANKING BILL PASSED BY HOUSE (Received 10th March, noon) WASHINGTON, 9th March. The House passed the Banking Bill. The Bill embodies President Roosevelt’s programme for controlled expansion of currency and the resumption of normal banking under Iris regulation. It would ratify executive orders issued by the President and continue his authority over the banking situation, provide for the concentration of the United States gold supply in a Federal Reserve Bank, penalise hoarding, provide for controlled expansion of currency, authorise reorganisations under careful safeguards, and for a period the segregation of new deposits in banks of a certain class, the new deposits so segregated to be subject to withdrawals as the comptroller may permit. The Bill would permit banks to get circulating notes from the Federal Reserve system. In return for United States obligations, notes, drafts, bills of exchange, and bankers’ acceptances notes would be given the banks to the full value of the United States obligations, and 90 per cent, of the sound value of the notes, cJraf€S‘, "bills of exchange, and bankers’ acceptances. (Received 10th March, 2.30 p.m.) WASHINGTON, 9th March. The Senate sent the Bank Bill to the President on Thursday.

BANKING REFORM MR ALDRICH’S PROPOSALS (Received 10th March, 9.25 a.m.) NEW YORK, 9th March. Mr Aldrich, head of the Chase National Bank, the largest in the world, proposed the most drastic programme of banking reform that has ever emanated from Wall Street. Not only would it divorce deposit and investment banking completely, but curb severely the activities and power of leading private banking firms, notably the J. P. Morgan Company. It would forbid private bankers to take deposits or be directors of banks of deposits. Members of the Morgan firm are directors of some of the largest commercial banks in the country, and hold important deposits, foreign and domestic.

The programme involves the inclusion of all commercial banks in the Federal Reserve system. l Talk of a dictator for Wall Street is being heard. He would be the referee to adjust delicate operations in foreign exchange transactions. Since the beginning of the week approximately 35 million dollars in gold and gold certificates has flowed back to the Federal Reserve Bank in New York from a number of banks and individual hoarders.

CANADIAN DOLLAR ANOTHER LEAP UPWARD (Received 10th March, 8:45 a.m.) MONTREAL. 9th March. The Canadian dollar leaped upward again to day. The French franc gold basis currency was used as a criterion in the absence of quotations. The United States dollar was down to 4.69 against Wednesday’s 4.72. The pound is steady at 4.13. The continued rise in the Canadian dollar has furnished financial experts with further evidence of the demand for dollar credits in Europe to pay for Canadian exports. Exporters were asked for the price for quotations on goods in terms of the Canadian dollar. Formerly they were quoted through the medium of the pound or the American dollar.

BRITISH COMMENT RESERVED LONDON. 9th March. Comment on the American crisis is reserved pending the meeting of Congress. The “Financial Times” says if the proposals cabled from New York represent those being submitted to Congress, the President has cut through the tangle with a scheme sound and straightforward, though it will have its painful reactions.